The Business Environment of China: Challenges of an Emerging Economic Superpower

China is one of the oldest continuous civilizations in the world, with organized society existing for more than 10,000 years. While the country had a complex and dynamic past, the scope and pace of change in China since the reform era of the 1980s was unprecedented in the nation’s long history. The country reduced the number of its citizens living in poverty by over 200 million people and achieved a sevenfold increase in per capita income from 1979 to 2006. In 2008, China’s GDP accounted for 6 percent of the global total, making it the third-largest economy in the world. It was also a leading recipient of foreign direct investment, attracting $82.7 billion in 2007 and approximately $92.4 billion in 2008. Although these results were impressive, as the most populous nation in the world, China was facing the need to create 100 million new jobs by 2013 and to quadruple its GDP by 2020 in order to achieve and sustain a reasonable standard of living for its people. Moreover, in the midst of the 2009 global economic crisis, the country had experienced a steep slowdown in its economic growth, from 13 percent in 2007 to a projected 7-8 percent in 2009. To help accomplish its objectives in the face of these challenges, China had opened itself to foreign investment, trade, and the market-oriented ideas that would stimulate domestic productivity and build its global competitiveness. Although the country had experienced its share of hardship, it was faring better than most developing and many developed nations. As governments in advanced market-oriented economies were driven to intervene in the management of their domestic financial institutions, all eyes were on China and speculation ran high regarding how the country’s global role would change in the new market economy. This note provides a brief history of the country and explores China’s current status in the global business environment.