China is currently the second largest economy in the world behind the United States, with a Gross Domestic Product (GDP) of nearly RMB 57 trillion (USD 9.3 trillion) in 2013 and averaging 8.3% annual growth over the last three decades. Much of this growth can be attributed to two key factors:
- The “open-door policy” implemented in 1978, which committed China to adopting policies to promote foreign trade and establish a foundation for future economic reforms; and
- China’s acceptance into the World Trade Organisation (WTO) in December 2001 further opened China and liberalised the market, leading to a surge in trade and Foreign Direct Investment (FDI).
FDI inflows have increased rapidly since China joined the WTO; China is now one of the top destinations for FDI in the world, with FDI inflows reaching RMB 720 billion (USD118 billion) in 2013. The chart below illustrates the increase in FDI inflows, imports and exports from 2001 to 2013.
China is a massive country; geographically it is nearly the size of the United States. China is divided into 34 provincial-level administrative units together with four direct municipalities – Beijing, Chongqing, Shanghai and Tianjin. China also has two Special Administrative Regions (SARs) – Hong Kong and Macau – which are both semi-autonomous and self-governing.
Generally speaking, the development of China is uneven, with stark differences between coastal provinces and the inland areas. Furthermore, China should not necessarily be viewed as one market; there are substantial regional differences in terms of culture, language and consumer preferences.
China’s rapid development has created significant opportunities in the market for most companies. However, China is frustratingly bureaucratic and can be a highly challenging market in which to gain a foothold.
