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Doing Business in China & Hong Kong

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ABOUT CHINA

China is the world's fourth-largest country (after Russia, Canada, and US). It has a population of about 1.3 billion and an estimated population growth of 0.87%. Its GDP, based on purchasing power parity, equates to US$ 6 trillion, making it the second largest economy in the world.

In late 1978 the Chinese leadership began moving the economy from a centrally planned economy to a more market-oriented system. Whereas the system operates within a political framework of strict Communist control, the economic influence of non-state organisations and individual citizens has been steadily increasing. The authorities have switched to a system of household and village responsibility in agriculture in place of the old collectivisation, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprise in services and light manufacturing, and opened the economy to increased foreign trade and investment.

The result has been a quadrupling of GDP since 1978.

Agriculture and industry have posted major gains, especially in coastal areas near Hong Kong and opposite Taiwan, where foreign investment has helped spur output of both domestic and export goods.

Access to the WTO strengthens China's ability to maintain sturdy growth rates, and at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences. Beijing has claimed 7% 8% annual growth in recent years. However, China faces a set of substantial domestic economic policy challenges  banks, social welfare and agriculture  that will require considerable further effort on the part of the Chinese authorities to ensure continued economic success over the medium term.

China is the largest recipient of foreign direct investment ("FDI") among developing countries and looks set to overtake the US as the largest recipient in the world. The top investors, in decreasing order of investment, are Hong Kong, USA, BVI, Japan, Taiwan, Singapore, Republic of Korea, UK, Germany, France, Holland, Cayman Islands, Macao, Australia and Canada.

Many foreign firms have been attracted to China by the potentially huge domestic market, despite widespread poverty and unemployment. Other investors have specifically entered China in order to produce goods for export. These firms view China as part of their global production strategies, and seek to take advantage of China's undoubted low labour costs. By 2001, foreign invested enterprises accounted for half of China's exports.

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