Chinas Political Economic and Legal System - Case Study Example

Table of Contents Executive Summary 3 Introduction 4 Political Economic Analysis 5 Political System 6 Economic System 7 Legal System 8 Recommendation 9 Conclusion 9 Reference List 10 Executive Summary China has for decades been faced with poor or dictatorial leadership that has affected the political and economic growth of the nation. However, all this changed with the leadership of Deng Xiaoping who focused the country’s growth on a market-oriented economic development and stabilized its political unrests (Central Intelligence Agency, 2015). The result was population control, improved living standards, global expansion through increase of trade with multinational companies. The political atmosphere is still however controlled. Introduction China as a country is one of the fastest growing economy in the world. This has been facilitated by having controlled policies, focusing on the market as well as minimizing the legal and political issues that bring down the economy. In return, many nations have invested in the country, many multinationals moved to compete for the expanding market as well as individual investors taken up space in the nation as well. China is one of the largest exporters in the world, it also has some of the best and most organized banking systems, developed stock market as well as a market-oriented system that encourages liberalization in as far as economic trading is concerned (Bramall, 2008). This has led to high economic security with investors having lower risks of losing their money and investments and high returns in the process. It also accommodates all types of investors. The purpose of this report is to show how the political, economic and legal systems of China are playing a role at its current rate of growth. It will specifically be examining the benefits, costs and even the legal implications of the systems to verify whether this nation is attractive for foreign investors or not and what they are likely to encounter in the process of investment (Dumbaugh, 2010). Political Economy Analysis The political economy of China refers to the interplay between the political stability of the nation combined with the economic growth in terms of laws established to protect the investors and other traders, any deregulation that may be in place or any privatizations and major changes in the economic front (Liu, 2011). The political climate is stable and the economy is market oriented and accommodates different currencies for trade hence favoring the investors. When using a political economic system to examine a country, the focus will be on the political, economic as well as legal benefits, costs as well as well as the most likely risks and challenges investors can encounter. This therefore means that the investors will have an opportunity to examine the nation in in-depth and not make shallow analysis (Jiang, 2013). Any investment will therefore be comprehensive for attractiveness of the market. Political economic analysis table (compulsory) Political Economic Analysis Benefits Risks Costs Political Systems Communist system-individual growth Political control Political stability Demand for freedom High population a risk for revolution and unrests. Minimal government opposition Lack of powerful people to influence government Economic Systems Increasing purchasing power Increased per capita growth Huge wealth growth Corruption and crimes Low domestic consumption Environmental damages Improved exchange rate program Restructured economy Improved infrastructure Legal Systems Minimal chances of legal system overhaul Tight political control Democracy in law making Exploitation of domestic workers Lack of comprehensive labor laws High chances of strikes and go slow Minimal expenses on workplace rules Minimal legal restrictions on foreign investors a) Political system A political system deals with politics of a nation Benefits The government of China utilizes a communist system of growth which is in line with majority of the other nations of the world and this system facilitates individual growth without relying on collectivist systems that deter growth and hence stability in the process (Hill, 2007). The leadership of the nation has kept the country under a tight leash with political controls. This has ensured that the nation remains politically stable to invest in (Pepper, 1999). Risks There is always the risk that the tight control the Chinese people are kept under might not remain for long and especially if there comes a time the people demand leniency and a bit of freedom. This may likely result in political unrests and based on the high population, this might pose a risk to the investors and well as the current economic stability the nation has been enjoying (Dittmer & Liu, 2006). Costs As in many nations, China also has the people that powerful and they need to be kept under tight leash to avoid them influencing the government on the direction it should take politically as well as economically. This is however not likely to take place anytime soon because of the minimal opposition the government is facing on the political front compared to other nations in the East and this is good for investors. b) Economic system An economic system deals with systems of production and allocation of resources. Benefits China has a population of over a billion people and the country is really big. The purchasing power parity has continued to increase steadily for the last couple of years with the current standing being over $17 trillion (Lardy, 2012). This accumulated with the current per capita growth of over $12,000 is really impressive as is an indication of nit only the present wealth but a huge potential of future wealth accumulation (Garnaut & Song, 2006). Risks Some of the economic challenges that China continues facing are potential risks for foreign investment. Some of these economic challenges include corruption as well as other crimes in the nation, low domestic consumption making the market almost fully dependent on foreigners which is highly risky as well as environmental damages related to the development and transformation of the economy and which seems to be slowing it down (Knight & Ding, 2012). Costs China has highly improved its exchange rate program where instead of relying fully on only the dollar; it has incorporated other currencies as well. The economy has also been restructured in terms of price adjustments and increasing the purchasing power which has contributed greatly to the increase in the GDP. The restructuring of the banking systems, increase in communication and transport systems ensures an increase infrastructure all of which supports economic growth (Song & Woo, 2009). c) Legal system A legal system deals with legislatures and statutes of the nation. Benefits The legal system of China is tied down with that of Europe and hence there are minimal chances of it being overhauled without people knowing about it or likely to take place anytime in the future. With the tight political control in the nation and the implementation of democracy in the country, the legal system is stable and the laws are in favor of increasing foreign investment which supports the growth (Brown, 2010). Risks There have been documented cases of multinational companies exploiting the Chinese domestic workers in their factories as a result of lack of strict legal precedence on employees’ labor laws (Xie, 2015). This is likely to affect directly or indirectly other foreign investors seeking to engage locals for employment contracts without stringent legal enforcements being in place. There are high chances of go slows and strikes from workers that have no legal representation. Costs The nation fails to adequately secure the rights of workers or even put stringent measures on the workplace as well as environmental pollution policies. These however possess minimal costs for the foreign investors unlike in nations where the workplace rules are strict and expensive for the investors to support. The minimal legal restrictions are a benefit to the foreign investors in terms of the costs and expenses incurred (Chow, et al. 2014). Recommendation The political, economic and legal benefits of China are very encouraging as the nation not only indicates that it is successful in gaining wealth based on its purchasing power but the increasing rate of GDP together with the political control and stability being established in the nation are an indication that it has potential for future growth. The fact that the nation depends highly on foreign investments is an indication that the foreign investors cannot go wrong in investing in this nation and they should therefore take the opportunity to invest in the nation (Chen, 2011). Conclusion The nation may have a few risks when it comes to its political and economic analysis which may not deem favorable by the foreign investors but its benefits and the costs of investing in the nation surpass the risks by far (Zimmerman, 2010). China is therefore attractive for foreign investors. References Bramall, C. (2008). Chinese Economic Development. New Jersey: Taylor & Francis. Brown, R. (2010). Understanding Labor and Employment Law in China. Cambridge: Cambridge University Press. Central Intelligence Agency. (2015, June 18). East and SouthEast Asia China: The World FactBook. Retrieved from https://www.cia.gov/library/publications/the-world- factbook/geos/ch.html Chen, C. (2011). Foreign Direct Investment in China: Location Determinants, Investor Behavior and Economic Impact. Washington DC: Edward Elgar Publishing. Chow, G. et al. (2014). Routledge Handbook of the Chinese Economy. New Jersey: Routledge. Dittmer, L. & Liu, G. (2006). China's Deep Reform: Domestic Politics in Transition. Massachusetts: Rowman & Littlefield Publishers. Dumbaugh, K. (2010). Understanding China's Political System. New York; DIANE Publishing. Garnaut, R. & Song, L. (2006). The Turning Point in China's Economic Development. Canberra: ANU E Press. Hill, C. (2007). International Business: Competing in the Global Marketplace. New York: McGraw-Hill/Irwin. Jiang, S. (2013). The China Lens A Political-Economic Analysis of Changing China. Bloomington: Xlibris Corporation. Knight, J. & Ding, S. (2012). China's Remarkable Economic Growth. New York: OUP Oxford. Lardy, N. (2012). Sustaining China's Economic Growth after the Global Financial Crisis. Washington DC: Peterson Institute. Liu, G. (2011). Politics and Government in China. New York: ABC-CLIO. Pepper, S. (1999). Civil War in China: The Political Struggle, 1945-1949. Massachusetts: Rowman & Littlefield Publishers. Song, L. & Woo, W. (2009). China's Dilemma: Economic Growth, the Environment, and Climate Change. New York: Brookings Institution Press. Xie, Z. (2015). Labor Law in China: Progress and Challenges. New York: Springer. Zimmerman, J. (2010). China Law Deskbook: A Legal Guide for Foreign-invested Enterprises, Volume 1. Washington DC: American Bar Association. Read More