People’s Republic of China

1. Short overview
Situated in East Asia, China is the world’s most populous country, with a population
of more than 1.4 billion people (current population of China is 1,446,811,963 as of Sunday,
November 7, 2021, based on Worldometer elaboration of the latest United Nations data). This
huge number is equivalent to 18.47% of the total world population (~7.9 billion as of
November, 2021, Worldometer).
When it comes to life expectancy, it increased dramatically since 1990, and at the
moment, it reached ~76-77 years. China has managed to reduce its burden of disease in the
last few decades and has increased its child mortality rate and maternal health dramatically.

In China, the majority of infant deaths are related to difficult labor, pneumonia, and
nutrition deficiency diseases (cancer, diabetes, or epilepsy; also, China faces around 1.6
million premature deaths due to smog and air pollution), but in Beijing and other large cities,
congenital heart disease has become the top killer. When it comes to fertility rate, 12 million
babies were born in 2020 - a significant decrease from the 18 million newborns in 2016. A
lower fertility rate is a natural result of China's social and economic development. As
countries become more developed, birth rates tend to fall due to education or other priorities
such as careers (the prioritization of economic growth has led to worsening environmental
conditions, including air, soil, and water pollution that adversely affect public health
conditions). What is also needed to be taken into consideration is related to overpopulation.
Overpopulation in China began after World War II in 1949, when Chinese families were
encouraged to have as many children as possible in hopes of bringing more money to the
country, building a better army, and producing more food. But this started to pose a problem
so major that in 1980 a one-child policy and other enforcements were designed to control the
size of the rapidly growing population. In 2015, the policy officially ended, and as of 31 May
2021, China's government has relaxed restrictions, even more allowing women up to three
children.
When mentioning key events in China’s history, one represents “The First Five-Year
Plan” (1953-1957), that emphasized rapid industrial development, partly at the expense of
other sectors of the economy. The bulk of the state’s investment was channeled into the
industrial sector, while agriculture was forced to rely on its own meagre capital resources for
a substantial part of its fund requirements. Within industry, iron and steel, electric power,
coal, heavy engineering, building materials, and basic chemicals were given first priority. The
aim was to construct large, sophisticated, and highly capital-intensive plants. However, “The
Great Leap Forward” (second five-year plan, 1958-1962) didn’t receive the same succes.
Chairman Mao Zedong launched the campaign to reconstruct the country from an agrarian
economy into a communist society through the formation of people's communes, but this
program’s policies turned the country towards an economical disaster, as the death toll from
famine and other causes rose to ~45 million (this resulted in calling this period the “Great
Chinese Famine”).
Chinese officials carried out programs to try and get rid of the economical depression
their country fell into, but this only made Mao Zedong doubt his colleagues revolutionary
commitment. This concluded in the Great Proletarian Cultural Revolution (August 1966).
Mao shut down the nation’s schools, calling for a massive youth mobilization to take current
party leaders to task for their embrace of bourgeois values and lack of revolutionary spirit. In
the months that followed, the movement escalated quickly as the students formed
paramilitary groups (“Red Guards”) and attacked and harassed members of China’s elderly
and intellectual population. The Revolution lasted until Mao’s death, in 1976.
The late 1970s was the moment for the “Four Modernizations”. They were supported
by Deng Xiaoping and prioritized by the government after Mao’s death. This program refers
to four areas of development: agriculture, industry, science and technology and the military,
and its main goal was to fully modernize this sectors by the end of the 20th century. Deng’s
strategy for developing China into a modern, industrial nation was the development of the
socialist market economy, a combination of government planning and free markets. Deng
introduced planned, centralized management of the economy by skilled and experienced
government workers. Under Deng, rural markets were revived to sell peasants' homegrown
products and the surplus products of communes (that were abolished in 1982). Not only did
the rural markets increase agricultural output, they created a demand for domestically-
manufactured goods and increased the political support for more difficult economic reforms.
Peasants who were able to sell surplus agricultural yields on the open market had the means
to purchase more domestic products, stimulating industrial growth.
 Between 1989-2020, a large series of significant events took place in China’s
economic history:
● 1989: Coastal Development Strategy
- nowadays, it aims to make the region ahead of developing export-oriented economy
and to promote the inland economic prosperity at the same time
● 1990: Shanghai Stock Exchange opens (trade made by larger, state-owned
companies- banks, energy firms -while investors’ majority represents financial
institutions - banks, pension funds)
● 1991: Shenzhen Stock Exchange opens (trade made mostly by Smaller and
emerging-sector companies and individual investors)
● 1996: “Grasp the large, let go of the small” (the Communist Party’s slogan
refering to the fact that small state-owned firms were to be closed or sold)
● 1999: Western Development Strategy
- main components: development of infrastructure (transport, hydropower plants,
energy and telecommunications), enticement of foreign investment, increased efforts
on ecological protection (such as reforestation), promotion of education and retention
of talent flowing to richer provinces
● 2001: Entry to WTO
● 2002: Qualified Foreign Institutional Program
- it allowed foreign capital to be invested to the domestic security market
● 2013: Belt and Road Initiative
- an effort to develop an expanded, interdependent market for China, grow China's
economic and political power, and create the right conditions for China to build a high
technology economy
● 2014: Alibaba IPO
● 2015: Made in China 2025
- a national strategic plan and industrial policy of the Communist Party to further
develop the manufacturing sector of the People's Republic of China

2. Economic environment
China is the second largest global economy, the largest exporter and has the largest
exchange reserves in the world. Since China began to open up and reform its economy in
1978, GDP growth has averaged almost 10% a year, and more than 800 million people have
been lifted out of poverty. There have also been significant improvements in access to health,
education, and other services over the same period. China’s high growth based on resource-
intensive manufacturing, exports, and low-paid labor has largely reached its limits and has
led to economic, social, and environmental imbalances. Reducing these imbalances requires
shifts in the structure of the economy from low-end manufacturing to higher-end
manufacturing and services, and from investment to consumption.
 The Gross Domestic Product per capita in China was last recorded at 16,410.80 USD
in 2020, when adjusted by purchasing power parity (PPP). The GDP per Capita, in China,
when adjusted by Purchasing Power Parity is equivalent to 92% of the world's average. GDP
per capita PPP in China is expected to reach 17,700 USD by the end of 2021, according to
Trading Economics global macro models and analysts expectations. In the long-term, the
China GDP per capita PPP is projected to trend around 18210 USD in 2022 and 18350 USD
in 2023.
A high-income economy is defined by the World Bank as a country with a gross
national income per capita of $12,536 or more in 2019. In 2020, China's GDP exceeded 100
trillion yuan ($15.37 trillion), with per capita GDP exceeding $10,000 for a second
consecutive year. China is expected to enter the low echelon rank of high-income economies
as a result of its 14th Five-Year Plan (starting 2021-2025), and strive towards becoming the
first over-1-billion-population high-income country in the world. But this would not become
reality without deepening reforms, upgrading its industry structure from one that is labor-
intensive to one that's capital-intensive, and onward from that to technology-intensive
industries, and also from low value-added manufacturing industries to high value-added
manufacturing industries, to capture the dividends of economic growth.
China remains a country characterized by an unfree economy, as its economic
freedom score is 58.4, ranking the 107st freest in the 2021 Index. The modest improvements
in its economic freedom score in recent years have resulted mostly from gains in the property
rights, judicial effectiveness, and business freedom indicators. Overall, the economic freedom
that does exist in China continues to lack depth and breadth, and the government needs to
ensure that business-friendly policy changes are understood and implemented nationwide.
Over the past few years, growth has moderated in the face of structural constraints, including
declining labor force growth, diminishing returns to investment, and slowing productivity.
The annual CPI inflation rate can be observed below. The government’s annual target
for the CPI is 3%, and inflation has been below this metric for the past eight years without the
government having to withdraw a great deal of money from the economy. This means that the
economy has been working well, but that demand for products is not excessive.
 Commodity prices have been rising throughout the global economy as depleted
inventories after COVID-19 have led to massive inventory restocking as businesses open
again. Shipping bottlenecks have pushed up prices of tin and sugar. Low interest rates have
resulted in a remodeling boom in the United States, adding to demand for lumber and copper.
A drought in South America has constrained the supply of corn as demand for corn-based
ethanol is rising. All of these factors have resulted in rising commodity prices, which have
increased producer prices in China as well.
In our case, the low CPI indicates that the economy is stable and that the price
mechanism is functioning well. Therefore, it is highly unlikely that the government will
withdraw liquidity from the economy, although it may choose to reduce the rate and/or
amount of fund injections.

3. Trade environment

Trade has become an increasingly important part of China’s overall economy, and it
has been a significant tool used for economic modernization. The direction of China’s foreign
trade has undergone marked changes since the early 1950s. In 1950 some three-fourths of the
total was accounted for by trade with noncommunist countries, but by 1954—one year after
the end of hostilities during the Korean War—the situation was completely reversed, and
communist countries accounted for about three-fourths.

During the 1980s and ’90s, China’s foreign trade came full cycle. Trade with all
communist countries diminished to insignificance, especially with the demise of most
socialist states. By contrast, trade with noncommunist developed and developing countries
became predominant.

Most of China’s imports consist of machinery and apparatus (including

semiconductors, computers, and office machines), chemicals, and fuels. The main import
sources are Japan, Taiwan, South Korea, Australia, the countries of the European Union
(EU), and the United States. Regionally, almost half of China’s imports come from East and
Southeast Asia, and some one-fourth of its exports go to the same countries.
 The great bulk of China’s exports consists of manufactured goods, of which electrical
and electronic machinery and equipment and clothing, textiles, and footwear are by far the
most important. Agricultural products, chemicals, and fuels are also significant exports. The
United States, Hong Kong, Japan, EU countries, and South Korea are the principal export
destinations.

China has become the world's second largest economy by GDP (Nominal) and largest
by GDP (PPP).

China developed a network of economic relations with both industrial economies and
those constituting the semi-periphery and periphery of the world system. Due to the rapid
growth of China's economy, the nation has developed many trading partners throughout the
world. All trading partners are considered important to the development of the Chinese
economy. However, the title of China's largest partners is ever-changing due to national and
international policy changes.

The major Chinese trading partners for 2018 were as follows:

 4. Social and cultural environment
In order to explain China’s cultural environment, it is best if we do so keeping in
mind Hofstede’s cultural dimensions. Geert Hofstede's cultural dimensions theory is a
framework for cross-cultural communication that shows the effects of a society's culture on
the values of its members, and how these values relate to behaviour, using a structure derived
from factor analysis. The dimensions, China’s level for each one and the meanings are the
following:

Dimensions Rank

PDI / Power Distance 80 / 100

IDV / Individualism 20 / 100

MAS / Masculinity 66 / 100

UAI / Uncertainty Avoidance 30 / 100

LTO / Long-term Orientation 87 / 100

IVR / Indulgence Versus Restraint 24 / 100

PDI: This dimension deals with the fact that all individuals in societies are not equal,
and it expresses the attitude of the culture toward these power inequalities amongst us. At 80
China sits in the higher rankings of PDI => a society that believes that inequalities amongst
people are acceptable. The subordinate-superior relationship tends to be polarized and there is
no defense against power abuse by superiors. Individuals are influenced by formal authority
and sanctions and are in general optimistic about people’s capacity for leadership and
initiative. People should not have aspirations beyond their rank.
IDV: The fundamental issue addressed by this dimension is the degree of
interdependence a society maintains among its members. It has to do with whether people's
self-image is defined in terms of “I” or “We”. At a score of 20 China is a highly collectivist
culture where people act in the interests of the group and not necessarily of themselves. In-
group considerations affect hiring and promotions with closer in-groups (families) are getting
preferential treatment. Employee commitment to the organization (but not necessarily to the
people in the organization) is low. Relationships with colleagues are cooperative for in-
groups they are cold or even hostile to out-groups. Personal relationships prevail over task
and company.
 MAS: A high score (Masculine) on this dimension indicates that the society will be
driven by competition, achievement and success, with success being defined by the winner /
best in field – a value system that starts in school and continues throughout organisational
life. At 66 China is a Masculine society: it is success oriented and driven. The need to ensure
success can be exemplified by the fact that many Chinese will sacrifice family and leisure
priorities to work. Service people will provide services until very late at night. Leisure time is
not so important.
UAI: This dimension has to do with the way that a society deals with the fact that the
future can never be known. The extent to which the members of a culture feel threatened by
ambiguous or unknown situations and have created beliefs and institutions that try to avoid
these is reflected in the score. At 30 China has a low score. The Chinese are comfortable with
ambiguity; their language is full of ambiguous and various meanings that can be difficult for
Western people to follow. All in all, Chinese are adaptable and entrepreneurial.
LTO: This dimension describes how every society has to maintain some links with its
own past while dealing with the challenges of the present and future. China scores 87 in this
dimension, which means that it is a very pragmatic culture. In societies with a pragmatic
orientation, people believe that truth depends very much on situation, context and time. They
show an ability to adapt traditions easily to changed conditions, a strong propensity to save
and invest, thriftiness, and perseverance in achieving results.
IVR: This dimension is defined as the extent to which people try to control their
desires and impulses, based on the way they were raised. With a low score of 24, China is a
restrained society. Societies with a low score in this dimension have a tendency to cynicism
and pessimism. In contrast to indulgent societies, restrained societies do not put much
emphasis on leisure time and control the gratification of their desires.

When describing its social environment, there are various elements that can be
analyzed, and it is important to mention that this type of environment can have significant
effects on citizens’ behaviour.
We can start by talking about social interactions. The Chinese prefer indirect
communication: as an extension of the need to maintain harmonious relations, the Chinese
rely heavily on indirect communication. They rely less on words and are more attentive to
posture, expression and tone of voice to draw meaning. They prefer to hint at something and
allow the listener to “connect the dots,” rather than communicate the message directly.
When referring to its form of government and the government’s actions, China is not a
democracy, but an authoritarian state which has been characterized as a totalitarian
surveillance state, and a dictatorship. Also, since social media reached top levels in East Asia,
many Chinese citizens came forth in recent years accusing the state or displaying so-called
“evidence” to try and demonstrate the state’s grasp on freedom of speech overall and
censorship. More exactly, the Chinese are tired of feeling controlled, afraid of the authorities
and kept in the dark when it comes to knowing critical information (example: Dr. Li Wen
Liang’s case). Also, the Chinese government chooses to ban certain smartphone applications
- Google, Facebook, Youtube, Instagram, Whatsapp, Netflix etc. - and as a tourist, it is
mandatory to delete those during your stay. These measures only show the government's
thirst for control and the wish to keep certain information regarding the state’s situation to
themselves, rather than display it accross the Globe.
Another interesting element is the social structure. In the 21st century, the current
social structure of China relies on strata, which are defined by an individual's economic and
social status. There are a total of ten strata which, in a general sense, include government
officials, private and small business owners, industrial workers, agricultural laborers, and the
unemployed. The 21st century saw a decrease in the percentage of peasants in proportion to
the overall working class as the economic reform gave them more freedom in their
professional lives. Many young people living in rural communities also began to find it more
appealing to attend university or find jobs in the city. There has been a major shift in the
thinking of the youth, seen through the older ages of those working in farming. Finding
individuals under the age of 40 still working in agriculture is now much more difficult than it
was before. Prior to the 21st century, social class was primarily determined by identity rather
than employment and education.

5. Political and legal environment

a) Political environment
● Current Political Leaders
President: XI Jinping (since 14 March 2013); president and vice president indirectly
elected by National People's Congress for a 5-year term. Nevertheless, a constitutional
change was passed by the 2018 annual sitting of parliament, the National People's Congress,
approving the removal of the two-term limit on the presidency, effectively allowing Xi
Jinping to remain in power for life.
Vice President: WANG Qishan (since 17 March 2018)
● Current Political Context
Overall, the political situation in China has been stable, with the Chinese Communist
Party (CCP) firmly in power. China's current leader, Xi Jinping, holds a triple title as CCP
general secretary, Central Military Commission chairman and state president. After assuming
these functions in 2012-13, he was reappointed to them in 2017-18. Following the abolition
of presidential term limits in early 2018, he is set to keep them beyond the expiry of the
current terms in 2022-23 and is seen as the most powerful Chinese leader since Deng
Xiaoping.
In 2020, the Chinese government reinforced its official political rhetoric and control,
both internally and in terms of foreign policy. Weak global demand and strained foreign
relations are expected to intensify calls for economic self-sufficiency emphasizing the
importance of the domestic market. In 2021, China’s most immediate challenges are related
to addressing the economic, social and public health impacts of the COVID-19 pandemic.
● Main Political Parties
The only political party in the country is the CCP (Chinese Communist Party). There
are eight other registered small parties, but they remain under control of the CCP.
● Executive Power
The Chinese executive is supervised by the State Council (collegial body equipped
with important powers and appointed by the National People's Congress) under which are
Government commissions, ministries and other organizations with the rank of a ministry.
According to the Constitution, the Council is 'the Supreme Administrative Body' of the
Chinese Government, even if the majority of important measures are decided by the Political
Bureau of the Chinese Communist Party (CCP). The Council thus plays an important role in
the economic domain.
● Legislative Power
 The legislature is unicameral, composed of the National People's Congress (NPC). It
is known as a 'Body of Supreme Power of the Government' and meets once per year in a
plenary session. There are approximately 3,000 designated deputies elected to the NPC every
five years by indirect vote of local bodies. Since the 1980s, it has been dominated by local or
sectional interests. The Standing Committee of the National People's Congress is appointed
by the Political Bureau of the Central Committee of the Party. It sits instead of the NPC
during its recess and exercises all its powers. It is composed of a president, 15 vice-presidents
and 176 permanent members. The Standing Committee sits regularly, but it is the Bureau of
the NPC which exerts its functions on a daily basis. Eligibility is controlled by the CCP,
which also has a right to supervise the appointment of the executives and the senior officials
of different administrative units.

b) Legal environment
China's legal system is largely a civil law system, although found its root in Great
Qing Code and various historical systems, largely reflecting the influence of Continental
European legal systems, especially the German civil law system in the 19th and early 20th
centuries.
What happens if you break a law in China?
Article 33 The principal punishments are as follows: (1) public surveillance; (2)
criminal detention; (3) fixed-term imprisonment; (4) life imprisonment; and (5) the death
penalty. Article 34 The supplementary punishments are as follows: (1) fine; (2) deprivation of
political rights; and (3) confiscation of property.
Although most nations have abolished capital punishment, over 60% of the world's
population live in countries where the death penalty is retained, such as China, India, parts of
the United States, Indonesia, Pakistan, Bangladesh, Nigeria, Egypt, Saudi Arabia, Iran, Japan,
and Taiwan.

● Court Officials
The judge
The Judge exerts the legal authority of the Government according to the law, he must
judge a case according to the law.
The judges are also cross-examiners who examine the witnesses.
Differing from traditional courts, only evidence presented in the court is considered.
Law minister
Justice and prison administration, governs the lawyer's profession and supervises the
examinations of admission to the law profession.
Lawyers
The lawyer has an advisory role towards his client and must defend him.
Ministry of public safety
It is the authority of the police force. The police are responsible for maintenance of
law and order, conduct investigations and arrest suspects in criminal cases.
May intervene in settling disagreements between private individuals.

● National Regulation and International Agreements

 ● Discrimination laws
Discrimination based on ethnicity, race, sex, religious belief, or handicap is illegal in
general. Furthermore, the Employment Promotion Law offers specific protection for rural
employees who relocate to cities in search of work, stating that they are entitled to the same
labor rights as urban workers and are not subject to discriminatory limitations.
● Health and safety laws
In China, Occupational Disease Prevention Law and the Safe Production Law are the
two basic laws for supervision of occupational health and safety. The regulatory framework
of occupational health and safety mainly includes the health administrative department and
work safety administrative department.
● Consumer Protection Law
The Consumer Protection Law, which admits government's duty in consumer
protection, aims to establish a comprehensive network in order to protect consumers
effectively. Such a network comprises legislative, judicial, administrative agencies and moss
media. First, central government departments and local governments are delegated powers to
make regulations or by-laws for the enforcement of the Law. To date, almost all provincial
governments have put into force by-laws protecting consumers.

Certain legal conditions may have an impact on the business of a company. China has
some laws that can show the effect on the growth as a business-promoting country:

- The country has banned social media like Facebook, Whatsapp, Twitter, YouTube, which has
prevented these platforms from earning revenue.
- China also has some restrictions on the investment of foreign companies. It may decrease the
number of international companies investing in the market of the country.
- The country is currently formulating the laws for the eCommerce business, which is, to some
extent, troublesome. The state has some laws for taxation and IPs, but there is no law to
validate the online contract between the seller and buyer. It may increase the risk of online
transactions to eCommerce sites.
 6. Conclusions
China is the second largest global economy, the largest exporter and has the largest
exchange reserves in the world. Trade has become an increasingly important part of China’s
overall economy, and it has been a significant tool used for economic modernization.
When referring to its form of government and the government’s actions, China is not
a democracy, but an authoritarian state which has been characterized as a totalitarian
surveillance state, and a dictatorship.