China's economy: GDP, Inflation rate and Integrations

Week 3 

In 2017, China’s GDP amounted to approximately 12237.70 billion dollars; this GDP value represented 19.74 percent of the global economy. In 2016, China’s GDP amounted to around 11190.9 billion USD (Clifford, 2017). China’s GDP amid the year 2012 and 2015 amounted to approximately 8560.55, 9607.22, 10482.37, and 11064.67 billion USD respectively. China’s GNI amid the year 2012 and 2017 include approximately 53911.65, 59042.24, 64479.11, 68644.96, 74059.87, and 82,482.84 billion RMB respectively. China’s GNP amid the year 2012 and 2017 amounted to approximately 8545.93, 9603.44, 10466.27, 10925.48, 11150.78, and 12208.14 billion USD respectively. China’s HDI amid the year 2012 and 2017 include 0.722, 0.729, 0.738, 0.743, 0.748, and 0.752 respectively (Ping, Chen, & Xiaojin, 2017). China’s consumer price inflation increased 2.3 percent in August 2018 to 2.5 percent in September 2018. Commodity prices increased by approximately 0.7 percent amid August and September 2018. 

China’s average inflation rate amid 1986 and 2018 amount to around 5.22 percent. China’s rate of unemployment declined to approximately 3.83 percent in June 2018 from around 3.89 in March 2018. China’s rate of labor participation amid 2016 and 2017 increased to around 68.93 percent. China’s income inequality amid the year 2012 and 2016 include 47.4 (0.474), 47.3 (0.473), 46.9 (0.469), 46.2 (0.462), and 46.5 (0.465) respectively (Clifford, 2017). In March 2018, China’s BOP credit information was reported at approximately 647.39 billion USD; this marks a significant decrease from approximately 751.58 during the year 2017. As of August 2018, China’s debt had experienced a significant increase to approximately 2.58 trillion USD. China’s poverty rate has significantly declined from 4.5 percent in 2016 to approximately 3.1 percent during the year 2017. The rate of poverty in China has declined from approximately 10.2 percent in the year 2012 to approximately 3.1 percent in the year 2017 (Clifford, 2017). 

China is the second largest market economy globally by nominal GDP. Moreover, it is also the largest economy globally by PPP (Purchasing Power Parity). In the year 2016, China ranked seventy-eight by GDP (PPP) and seventy-one by nominal GDP per capita; this is in accordance with an IMF report based on per capita income (Ping, Chen, & Xiaojin, 2017). China is endowed with natural resources of an estimated worth of twenty-three trillion dollars. Rare earth metals and coal accounts for approximately ninety percent of China’s natural resources. Additionally, China has the largest banking sector with total deposits of approximately 26.54 trillion dollars and total assets of approximately 39.9 trillion dollars. China is the largest commodity exporter and manufacturing economy in the world. Moreover, China ranks second globally in commodity importation, and its consumer market is the fastest-growing market in the world. China is the biggest trading nation globally and a net importer of products and services; it also plays a significant role in global trade (Ping, Chen, & Xiaojin, 2017). 

The significant increases in China's inflation rate will impact the international business environment by decreasing the consumers’ purchasing power, increase the cost of borrowing, increase employment levels, and weaken the country’s currency (Ping, Chen & Xiaojin, 2017). Additionally, high inflation rates will impact the country’s export trade negatively. The significant decreases in unemployment rates in China will enhance an increase in consumer spending, an increase in labor availability which subsequently enhances productivity, and the increase in resource mobilization. The significant decline in poverty rates will lead to a significant increase in consumer spending. The increase in China’s debt may lead to a significant increase in taxes and a substantial decline in consumer spending. 

References 

Clifford, P. G. (2017). The China Paradox : At the Front Line of Economic Transformation . Boston, Germany: De|G Press. 

Ping Y., Chen, K. C., & Xiaojin S. (2017). Foreign Direct Investment and Economic Growth in China: Evidence from a Two-Sector Model. Journal of Financial Management & Analysis , 30(2), 1–10. 

Week 4 

Economic integration relates to an agreement amid countries within a particular geographic area to minimize and ultimately remove non-tariff and tariff barriers to the free flow of services and commodities and the coordination of fiscal and monetary policies (Bustillo & Mauza, 2012). China is gradually progressing into a more market-oriented economy thereby, attracting foreign investments. For instance, China’s FDI amid January and September 2018 increased to approximately 91.77 billion USD (twenty-nine percent increase). In 2017, China’s FDI amounted to approximately 1310.35 USD HML. Human resources and investments have been flowing into the country from abroad at a rapid rate; this significantly boosts the country’s FDI and fostering the introduction of new and advanced technology into the nation. Foreign investments in China have established many joint ventures; these investments account for around thirty percent of China’s overall industrial production. Over the last four years, Japan’s FDI in China has significantly increased by over three-hundred percent (Ping, Chen & Xiaojin, 2017). 

Another approach to economic integration by China is through the removal of restrictions or constraints on labor mobility. The removal of these constraints has enabled the nation to attain rapid advancements in productivity thereby, attracting migrant workers from rural regions to increasingly productive industrial sectors in the country (Haggard & Noland 2018). Currently, China's economy is centered primarily on the labor-intensive production of manufactured commodities, exploiting the advantage of cheap labor, good infrastructure, and a highly educated labor force. Thirdly, the country has executed various privatization strategies to enhance international trade. Privatization plays a significant role in increasing competition in the marketplace, which subsequently fosters innovations, efficiency, and the generation of profits. Fourthly, China has significantly reduced its tariffs. The country has also removed other trade barriers thereby, opening the nation to international free trade; this also enhances its capacity to import and export goods with other countries. Other primary reforms have been initiated in various areas. For instance, the advances in the establishment of safety nets and privatization of China's housing sector. Additionally, China's foreign market's operations and development have been improved through the elimination of various requirements and restrictions (Haggard & Noland, 2018). 

China’s strongest allies include the U.S, Japan, Hong Kong, South Korea, Vietnam, Germany, India, Netherlands, the U.K, Singapore, Taiwan, Russia, Thailand, and Malaysia (Bustillo & Mauza, 2012). China has bilateral trade agreements with many economies and countries; they include Austria, Canada, Germany, France, the U.K, Thailand, South Korea, Spain, Japan, Italy, and the Belgium-Luxembourg Economic Union. The country’s bilateral trade treaties cover aspects such as the repatriation of trade advancements, arbitration, and arbitration. Additionally, the country maintains fourteen FTAs with its investment and trade partners. China’s FTA affiliates include ASEAN, Hong Kong, Taiwan, Macao, Switzerland, Singapore, New Zealand, Pakistan, Iceland, Chile, Costa Rica, and Peru (Bustillo & Mauza, 2012). 

China is currently involved in a trade war with the United States (Haggard & Noland 2018). Each nation has imposed additional tariffs on goods traded with each other. In January 2018, the United States imposed tariffs on solar panel imports, which are mainly manufactured in the Republic of China. On 6th July 2018, the United States imposed a twenty-five percent tariff on imported Chinese commodities worth thirty-four billion USD. China responded by imposing a similar tariff on all goods imported from the U.S. In mid-August 2018, the U.S further imposed an additional tariff on Chinese imports worth sixteen billion USD. On 24th September 2018, an additional tariff on Chinese goods worth 200 billion USD was effected. In retaliation, China imposed an additional tariff on U.S goods worth sixty billion U.S (Haggard & Noland 2018). 

References 

Bustillo, R., & Maiza, A. (2012). An analysis of the economic integration of China and the European Union: the role of European trade policy. Asia Pacific Business Review , 18(3), 355–372. 

Haggard, S., & Noland, M. (2018). Networks, Trust and Trade: The Microeconomics of China-North Korea Integration. Asian Economic Journal , 32(3), 277–299. 

Ping Y., Chen, K. C., & Xiaojin S. (2017). Foreign Direct Investment and Economic Growth in China: Evidence from a Two-Sector Model. Journal of Financial Management & Analysis , 30(2), 1–10. 

Week 5 

Tesla Inc.’s Porter’s Five Force’s Analysis 

Rivalry with Competing Firms 

Under this category, I will delineate the effect of competition on the automobile business environment. Tesla Inc. runs in a market that is highly competitive. The external elements’ intensities liable for competitive rivalry’s strong force include:- 

Few numbers of companies (weak forces) 

High competitiveness of companies (strong forces) 

Minimal switching expenses (strong forces) 

Very few organization currently function in the automotive business environment. According to this evaluation system, this external feature restricts the impact of competition on the company. Nonetheless, these companies are usually competitive with regards to innovation and product promotion. For instance, large automotive organizations often have competitive marketing promotions. Tesla Inc.’s 4Ps or marketing mix partially meets this level of competition, and this subsequently strengthens competitors’ impacts against the firm. Additionally, the low impediments placed on consumers to purchase vehicles from other car manufacturers (this is reflective of the low-switching costs) strengthens further competition’s force. The competitive rivalry should, therefore, be a Tesla’s high-priority strategic management factor of consideration (Walder, 2013). 

Buyers of Output (Bargaining Power of Buyers) 

Tesla Inc.’s consumers impact revenues generated from the company’s sales directly. The external attributes’ intensities reflect a moderate Buyers of output’s force on the company are listed below: 

Low (minimal) switching expense (strong force) 

Moderate (average) substitute accessibility (moderate forces) 

Low (minimal) volumes (capacity) of purchases (weak forces) 

Minimal switching expenses minimize the obstacles for the company’s consumers to buy vehicles from other automotive manufacturers; this external element presents a strong or powerful force against the organization and other entities in the automobile industrial environment. Nonetheless, substitute accessibility is usually average in multiple cases and thus constraining the bargaining power of consumers against Tesla Inc. Additionally, the low volumes of purchases minimize the impact of consumers on Tesla Inc. The external features’ intensities under this entity present consumers’ bargaining power as an average force and thus a secondary priority for the management; this prioritization is exhibited in the company’s intensive strategies and generic strategies (Magretta, 2012). 

Suppliers of Inputs (Bargaining power of the company’s suppliers) 

Tesla Inc.’s business relies on supplier reliability. The external factors’ intensity generates a moderate force of the suppliers’ bargaining power are listed below: 

Moderate (average) forward integration (average or moderate forces) 

Moderate (average) supplier size (moderate force) 

Moderate (average) levels of supply (average or moderate forces) 

The company’s suppliers exhibit a moderate force in forwarding integration strategies; this element reflects the suppliers' limited influence in their product sales and distribution approaches, thereby, imposing a moderate force on the organization. Additionally, a significant number of the company’s suppliers are averagely sized and, hence, have a limited influence on the company’s business environment. The moderate supply level often empowers suppliers to impact Tesla’s business environment but to a restricted level. The aspects under this entity, therefore, present the suppliers’ bargaining power as a secondary priority in strategic management (Magretta, 2012). 

Substitute Products (Threats of Substitutes) 

Tesla Inc. is usually confronted with the effect of substitutes in the automotive industry. The external elements' intensities present a moderate force of substitute products against the organization, and they include 

Low (minimal) switching costs or expenses (strong force) 

Moderate (average) substitute accessibility (average or moderate forces) 

Moderate (average) substitute performance (average or moderate forces) 

Minimal switching expenses often encourage competition (Magretta, 2012), and in this particular instance, it enables substitutes, for instance, public transportation to attract consumers with much ease, thereby, imposing a strong force against the company’s business environment. Howbeit, the average accessibility to substitutes constrains the impact of substitute products on Tesla’s business environment. Additionally, many of Tesla’s substitutes exhibit a moderate performance level in satisfying consumers’ needs, thereby, restricting the force of substitute products against Tesla. The aspects under this entity, therefore, present threats from substitute products as a secondary priority in strategic management. 

New Entry (Threats of New Entrants) 

New entrants relate to new companies that influence the business environment and subsequently impact the performance of organizations such as Tesla Inc. The external elements’ intensities establish a weak force of new entry threats against the organization, and they include 

High costs in developing a company’s brand (weak forces) 

High costs of operating the firm (weak forces) 

High economies of scale (weak forces) 

Competing with Tesla is considerably difficult especially due to the high costs required in brand development along with Elon Musk’s popularity; this external feature serves as an entry barrier in this particular context. Additionally, the manufacturing and assemblage of automobile products required high costs in investment; this subsequently imposes a significant barrier or obstacle to the entry of new companies. Moreover, developed automotive entities such as Tesla Inc. often benefit from the high economies of scale. New entrants can only attain high economies of scale in instances where they exceed the production threshold (Walder, 2013). The aspects under this entity, therefore, present new entry threats as a minor concern in strategic management. 

References 

Magretta, J. (2012). Understanding Michael Porter: The essential guide to competition and strategy . Boston, Mass: Harvard Business Review Press. 

Walder, J. (2013). Critical Evaluation of Michael Porter's Five Forces Framework . Place of publication not identified: Grin Verlag.