Pestle analysis of China. China is a country situated in East Asia neighboring India, Pakistan, Afghanistan, Vietnam, Russia, Tajikistan, North Korea, Nepal, Mongolia, Myanmar, Laos, Kyrgyzstan, Kazakhstan, and Bhutan. She’s the home of the world’s largest population of 1.4 billion people. The capital of China is Beijing.
China is the 3rd or 4th largest country in the world comprising 3.7 million square miles of area. She has got 23 provinces and five independent regions. Beijing, Taijin, Shanghai, and Chongqing are the direct controlling municipalities. Macau and Hong Kong have got special privileges.
China has got the world’s largest army and 2nd highest military and defense spending. Roundabout 10% of the world’s richest personals are residing in China. Her power and influence suggest that she’s going to be the next superpower of the world after the USA.
The country has a socialist system and one Chinese Communist Party ruling the country. China is one of the few remaining socialist countries of the world after the collapse of the Soviet Union and the cold war.
She’s the world’s leading economies of the world in the 21st century. The country has the largest number of manufacturers and exporters there. They all are contributing to increase the growth and product of her economy.
Today, we’ll study the pestle analysis of China. It would help us to analyze the macro-environmental factors of the world’s richest country. It would be very useful for the decision making of many businesses planning to partner up with her. For the internal environment of the country, check out the swot analysis of China. Here’s the pestle analysis of China as follows;
Political factors impacting China
Stable Political Environment
The political environment of China is stable and it’s one of the main reasons behind her success. She doesn’t have sufficient freedom of speech that we experience in the western country. Many critics question her political system without the freedom of speech.
FDI (foreign direct investment)
The foreign investors usually look for an established country’s infrastructure, cheap labor, and a stable political environment before investing their capital. China has got all of these characteristics. That’s why she’s the best place for FDI (foreign direct investment). She has an FDI of 137.3 billion dollars by the end of 2020. It’s very high if you keep in mind the pandemic of covid-19.
Members of World Organizations
China has the permanent seat at the table of the United Nations Security Council. She’s also a member of the world’s leading organizations like ASEAN Plus, WTO, BCIM, APEC, G2O, BRICKS, and many others. She has managed to develop very good relationships with other world’s leading countries.
Conflict with the USA
China’s relationship with the US government and the Trump administration has been very difficult. The Americans never liked the communist and socialist system of government. That’s why they perceive China as a major threat to the world’s security and freedom of speech with her censorship and secretive policies. A recent protest in Hong Kong has also raised many questions.
The conflict between both countries would get cool down under the presidency of Joe Biden.
The government regulations are the most powerful force in China. All the businesses, companies, and foreign investors have to follow her regulations. Often it results in the form of censorship and great limitations. It becomes very difficult for companies Facebook, Netflix, Google, and others to run their business openly.
Economical factors impacting China
China’s GDP was 24.2 trillion dollars by the end of 2020 and it’s the world’s highest revenue of any country. The annual per capita of China was 17206 US dollars and it’s 73rd highest. Her foreign reserve comprises 3 trillion dollars. The country has been maintaining its revenue strength since 2010.
China has upgraded the conventional communist-controlled economy towards a market-based economy. It has helped the country to grow its economy by 10% every year.
China has indeed become the world’s leading economy and the most powerful. But she has paid the huge price of damaging the environment, urbanization, inequality, and many other challenges. Now, she has to address all of those issues in order to maintain its position.
China provides the advantage of cheap labor costs to the world’s manufacturers. That’s why they outsource their production work in China. But the country’s economic growth has been increasing the labor cost. Now, she’s paying higher wages than Mexico, Brazil, and Argentina. The question is whether she would provide cheap labor in the future or not.
China has also become a very powerful investor in the global market. She has invested her resources in countries like Chad and Niger, Angola, Argentina, Venezuela, UAE, Bangladesh, Pakistan, Australia, the UK, and the US. It shows Chinese influence and power in the global market.
The corporate income tax in China used to be 25%. She decreased it to 15% to promote the businesses. The income tax for an individual varies from 3% to 45%.
Social factors affecting China
As we know that China is home to the world’s largest population of 1.4 billion people. It means that she has the world’s largest consumer market. Businesses and companies have to produce mass products to meet the demands of the consumers.
The Chinese government has increased the minimum wage rates. Now people have more money to spend and their purchasing power has increased. That’s why Chinese people have been increasing their spending on clothes, cars, and smartphones to show off their successful status. The higher consumer spending would increase the growth of local businesses.
China has an impressive literacy rate of 96.4% and it’s one of the highest in the world. It means that her people have advanced understanding and intellectual skills.
Poverty Reduction Plan
The highest literacy rate has helped the country to decrease the poverty level. According to a report by Poverty Alleviation and Development, she has brought 68 million people out of the misery of poverty for the past 5 years. It makes a total of 850 million people, the world’s highest figure in human history. The country plans to do so in the upcoming years as well.
The rate of elderly people and the aging population has been increasing in China. She’s facing a serious issue of the increasing demand for labor. Now the country should amplify the birth rate and bring foreign workers.
Technological factors impacting China
According to an estimate by eMarketer, China has the highest number of online users of more than 914.1 million online users by the end of 2020. It comprises 65.5% of the total population. It would reach 975 million online users by the end of 2022.
Some of the world’s top tech giant companies like Tencent, Alibaba, Baidu, and many others belong to China. Their market share is so big that other world’s leading companies don’t hold a chance in China.
Science & Tech Leader
China has a plan of becoming the world’s leader in science and technology. She has started the innovation and entrepreneurship program in 2015 to achieve her goals. It would help the country to move from a cheap labor economy towards a tech economy.
Legal factors affecting China
Chinese has introduced many labor laws over the years like Administration Regulation Chen 2019, PRC Labor Contract Law 2007, and PRC Labor Law 1995. They deal with issues like labor disputes laws, employees’ remuneration and benefits laws, and labor standard laws.
She has divided its FDI catalog into 4 categories; permitted, prohibited, restricted, and encouraged. Now, there are 484 industries (production of food & drink) operate under the encouraged category, 35 industries (banks, securities, power grid, and construction) in the restricted category, and 28 industries (air traffic, postal, and domestic) in the prohibited category. Other than the abovementioned industries fall under the category of a permitted category.
Environmental factors Impacting China
High Pollution Level
The growing economic development has caused a catastrophic impact on the environment. Loss of biodiversity, air and water pollution, climate change, deforestation, and industrial waste are some of the major issues.
The Chinese government has taken several appreciative steps to face environmental issues. For instance, public awareness programs to protect the environment and decentralization of control at the local level.
After an in-depth study of the pestle analysis of China, we have realized that China is the new tech and economic leader of the world. The country should keep in mind issues like the aging population, environmental challenges, and poor public image.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.