Chinese Political and Economic System and China´s policies on foreign investment

Chinese political system.

In the context of the political system the chinese government is People’s Republic of China and it’s a communist state.
China is a centralized as a unitary state, totally administered by the Chinese Communist Party, with a large national bureaucracy that deals with everything and it’s authoritarian in its structure and in its ideology.
According with the executive power is overseen by a collegial corporation with important powers: the State Affairs Council (CAE), under which government commissions, ministries and certain agencies with ministerial rank are placed.

In terms of the legislative power is unicameral and rests in the Popular National Assembly. It is made up of about 3000 deputies who are elected every five years by indirect suffrage by the local authorities. In fact, the deputies represent the 23 provinces, the 5 regions and the 4 autonomous municipalities.

 

Chinese economical system.

Nowadays China is the second largest economic power in the world, the first exporter and has the highest exchange reserves. The global recession of 2009 interrupted the pace of steady growth that the country had undertaken, and the limits of growth focused essentially on exports. As a result of the global crysis in 2016 Chinese, growth was 6.6% of GDP, and is expected to be only 6.2% in 2017, which has resulted in an evident recession in the northeastern región.

Moreover local businesses and local authorities are heavily indebted, and the injection of billions of yuan into the economy fuels speculation and the central bank’s exchange reserves are declining, which has led the authorities to resort to control of investments. The quality of bank assets degrades and this trend is underestimated due to the importance of shadow banking.

There are still a number of challenges related to population aging, labor shortages, the lack of openness of the political system, the competitiveness of an economy dependent on high investment expenditure and the expansion of credit.
Also there are still large differences between the living standards of the city and the countryside, between the urban areas of the coasts of China and the interior and west of the country.

But China is planning to grow his economy with the Five Year Plan that includes:
– Innovation: in the outside China still farming and planting by hand and using animals instead of irrigation or using authomatic machines and they need to develop urbanization and services.
– Internet +: They need to digitalize the country (Internet of Things, Big Data, Robotics, IA, Smart cities…)
– Made in China 2025: it’s base don Industrialization 4.0. They don’t want their productos to be perceived like low quality products and they will need to créate a suistanable financial system.
– Opening Up (One Belt One Road): They want to expand the chinese market in order to develop the exportation to Europe and other countries by a large system of railways.
– Coordination & Sharing.
So Chine in order to achieve these goals are going to deal with the construction of more airports, reestructure his 5 big cities (Beijing, Shangai, Guangzhou, Shenzhen and Tianjin) and deal with the problems of the ghost cities trying to bring people to them.

 

China’s policies on foreign investment.

Investment in China has his particular way.
First of all if you are interested in investing in China you need to take careful if the industry you want to invest is in the Catalogue of Industries for Foreing Direct Investment 2015 which stablish the rules to follow for foreing industries. Also it takes notes about the procedural restrictions that will be apllied for the investment so the investor could know if the business will be encouraged or discouraged by Chinese government.
So take careful about the business you want to invest because the governemt has the total power to stop your company and keep in mind that all the money you earn in China need to be in China.


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