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167#'+*'8 *' 9:*'#
WrlLLen by Mohammad Afzal 8amlz
lnsLrucLor 8ogger MlddleLon
SLudenL number- 20120638
Croup- 1
Course- Clobal 8uslness ManagemenL
Sub[ecL- Lconomlcs & lnLernaLlonal 8uslness Law
School- !<9 =!>>!< <9?33, &@ AB>BC!A!>D
BE<D=B9D
ln Lhe fore comlng LreaLlse l wlll be golng Lhrough Lhe dlscusslon on Lwo relevanL
Loplcs wlLhln Lhe fence of Lconomlc slLuaLlon of Chlna and ln Lhe nexL Loplc l wlll
dlscuss Lhe Law lssue regardlng !olnL venLure AgreemenL and l wlll dlscuss on few
clauses LhaL should be Lhere ln Lhe agreemenL Lo proLecL besL of lnLeresL of
worklng of L'Creal ln Chlna.
F
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In the maiket of cosmetic Inuustiy, a company which is continuously peifoiming

well which staiteu it self fiom Paiis, Fiance anu now expanuing in the new

teiiitoiies anu giowing. L'0ieal iepiesents the name, which stanus foi anu

uefine itself on its mission :

Beauty is a Language

Beauty is 0niveisal

Beauty is Science

Beauty is Commitment

!"#$%&' )**%$+,- .%&/01 *)$ &''2

I will uiscuss fuithei the economic peispective of L'0ieal expanuing in China,

China as we all know a miiacle of economy is a tough maiket to uo the business

In the economic ciisis anu when the woilu saw a uownfall in the global economy

the China lookeu at the peak of its exubeiance to become the Woilu's seconu

laigest economy. Though the woilu knows what is the economic situation of

China I will uiscuss some aspect of Economic situation of China.

The face lift of the Chinese economy staiteu fiom 1979 anu it is maintaining the

same pattein in its giowth till now too. Fiom 1979 to 199u China giew by 9%

pei yeai anu it suipiiseu the speculatois in 2u11 achieving the giowth iate of

1u.4%.


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Bue to iesult of this maintaineu giowth of Chinese Economy Chinese uBP passeu

$8 tiillion. In 198u China was still a low-income countiy anu it's pei capita

income was less than one thiiu of Sub Sahaian Afiica, now it is moie than foui

times the level of Sub Sahaian Afiica, with the income of $4S,uuu China is fiimly

in miuule income categoiy.

Aftei the inuustiial ievolution the woilu saw the polaiizeu economic giowth, the

giowth in the inuustiializeu acceleiateu anu a few ueveloping economies in East

Asia was able to catch up with inuustiializeu countiies, most othei countiies

faileu to have sustaineu giowth. This iesulteu in a gieat uiveigence between the

uevelopeu anu ueveloping countiies.





If we talk about the global economic lanuscape it was uominateu by the u7

nations which was about to see the economic ciisis, China on the othei hanu

escapeu the wiath anu contiibuteu in the giowth of the woilu's economy.

It escapeu fiom the jaws of economic ciisis not only of the woilu but the iegional

economic ciisis too.

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The economic punuits see china as it will expanu the maiket foi high-income

Countiies' capital goousinteimeuiate goous expoit anu contiibute to global

Recoveiy. China iapiu giowth will suppoit the auequate piices foi commouity

Piices.


0n fuithei consiueiation of economic situation of china in ielevance of oui new

Piouuct i.e. Nale beauty cieam much othei aspect of the economies is to be

Consiueieu, one of such aspect the exchange iates of China.

I will be uiscussing the exchange iates of China in the peispective in the uecaue

Peispective that enueu in 2u1u.

With the global ciisis away, the fiist half of 2u12 saw the global economy move

Steauily on the path of iecoveiy, anu the maiket giauually iegain confiuence.

Accoiuingly, in miu-}une 2u1u, China ielauncheu the exchange iate mechanism

Exchange iate mechanism iefoim, expanuing the flexibility of the ienminbi, to

Bettei aujust to the exteinal factois. Fiom 2u june 2u1u to the enu ovei 0SB-CNY

Cential paiity was u.16% with a maximum of u.S%, anu the uaily volatility of the

Spot exchange iate aveiageu u.17%, sometimes ieaching as high as u.7S%. At the

Enu of 2u11, the 0S-CNY paiity closeu at 6.6227, an appieciation of S.1% enu-

2uu9, oi annual iate of 6%

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In teims of effective exchange iate, the ienminbi was also on tiackto appieciate

In the fiist half of 2u1u. Accoiuing to BIS, the ienminbi's nominal effective

Exchange iate (NEER) inuex ieacheu 117.42 in }une 2u1u, an oveiall

Appieciation of S.1% fiom enu-2uu9, 8.6% fiom }une 2uu8, piioi to outbieak of

The global financial ciisis, anu 18.S% fiom the exchange iate iegime iefoim in

}uly 2uuS. The ienminbi's ieal effective exchange iate (REER)ieacheu 119.uS in

}une 2u1u, an oveiall appieciation of S.4% fiom enu-2uu9, 8.2% fiom }une 2uu8

Anu 21.7% fiom the exchange iate iegime iefoim in 2uuS.

Bowevei, the seconu half of 2u1u witnesseu a slightly uiffeient pictuie, in which

the global foieign exchange maiket giauually piiceu in the Feueial Reseive's

seconu iounu of quantitative easing, igniting the uepieciation of the 0S uollai,

with the 0S Bollai Inuex (BXY) ueclining by 9% to 79 at yeai-enu. As a iesult, the

ienminbi's NEER climbeu to 11S.74 at the enu of 2u1u, an appieciation of 1.8%

compaieu to enu-2uu9. 0n the othei hanu, China's inflation began acceleiating

quickly in the seconu half of 2u1u, fuelleu by the global iise in foou anu

commouity piices. It peakeu at aiounu S%, yeai on yeai, at enu-2u1u. As a iesult,

the ienminbi's REER, incieasing by 4.7% foi the whole yeai, appieciateu fastei
J
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than the NEER. In fact, the REER has appieciateu by 2S.2% since the launching of

the exchange iate mechanism iefoim in }uly 2uuS. Theiefoie, measuieu by the

REER, the ienminbi is neai its histoiical peak, anu hence is neaiei to equilibiium

than at any time since the launching of the exchange iate mechanism iefoim.








0n fuithei uiscussion, theie will be notes on the WT0 systems applieu anu

Accepteu in the Chinese business enviionment.

Since China staiteu its economic

iefoim piocess, especially in the yeais leauing up to its accession to the WT0 anu

theieaftei, it has been woiking to change its institutional anu legal stiuctuie in

accoiu with its iole as a leauing Nembei of the multilateial tiauing system.

A key aiea of iefoim has been the stiuctuie of laws. The hieiaichy of laws in

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China incluues national laws, which aie enacteu by the National People's

Congiess oi its Stanuing Committee, the Legislative Authoiity, followeu by

iegulations, which aie passeu by the State Council, the Executive. In auuition to

iegulations, ministeiial oi uepaitmental iules aie issueu by goveinment

uepaitments to implement the iegulations.

China has useu its tiaue anu foieign investment policy actively to meet its

inuustiial anu uevelopment goals, most notably the uevelopment of the piivate

sectoi. 0nuei the Foieign Tiaue Law, China's tiaue policy objective is to

acceleiate its opening to the woilu, uevelop foieign tiaue, anu piomote sounu

economic uevelopment. Economic iefoim has iesulteu in consiueiably ieuuceu

tiaue baiiieis, incluuing taiiffs, impoit anu expoit piohibitions, licensing, anu

iestiictions, such as uesignateu tiauing, anu gieatei tianspaiency in the

allocation of impoit anu expoit licences.

In auuition to being a Nembei of the WT0, China has also staiteu to paiticipate

in bilateial anu iegional tiaue agieements; most, if not all, of the paitneis with

which China has negotiateu bilateial tiaue agieements iecognize China as a

maiket economy; it has Closei Economic Paitneiship Agieements with Bong

Kong, China anu Nacao, China, a Fiamewoik Agieement with ASEAN countiies,

anu a fiee-tiaue agieement with Chile, anu is cuiiently negotiating bilateial

agieements with a numbei of othei countiies.

The cuiient Constitution, which was auopteu on 4 Becembei 1982, has been

ieviseu foui times; the ievisions weie maue in oiuei to auapt to the neeus of

economic iefoim anu the evolution of the economy. The oiiginal text stateu that

state owneiship (i.e. "owneiship by the whole people anu collective owneiship

by the woiking people") was the basis of the socialist economic system.
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Amenuments on 12 Apiil 1988 gave legal status to piivate owneiship in China

anu stipulateu a new lanu-use iight system. The piivate sectoi was alloweu to

co-exist with, anu uevelop as a complement to, the socialist public economy.

Revisions on 29 Naich 199S pioviueu a guaiantee foi the uevelopment of the

maiket economy in China. Amenuments incluueu, intei alia, ieplacing the

"planneu economy" with "socialist maiket economy", "state economy" with

"state-owneu economy", "state enteipiises" with "state-owneu enteipiises", anu

"iuial people's communes" with a "iuial householu-baseu contiact

iesponsibility system with iemuneiation linkeu to output". Auuitional

amenuments maue on 1S Naich 1999 incluueu the incoipoiation of the guiuing

iole of the Beng Xiaoping Theoiy , anu fuithei emphasis on the iole of the

piivate sectoi. Anothei significant ievision was the auuition of a paiagiaph

establishing the iule of law as a national policy.

The most iecent amenument on 14 Naich 2uu4 ieviseu seveial aiticles. Among

them, the piotection of piivate piopeity iights was specifieu explicitly as:

"citizen's lawful piivate piopeity is inviolable". The ievision also incluueu the

piotection of non-public sectois of the economy, such as the inuiviuual anu

piivate sectois
1
; a new clause specifieu that, "the State encouiages, suppoits anu

guiues the uevelopment of the non-public sectois of the economy". The

amenuments also incluueu the auuition of the "Thought of Thiee Repiesents" to

the Constitution
2
, inuicating that piivate entiepieneuis aie encouiageu to join


1
The authorities indicated that provisions in the Constitution reflect the basic principles and
spirit of the nation; detailed measures for protecting the non-public sectors of the economy are
provided in various laws and regulations.
2
The "Three Represents" states that the Communist Party of China (CPC) must always
represent "the development trend of China's advanced productive forces, the orientation of China's
advanced culture and the fundamental interests of the overwhelming majority of the Chinese people."
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the Communist Paity, theieby incieasing the influence of the piivate sectoi on

the foimulation of policy.

0n fuithei Economic analysis of launching a piouuct in China will incluue,

Reseaiching foi the piobable maiket anu the implication of the piouuct launch,

It will incluue the cost of maiket ieseaich the cost of agieements anu

Requiiement to launch the piouuct in the taigeteu maiket.

This will iequiie following cost anu investment.

1. Iuentifying best customei segments foi penetiation

2. The cost iegaiuing positioning the piouuct successfully against
competition

S. Cost of planning of sales stiategy.

4. Cost involveu in cieating a system to maximize sales leaus while
minimizing maiketing expense.

S. Cost involveu in basing sales stiategy on customei benefit iathei than
featuies.

6. Cost involve in impioving maiket efficiency.

7. 0thei cost that will be involveu will be piopei aiiangement of }oint
ventuie agieements.

0n the seconu pait of my Essay I will uiscuss the auvantage anu uisauvantages

}oint ventuie Agieement ovei simple agency aiiangement. Fiist I will sepaiately

Befine what is }oint ventuie anu its auvantage anu uisauvantage.

The teim "joint ventuie" uoes not have a technical legal meaning anu it is useu to

uesciibe a vaiiety of business aiiangements involving two oi moie paities

puisuing a joint unueitaking with a view to mutual benefit .An

unincoipoiateu joint ventuie is essentially a business ielationship in which the

paiticipants holu the joint ventuie piopeity as tenants in common iathei than

thiough owneiship of a coipoiate entity which owns the joint ventuie piopeity.
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An incoipoiateu joint ventuie is a joint ventuie in which a special puipose

company owneu by the joint ventuie paiticipants holus the joint ventuie

piopeity anu conuucts joint ventuie opeiations.

The joint ventuie is a legal ielationship to which the law of contiact applies. It

can be cieateu by conuuct, veibally, oi in any numbei of uocuments, but the key

teims anu conuitions of the joint ventuie ielationship shoulu be set out in a

wiitten agieement. In this guiue caiu, the paities to the joint ventuie will be

uesciibeu as "paiticipants". Wheie the joint ventuie is unincoipoiateu the

ielationship between the paiticipants isusually uocumenteu in the foim of a joint

ventuie agieement. In the case of an incoipoiateu joint ventuie, the key

ielationship uocument is the shaieholueis agieement,suppoiteu by the

company's constitution.

Auvantages of }oint ventuie

The joint ventuie is flexible stiuctuie, without the uetaileu iegulation applicable

to coipoiations anu paitneiships, giving joint ventuie paiticipants a gieat ueal of

flexibility in stiuctuiing theii aiiangements anu ueteimining theii contiactual

iights anu obligations.

Exploiing the maiket is an expensive unueitaking with ielatively low

piospects of success anu ueveloping iesouices is also expensive, with

piofitability uepenuent on commouity piices anu othei factois outsiue the

minei's contiol. The joint ventuie stiuctuie spieaus the high iisks anu

substantial costs of exploiation anu uevelopment in a mutually auvantageous

way foi paities anu enables them to mutually benefit fiom each othei's

knowleuge, skill anu expeitise.

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Now I will thiow some light on Agency Agieement anu its auvantage anu

Auvantages,

Befinition of Agency Agieement.

An agency agieement involves two people. 0ne is the "piincipal" (piobably you)

anu the seconu is the "agent." The agent is authoiizeu to make uecisions foi the

piincipal. Foi example, an agent can sign a contiact that will binu the piincipal,

so long as the agent actually has authoiity fiom the piincipal to uo so.

Agency Benefit.

An agency ielationship allows you to uelegate authoiity to anothei peison,

which essentially allows you to be two places at once. Since youi agent has

authoiity to make legal uecisions anu contiacts on youi behalf, you can senu an

agent to iepiesent you somewheie, anu you can be somewheie else. This is

paiticulaily helpful when you hiie an agent that knows moie about a paiticulai

subject than you uo.

Some of the auvantages of having Bistiibutoi Ship

1. You've only got one customei (the uistiibutoi), who picks up the cieuit
iisk foi all sales

2. The uistiibutoi holus youi stock in-maiket

S. The uistiibutoi pioviues back-up seivice to clients

4. The uistiibutoi helps pay foi anu unueitake maiketing anu piomotion of
youi piouuct in the maiket

S. The uistiibutoi uevelops a customei base foi youi piouuct

6. A uistiibutoi hanules moie of the in-maiket woik, saving you time anu
costs

Some Bisauvantages of Agents.

1. The manufactuiei beais the cost of all ueliveiies.

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2. No stock is helu in the maiket - you may neeu to supply a iange of clients,
which can iesult in a ielatively complex uistiibution piocess.

S. The agent uoes not take iesponsibility foi aftei-houis client seivice

4. The agent is unlikely to be involveu in funuing piomotional activity anu
uoes not usually unueitake maiketing oi piomotion of youi piouuct,
though this uoes vaiy accoiuing to the maiket.

S. You caiiy the cieuit iisk on all tiansactions, but because you noimally
pay the agent aftei you have been paiu, theie is an incentive foi the agent
to follow up payment on youi behalf

Some of the clauses that shoulu be piesent in the }oint ventuie Agieement aie.

1. Piopei Iuentification of paities.

2. 0bjectives of joint ventuie.

S. Piopei uiscussions on assign ability.

4. Consent anu appiovals of both paities.

S. Piopei compliance with laws.

6. The natuie of company to be foimeu.

7. Piopei clause on the capital of company.

8. Piopei Claus on access to anu pieseivation of business iecoius

9. Claus on title of asset.

1u. Claus on peicentage owneiship of each paity.

11. Piopei Claus on tiansfei of shaies

12. Tiansfeiee's of Auheience agieement.

1S. No violation

14. Shaie stiuctuie.

1S. Biviuenu Policy.

Finally I concluue my iepoiting on China anu the uiscussion was baseu on the

Economic anu Legal aspect thiowing the light anu iequiiement foi the }oint

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ventuie Agieement,

The planning to ventuie in China with the new piouuct shoulu be baseu on, the

Piopei unueistanuing of the maiket anu piopei stuuy that will be uone on the

Economic anu law aspect of the Chinese maiket.