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8/6/2019 The Rising Power of China
http://slidepdf.com/reader/full/the-rising-power-of-china 1/6
Siddhartho Mukherjee, National EMBA 2012 student
THE RISING POWER OF CHINA - ITS IMPACT ON GLOBAL BUSINESS
In this assignment paper I am going to write about the rising power of China, which though an
ongoing discussion but has been specially highlighted, in recent times, due to slow currency
appreciation and global imbalances.
Description of the activity, event, etc., a brief explanation of its controversial nature
The rising power of China is a controversial issue as it has both been appreciated by some and
simultaneously raised eyebrows of many. China, a civilisation of 5,000 years, was very much
isolated through its strong ‘Chinese Walls’ and grew quietly from within. It has been under
communism regime since late 1940 and was not much on international focus until it started to
rise as an economic power. Presently, with a consistent GDP growth at an average 8 % per
year, they have established themselves as second largest economy. Infact in 2010 Chineseeconomy overtook the Japanese economy.
With economic advancement they have gained themselves much attention of the global
economic forum and have started to realise its power. “We used to hide our power—deny our
power,” a Chinese scholar told David Lampton of the School of Advanced International Studies
in Washingtoni. The success story of China was initiated through its alliance with America but
with its recent growth, coupled with the economic crisis in United States and Europe, it has
started to rethink its strategy. China has realised it is a power that the world cannot deny and
the rest part of its growth can go without support of America.
A combination of economic and political reasons has made this entire growth story
controversial. Growth of China and other emerging economies are welcome from business
perspective, but the line between economic power and political power gets thinner as the
country grows year after year. Adding to the controversy is China’s perception that the western
world is hostile to China’s development and they should be strong from all aspects including
military power, to be prepared for any challenge.
Identification of major stakeholders (and their interests)
The biggest stake holder is the United States as it is benefited from the gain in business through
the American companies operating in China. It has a two part aspect, one by American
companies setting up manufacturing facilities in China and gaining access to the cheap labour
pool; these companies can compete better in the world market. Majority of electronic and
8/6/2019 The Rising Power of China
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Siddhartho Mukherjee, National EMBA 2012 student
consumer goods of the American brands (like HP, Dell, Whirlpool and many others) are
manufactured in China and shipped worldwide from there. The other advantage to American
business is in the form of expanding the market base into China and selling its brands to the
advancing1 Chinese population. Ford and GM combinedly has 17.5% market share of the
automobile market in Chinaii, while sales of various American brands like GE, KFC, McDonald,
Gap has an increasing trend.
Other Asian and emerging countries are sponsoring the growth too. Chinese growth has helped
India and other emerging countries to develop trade relationship with China and reduce
dependency on the western world. Several African countries have fuelled China`s growth as
they find it easier to trade with China than with European or American businesses.
Analysis of the situation and a clear indication of your position on the issue
Broadly speaking the growth of China has initiated various speculations from the developed
world; the most being a possibility of power struggle with the current power centre - United
States. In this paper, the discussion is limited to business perspective and its impact on the
global economics. The rising power of China has created several controversies starting from the
currency devaluation, to trade imbalance and other subjects, as discussed in section below.
o Foreign reserves & currency war - At the time of writing this paper, China holds US$
2.8 trillion foreign exchange reserve (65% of it is in USD iii) which calls for
appreciation of their currency. The accusation by other leading economies, like
United States, is China has kept its currency undervalued for other bigger gains.
China would not like to appreciate its currency in fear of losing the competitive edge
in global exports. The graph below shows the gap between real and nominal value
of the Yuan against the Dollar.
1 ‘Advancing Chinese population’: the growing middle‐class population those have the buying power and are tech‐
savy.
8/6/2019 The Rising Power of China
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Siddharth
o Mukherjee
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8/6/2019 The Rising Power of China
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Siddharth
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8/6/2019 The Rising Power of China
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Siddhartho Mukherjee, National EMBA 2012 student
the middle market but after acquisition of IBM computers in 2005 it has positioned itself as the
world`s third largest PC manufacturerv.
China’s growth is not to be frowned upon but to be taken seriously as with more Chinese
companies emerging as global players (CITIC, Haier, Lenovo), the competition scenario ischanging fast. China has been an active player in the region to develop business with its
neighbours and have been growing strong to invest in infrastructure and the resource industries
of Africa. From purchasing big corporations to medium or small resource companies China has
well rounded strategies to span its growth across the globe. Recently a Chinese photo-voltaic
cell company, Suntech, has started manufacturing in Arizona to protect itself from import
embargosvi.
With these rapid developments, the business scenario has much changed in recent times.
Chinese people’s preferences, affordability and style of living are changing and it creates an
expanding market for the global companies to focus on this emerging economy. In some fields
of business, like technology, it is a ‘survival of the fittest’ situation where if the major players are
not watchful of China’s growth, they could either be squeezed out of business or would be taken
over by them. Another growth strategy Chinese companies have taken is to manufacture
products as per the regional standards. They are aware of the quality consciousness and
affordability of customers in different part of the world, and deliver their products accordingly.
Thus a Chinese brand of toy being sold in North America will be of much superior quality than
what China sells to its neighbouring countries. While this indicates their thoroughness in
studying customer behaviour pattern, it also speaks about their aggressiveness to penetrate
markets globally and not to limit their market to few segments.
The impact of this rising power is not limited to takeovers and competition but will spread to
other aspects of society as well. With power shifting to the east, western governments will be
losing political grip on many parts of the world around and there will increasingly be more
penetration of foreigners in their society. However not everything is lost in the game; by
emergence of new great powers and rising number of Indians, Chinese and Brazilians who can
afford to buy costlier products and services, it will help the companies to grow in newer markets.
The growth of China has stimulated the global business environment and has opened doors of
opportunities to companies to expand their business in China, and for Chinese companies to
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Siddhartho Mukherjee, National EMBA 2012 student
expand outside China. The benefit is shared across the globe and now when there is a financial
crisis on Europe or America, they can look up to some new countries for helping them out.
i The Economist “Less biding and hiding”, December 2nd, 2010
ii http://www.thestreet.com/story/10966500/fords-china-sales-rise.html (accessed on January 11, 2011)
iii The Economist “China does not know where to put all its dollars”, October 14
th, 2010
iv Bloomberg Businessweek, “Charlie Rose talks to John Huntsman”; paper print edition, January 10‐16,
2011.
vThe Battle for China`s Good-Enough Market – Harvard Business Review (included in MBUS 971 course
binder)
vi Bloomberg Businessweek “Chinese Plants Grow on US Turf” – paper print edition, January 3‐9, 2011