China is making a concerted effort
to continue to attract investment, especially in the country’s less
developed areas. China has tremendous market potential, it is still
a poor country. Anticipated demand does not always translate into
actual demand. In addition, thanks to the country’s lack of a
well-developed transportation system, distribution problems
continue to exist, particularly outside major urban areas.
Recognizing the problems associated with its infrastructure, the
country has committed $800 billion to improvements over the next
decade. In addition, China is offering preferential tax breaks to
countries that invest in more remote areas. Some experts believe
that a certain amount of interdependency has been established
between the United States and China that will influence the policy
decisions of the two countries. China is having two regions eastern
and the western part. The Eastern region was well developed by
comparing to Western region .The Govt of China has decided to
develop the western region which is economically backward and
Communicated the lot many preferential policies to encourage
investment in the western region. Important policies are discussed
here ;
- Financial Support - All the Chinese
Financial will be giving credit support on priority to foreign
investor. A List of key industries are prepared and advertise
through various institutes to attract Foreign Investor. To put
restriction on foreign Investment In the central and eastern
region.
- Tax Concessions - Provide the tax
concession for a particular period
- Industrial Policy Concessions - The
deep processing of agricultural and animal products, tourism,
forestry, mining, Infrastructure construction and the development
and manufacturing of electronic components are on the priority list
for Industrial policy Concession.
- Land and Resources Concessions -
The Govt of Chinese on priority are developing the infrastructure
facilities like logistic, transport , airport , roads.it attracts
the investor to putting up their production facility. Make
arrangement of availability of land 133 foreign investor. The low
land price policy will be implemented for industries encouraged by
The Chinese govt.
- Financial Support and Incentives -
Project supervision and insurance systems will be implemented to
ensure the quality and completion of projects.Easy credit policy
will make easier loan for setting up production facilities in
western region. To provide the technical assistance loan. The
Insurance systems will be implemented to ensure the quality and
completion of projects
- Technological Policy Support - All
the efforts will be made to build an agricultural information
network, promote e-commerce, develop high-tech industries such as
solar and wind power generation, new materials and biomedicine.
Steps will be taken to foster a batch of new high-tech enterprises.
The Chinese Govt is giving International cooperation and support.
The Govt. will be developing the productivity, regional scientific
& technological centre and market centers The efforts will be
made to promote the development of university science parks and
national engineering technology research centers.
How can firms prepare for the unique
challenges of operating in these areas - Firms can face all these
challenges during the operation of their unit.
- Communication - It is very big
problem to run the unit in China. It is very difficult to
understand the Chinese language and to communicate with work force
with them.
- Large Industrial project - The
Foreign Investor should be on large scale. The cost of setting up
and running unit in China will be high as compare to their own
country.
- Location - It is not good if your
customers far off countries to China.
- Improvement of Infrastructure - The
main bottleneck is lack of shortage of transportation , electricity
and telecommunications. The western part of China is still far
behind and Lot of work is required to Improve the region on
economically & social grounds.
- Medical Facility - No Medical
facilities are there in this part of China and Chinese people are
depending on traditional Chinese Medicine.
China’s Government has took
following steps to develop central and western China which are
underdeveloped.-
- Adopted different development model
to fulfill the needs of foreign investors. For example revise the
catalogue of encouraged industries for foreign investments.
- Guide the foreign investors to
underdeveloped sectors that the government intends to develop.
- Make available and provides
advantage of environment-friendly, energy and local resources to
develop the sector.
- Established market liberalization
policies to make regional economic development centers.
- Government included new energy,
advanced technological equipment, new materials, aerospace and
Information technology to list of encouraged industries.
- These addition joined older
traditional sectors which has been dominated earlier economic
activity in western region.
- The government also designated
three economic clusters in western region to spur development. The
three economic cluster were Chengdu-Chongqing Economic zone,
Guangxi-Beibu Gulf Economic zone and Guanzhong-Tianshui economic
zone.
- The designated cluster encouraged
economic development in closed areas and creates widespread growth
across the western region.
Effect are as
follows-
- Restrictions on foreign investment
in undeveloped areas are lifted
- Foreign retailers now able to
invest in local capitals of western region.
- Telecommunication sectors are
opened to foreign investment
- Foreign invested enterprises
allowed in western china to contract domestic enterprises.
- Fund-raising programs started by
promoting project financing.
Firms prepare themselves for unique
challenges of operating in these areas by contracting domestic
firms. Make joint venture with traditional enterprises, make
different strategies to make success, promote projects, and
advertise their project in local areas.