Risks and uncertainties in China - Essay Example

Risks and uncertainties in china Introduction In the past decade china has experienced a high population growth. This has beenaccompanied by growth in the economy which is supported by high technological growth and increased tax from manufacturing industry. Nevertheless there have been increased risks as well which are associated by increase concentration of products in the market. Literature review China is one of the countries that experiences high corruption rates both in the corporation and in public sectors.

As a new company in the country it is important for the company to put up the necessary strategies such as regular auditing of company operations to ensure that the company does not lose its resources through corruption cases. This is backed up by increased cyber crime which is as a result of high tech technologies (Delloite, 2005). Chinas large companies have establishing affiliates overseas and this is having an advantage on China accounting exposure especially when the country is experiencing weaker currency that it’s trading partners.

An example is in 1993 when accounting standards of business enterprises was formed after a varying season of Chinese currency. Nevertheless, formation of this does not guarantee the Chinese company an efficient exchange rate. This poses a threat to the companies that are not well established (Delloite, 2005). Chinese GDP keeps on varying as per the graph below. This poses a great threat to local and abroad companies that have started operating in this market. For a business to succeed it need to look at a steady economy as aspects such as inflation might negatively impact on the company financial status.

The graph indicate a decreasing economical growth since 2011 therefore, there is need to forecast on the future trends of the economy. Chinese people like consuming local products. Chinese people are so patriotic concerning their consumption behavior. As a result, citizens are highly concerned about the products they consume. In order for the company to penetrate in Chinese market, the product needs to brand their products like those of china. Failure to do so will see the company operate at a loss as its goods will not be consumed (Delloite, 2005).

In the current days there has been a speculation on the Chinese future exchange rates with researchers believing that the government of china will revalue its currency in few coming years. If this idea is implemented, it will have a major impact on the consumer market. As an investor it’s important to look at this issue keenly as it may have an adverse effect towards the success of the businesses in China. The projected impact of this move will be reduction of the prices of imported goods a move that will expose the local products to intense competition.

Such an action will highly impact on young established businesses (Delloite, 2005, p.17). China is planning to implement new policies that are aimed at shifting the economic growth from being export oriented to be based on domestic demand. This will have a direct impact on the taxation rate both in the business and public related activities which might affect the consumption behavior (Delloite, 2005, p.18) Conclusion The success of the business highly depends on the planning on the risks and uncertainty that might be faced by the business in the future.

Chinese population provides a local market for the products but it also have many risks that a company prospecting to venture in it might have a close look at them to avoid any loses. Reference Delloite. 2005. China consumer markets: opportunities and risks. Retrieved from http://www.bglegis.com/China_Consumer.pdf