China is an emerging economy that offers many market opportunities for both foreign and domestic investments. While the view has been on the US as a better place to conduct business, there is currently a changing focus as many people start considering China as a right place for entrepreneurship. China’s massive population, fair business legislations including tax incentives as well as a growing economy offering large market and considerably low labor costs make the entrepreneurs in China better off in doing business than their rivals from the West.
China has been experiencing a steady and robust growth over the past thirty years (Carraher, S. M. et al. 2010). According to Wang, W. et al., (2011), the gross domestic product (GDP) of China has an annual increase of 10%, making China the second largest economy after the USA and the world’s leading exporter. China has forty-two million small and medium enterprises. These businesses have been growing and increasing in number due to the favorable business environment. Chinese government offers financial support to the SMEs to improve the growth of their businesses. Also, there are a few legal formalities that one must meet before commencing up a business in China. For the local entrepreneurs, one only needs to register the business and get a license. After that, the entrepreneur can begin the business. These limited regulations make it easy for the new entrepreneurs to join the market. Also, the tax rates for the entrepreneurs in China are favorable as compared to those in the western countries (Bosma & Levie, J. 2010). According to Kelley, D. et al. (2012), Chinese entrepreneurs also enjoy a tax incentive on specific business projects. Chinese entrepreneurs investing in the high-new technology enterprises have preferential tax rates of 15% and a 50% deduction for a qualifying research and development expenditure. It is meant to promote technological innovation and attract more entrepreneurs to invest in the technology improvement businesses. These businesses also enjoy a two year tax holiday and a reduced tax rate of up to 12.5%. These tax incentives are a source of motivation to the new entrepreneurs to join the business.
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Also, the economic conditions in China are stable, creating a climate suitable for entrepreneurship (Hart & Acs, 2011). With the high population, the demand is high, attracting more locals to invest. The large population also provides active labor at an affordable price, making the firms save costs on the workforce. The Chinese population is well educated with adequate technical skills that are required by the Chinese companies to provide labor. The cheap labor increases the profits to the entrepreneurs, giving more people the incentive to become entrepreneurs. China is also open to the regional and international trade, creating an additional market for the entrepreneurs to sell their products abroad. Export friendly policies play a significant role in promoting exports to foreign countries and allowing the entrepreneurs to expand their markets beyond the borders (Kenney, M. et al. 2012). In efforts to create a more friendly business environment, free trade agreements have been initiated to allow the entrepreneurs sell their products globally, thus increasing their market base and consequently more revenue.
However, other scholars argue that it is unsafe and insecure to do business in China due to the political uncertainty as well as stiff competition due to the increasing number of foreign investors who are fighting China market favorable and attractive . According to Guan, J., & Chen, K. (2010), China’s political environment is uncertain posing a threat to the entrepreneurs. Also, the competition has increased in the entrepreneurship in China. Many foreign investors have invaded the China market, taking advantage of the favorable market conditions in China. Investors from the US and North Korea are invading the markets in China, creating stiff competition to the local entrepreneurs. Despite these challenges, China entrepreneurs remain advantageous over their rivals from the US and the rest of Europe.
United States is the leading economy in the world, having the best infrastructures and other facilities that support business (Giacomin, O. et al. 2011). The stability of the economy is the significant boost to the entrepreneurs, guaranteeing them a stable market. Also, the US dollar is very stable as compared to other currencies, making the US entrepreneurs who engage in exports to have the upper hand. According to Rao, C. P. et al. (2015), 70% of Americans would prefer to be entrepreneurs as compared to working for someone else. It is different from the 46% of the adults who prefer entrepreneurship in the West. However, the American tax policies are unsupportive to the entrepreneurship. Sales tax reduces personal consumption. Thus higher taxes lower the profits available for the entrepreneurs. The tax rates charged by the United States on its entrepreneurs is slightly lower compared to what is charged by the European countries but is higher than what is charged by the Chinese government on its entrepreneurs. This makes Chinese entrepreneurs more advantageous than their rivals in Europe and United States.
The labor market and business regulations can be costly for businesses. However, the rules in the United States are less restrictive as compared to the European countries. Many countries in Europe have restrictions on the number of hours a business may open or the time of the night that a business may operate. Both America and the European countries have the restrictions on the maximum number of hours the employees may work; this increases the cost of labor to the entrepreneurs. This is unlike in China where the regulations on the employees are very minimal, and the labor cost is low due to more demand for jobs than the supply. The low costs of labor attract more entrepreneurs in China as it increases the profits.
China is gradually shifting to the high-tech economy in the world and is likely to overcome the US and Western countries soon. The Chinese government plans to increases the expenditure on the R&D from the current 1.7% to 2.5% of the GDP by the year 2020. The leading country, US spend 2.7% of the GDP on the R&D. The Chinese government is funding megaprojects such as new generation nuclear reactors, nanotechnology, and quantum physics. At the same time, the government is colluding with the multinational firms in various sectors to share their technology with the enterprises that are owned by the China state. According to Guan and Chen (2010), China has been applying new policies intended to promote technology from foreign multinationals in many technology-based industries including power generation, high-speed rail, and air transportation.
China has created the world’s first ever Ultra High Voltage ac and DC voltage transmission (Walsh, K. A. 2016). The high voltage transmission can deliver 6.4 gigawatts to Shanghai moving for over 1300 miles. These are more efficient and carry more power over longer miles compared to the generation firms in the US and the European countries. In about six years, China has developed a high-speed rail technology, becoming the world’s quickest and most extensive high-speed rail network, and is predicted to become the larger than the rest of the world combined after a decade. This technology has overcome that of the US and the rest of the world. Travelling from Beijing to Shanghai has been cut by seven hours, from eleven hours to four hours. Also, China has over thirty nuclear plants under construction; this is the highest number in the world, exceeding that of the US and any other European country (Jing, 2010). It is also currently researching the fourth generation nuclear power technologies. Chinese have also developed a supercomputer, making the world’s largest and fastest computer. Despite the fact that the United States has developed a supercomputer, its speed and performance are still slow as compared to the Chinese one.
In both China and the Western nations, young entrepreneurship is very common. Youths from these countries engage in business activities as a way of earning a living. In China, majority of the youths who gets into business do it in small scale. Most of the business activities that the young people engage in are majorly domestic. The Chinese government has put in place some source of finance to provide capital to the young entrepreneurs who might be having a business idea but lack the required resources to put the idea into action.
A country has an absolute advantage in producing goods when it can create the goods using a few resources. It can be as a result of country’s natural resources. China has an absolute advantage over the US and the rest of the western countries due to some of the activities that it can do efficiently. China has a lot of industrial production capacity, excellent and adequate natural resources such as deep water ports and navigable rivers as well as a large number of technicians and skilled labor derived from its large population. Also, China has an adequate internal transport system, making it easy for freight as compared to other countries from the West. The population of China is large; nearly four times that of the United States, giving it an advantage on the availability of enough workforces to increases its industrial and manufacturing capacity. The country has, therefore, an absolute advantage over the rest of the nations in manufacturing consumer goods. According to Cuñat and Melitz (2012), in a world with fewer barriers to international trade, nations will find it profitable to specialize in the production of goods that have a comparative advantage. With China having adequate low-priced labor, they have a comparative advantage in producing the labor-intensive goods. Similarly, United States will have a comparative advantage in producing goods that are human and physical-capital intensive due to the existence of highly educated labor force and technically sophisticated equipment (Porter, 2011). In such, each country will specialize in producing what it does best by utilizing the resources that are readily available.
Vernon’s model
The Vernon’s model is applicable in China’s emerging technology in the television industry. China, a newcomer in the field is exerting the rising control over the product life cycle in the worldwide television set industry. China have heavily invested in the direct television production, a technology that undergoes Vernon’s IPLC making China an international television set production, a technology that began in the domestic market. Earlier in the Television industry were the Western nations who invested in the industry by starting as a domestic technology but later rose to the global market through the IPLC. Vernon model was also used to explain the U.S. export strength, foreign production starts, foreign production competitive in export markets and the import competition. It hypothesizes a pattern of trade composition that occurs at different stages in the U.S. economic growth as it improves in its technology to become global.
Porter’s Diamond model
China has well-known factor conditions of sufficient natural resources as compared to other Western countries (Wang, Y. M et al. 2010). The country is well rich in natural resources, which provide the necessary raw materials for the growth of the industries. There is adequate land as compared to other Western countries, which provide space for the construction of the industries and expansion of other facilities. In addition, the climate is favorable, supporting Agriculture and consequently technology development. As explained in the Porter’s Diamond model, China makes use of these resources that it readily has to technologically grow its industries and become high tech nation. The existence of these factor conditions has a direct influence on the technology development of China. The availability of affordable and high skilled labor also gives China an upper hand in the growth towards being a high tech nation. As compared with their rivals, China is predicted to be the leading economy in the world by 2030, this being as a result of the many natural resources that China has over its competitors. As explained by Porter, a nation that has more natural resources as well as other factor conditions is more likely to become a leading economy as compared to its competitors.
According to Michael Porter, specific determinants must be considered by the firm. These factors include; Factor conditions: this refers to the situation in the country which includes knowledge and the level of infrastructure which form the basis for competition in any particular industry (Ozgen, E. 2011). Another determinant is the related and supporting industries. The prosperity of a market is heavily dependent on the presence of suppliers and related industries. These will reinforce innovation and facilitate the process of internationalization. The third determinant is the home demand conditions (Eickelpasch, A. et al. 2010). It deals with the need to know what the reasons exist for a thriving market. It also tackles the nature of the market and the size of the market. It is because of the existence of the interaction of the economies of scales, cost of transportation and the home market. The fourth factor is the strategy, structure, and the rivalry. It majorly focuses on how the organization is managed as well as its corporate objectives. It further focuses on the conditions in a country determining where the company can be established. The other factor is the government’s role in supporting and encouraging the development of industries both at home and abroad. The government’s role can be through financing or provision of infrastructure. Lastly, Porter indicates that the chance in the market also plays a role by providing opportunities for innovations (Mann & Byun, 2011). Michael Porter's model is applicable in the Chinese industries where the Chinese government puts up IT policies to help increase the growth of technology in the country and create a global competitive advantage.
In conclusion, the Chinese government has put up more favorable and supportive policies that are intended to boost the spirit of entrepreneurship in the country compared to the western nations. The new entrepreneurs venturing into business in China have more advantages, and their businesses are more likely to be successful as compared to their rivals from the US and the European countries.
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