Economic Situations in China and Greece - Research Paper Example

Research Paper Economic Situation in China China is the second largest economy in the global market. China and America are the two leading economiesthat are competing with each other. Rivalry is the important factor for an economy to progress (Hitt, Ireland & Hoskisson, 2009). China’s economic situation over last 3 years will be measured using macroeconomic indicators like GDP, GNP, PPP, Inflation rate and Interest rate. GDP China’s real growth rate of GDP was 10.4 % in the year 2010. In this year the country ends with a GDP of 6.1 trillion US dollars. In 2011 the percentage reduced to 9.2% while the GDP hits 7.49 trillion US dollars. The real GDP growth of china again reduced to 7.8% and GDP hits approximately 8.23 million US dollars in 2012. GNP China has achieved a GNP of 4,721,150 million US dollar. China’s GNP in 2011 was 6,628,086 million US dollar and the nation achieved 4,822,913 million US dollar of GNP in the year 2010. PPP According to International Monetary Fund China’s PPP in 2012 was 12,382.559 billion US dollar. According to World Bank’s report China’s PPP in 2011 was 11,290 billion US dollar. The country’s PPP in 2010 was 10085.71 billion US dollars. Inflation Rate The average inflation rate of China in the year 2012 was 2.62%. In 2011 the inflation rate of China was 5.53%. The nation was evidenced an inflation rate of 3.17% in 2010. Interest Rate In 2012 and 2011 the interest rate of Greece was 6%. In 2010 the rate was 10.84%. Economic Situation in Greece Greece is facing several economical problems since last few years. The data and information about the macroeconomic indicators of Greece is being listed below. GDP According to the IMF report it was estimated that Greece would achieve a GDP of 254,978 billion US dollar but finally had achieved a growth of -5.70%. According to the report of UN Greece had achieved a GDP of 299,001 billion US dollar at a growth rate of -6.7%. In 2010 the GDP of Greece was 271.112 billion at a growth rate of -3.5%. GNP It was projected that the GNP growth rate of Greece in 2012 would be -2.6%. The GNP growth of Greece in 2011 was 3.64% and GNP growth of the nation in 2010 was -7.23%. PPP Greece had attained a PPP of 2681.99 billion US dollar in 2012. In 2011 PPP of Greece was 28409.6 billion US dollar. The country’s PPP in 2010 was 29381.22 billion US dollars. Inflation Rate The average inflation rate of Greece in the year 2012 was 0.10%. In 2011 the inflation rate of Greece was 3.1%. The nation was evidenced an inflation rate of 4.7% in 2010. Interest Rate In 2012 and 2011 the interest rate of Greece was 0.75%. In 2010 the rate was 2.64%. Comparison of two economies Since last few years Greece is going through several economical problems. On the other hand China is becoming one of the strongest leading economies globally. China is the second largest and strongest economy in the world (Deshpande & Nurse, 2012). The higher GDP growth rate, increasing GNP and increasing PPP is the evidence of China’s economical development. On the other hand, decreasing GDP growth rate, decrease in per capita income of people which has identified in this study clearly states the Greece is undergoing several economical problems. Greek government debt-crisis and European Sovereign-debt crisis is the key reason behind the economical problems of Greece. The Greek government debt crisis is a part of European sovereign-debt crisis. It is a structural weakness of the economy of Greece that coupled with banking and tax unification of the monetary union of Europe. Due to these kinds of problems Greece is going through several challenges. In terms of China, the Nation is experiencing a higher average growth rate of 10% over the last 30 years. Higher GDP growth, increasing per capita income, high disposable income of people and Higher GNP states that the country is becoming one of the strongest economies. According to reports of IMF, World Bank and UN; china is the only nearest competitor of US in terms of economical situation. FDI in China Graeter’s Ice Cream Company should expand their business in Chinese market, as the country is developing economically. The ice cream manufacturer should not think about Greece as the potential option of global diversification. China is enriched with skilled labors, raw materials, capitals, advanced technology and economic advantages. Moreover, the cost of capital in any kind of business is lower than other developing countries. FDI has significantly benefited the organization in China. Chinese market is potential enough and due to the advantages of natural locations and availability of land may bring success for Graeter’s Ice Cream. Several favorable FDI policies in China and 100 percent profit repatriation should influence the organization to enter in China. On the other hand, the limited purchasing power and low disposable income of people may not help the business. The organization may not create a huge customer base as ice cream is not a necessary product. Therefore, it is feasible that the people of Greece, who are struggling to lead a daily life, cannot be able to afford such kind f products. Demand for Products The Chinese market is very much potential for ice cream and similar products. It is evidenced that China is one of the leading country in terms of consumption of ice cream. The high disposable income of people, rising purchasing power of Chinese and favorable consumer buying behavior should motivate Graeter’s Ice Cream to enter in the potential Chinese market. It is a typical impulse and affordable food product for the Chinese people. Kids, ladies and people of young generation are the target audience of this impulse food product. There has always a high demand for ice cream. Thus it can be suggested that the organization should expand their business in the Chinese market. Recommendations For the last 25 years, China has insistently shaped several relative laws and regulations in order to govern the foreign direct investment. China has achieved several benefits through the FDI policy. The exporting activity has increased due to this policy. Moreover, both the organizations and the countries are getting benefited through this policy. Therefore, several leading and potential organizations are expanding their business to china in order to achieve profits. The necessity resources, such as skilled labor, land and capital everything is available in China (Dube, Bechara & Dagher, 2010). Moreover, 100 percent profit repatriation should be the motivation factor for Graeter’s Ice Cream as they can take home 100 percent business profits. In terms of demand of products, ice cream is very much famous in China. Kids, ladies and people of young generations are the target audience of this impulse food product. It is a typical impulse and affordable food product for the Chinese people. The high disposable income of people and rising purchasing power of Chinese and favorable consumer buying behavior should motivate Graeter’s Ice Cream to enter in the potential Chinese market. On the other hand, the limited purchasing power and low disposable income of people may not help the business. The organization may not create a huge customer base as ice cream is not a necessary product. Therefore, it is feasible that the people of Greece, who are struggling to lead a daily life, cannot be able to afford such kind f products. Through the economical analysis and the comparison it is clearly identified that China will be the right option for the organization’s global expansion strategy rather than Greece. References Deshpande, A., & Nurse, K. (2012). The Global Economic Crisis and the Developing World. New York: Routledge. Dube,L., Bechara, A., & Dagher, A. (2010). Obesity prevention. Waltham: Academic press. Hitt, M., Ireland, R., & Hoskisson, R. (2009). Strategic Management. Stamford: Cengage Learning. Read More