International Business - UK and China - Essay Example

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UK has been the fourth largest economy in the world. It has been because Chinese economy is leaping ahead as it has done for several years, has pushed the UK into fifth position. The economy of the world's most populous nation has been growing vastly in recent years with an annual growth rate regularly nudging - even exceeding - 10%…
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Download file to see previous pages China has a growth rate three times higher than that of Europe, but wage levels there are typically close to a tenth of the UK's. The mere fact that China is such a successful player in the global economy means that small businesses in the UK are affected by the growth of the Chinese market. There are mutual benefits for both UK and Chinese businesses. China has a strong manufacturing base but is in need of technical expertise and innovative technologies that can be provided by Welsh companies. Moreover, there is a strong incentive for Chinese companies to co-operate with Britain as it can be used as a gateway to Europe, and in turn the biggest consumer market in world.
Chinese labor costs are very low. There is a fear from some small firms that British manufacturing base could be undermined. Indeed if a large manufacturer relocates to China this has implications for small manufacturers who are first or second-tier suppliers. In terms of labor costs a UK small manufacturer cannot compete and many are suffering as a result. Others indicate, however, that labor is not their highest overhead and when transport costs are included, they believe that they can compete favourably with Chinese products. Moreover, as China's economy develops its workforce, it will grow in wealth and in turn is potentially an extremely large consumer market for goods.
Chinese economy presents threats as well as opportunities to British businesses not only as competitor but as the market and supplier. "China and India now encompassed a third of all humanity, and were a potential mass market, supplier and competitor" (Duckers, 2005). Duckers makes a note that British businesses should not think that high value products can be kept while making low value products in China using the cheap labour. In fact, China is turning many times more engineers and technologists than Europe. China is producing half of the world's cameras, refrigerators and TV sets, 30 per cent of air conditioning and washing machines.
The growth of Chinese economy has proved to have positive impact on inflation in UK. "According to Monetary Policy Committee member Stephen Nickell, cheap Chinese imports are one of the main reasons why inflation in the UK has remained low in recent years. At the same time, the price of services such as lawyers' fees and haircuts have risen reasonably quickly" (Conway, 2005).
In the result of the rapid growth of Chinese economy, more and more British businesses are considering exploring opportunities for trading in China. When getting started the following challenges need to be considered: "Businesses need to ensure they receive a consular briefing before starting business in China and that the Chinese consulate knows in advance of the visit. China is one of the world's most complex markets and companies should send their best people. Employees should be prepared to stay in the region for at least five years to build a successful market. Companies should not start up blind - they need to undertake their own market research in the region before setting up an office or factory. Talking to complementary companies who have already established a successful base about the issues they faced will be hugely beneficial" (Logan, 2005).
As Helen Logan continues, the first step is securing a customer base. "Existing, international customers should be targeted first to build the client base, ...Download file to see next pagesRead More
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