China’s Manufacturing Sector: Opportunities And Challenges For Malaysia

The impact of tariff conditions in China

Discuss about the Economic Environment And Tariff Conditions In China.

In the first article, the matters related to the tariff conditions in China are discussed that how the economy has been affected the war conditions in the economy. There is change in import and export conditions in the country. GDP of the country is discussed, how it will be increased and what are the reasons for increase in economy. The conditions of inflation and interest rates have been discussed. Another article highlights the Malaysian downfall in the manufacturing sector and decrease in the profit margins and growth in the country.

This research paper discusses the fact that the China economy is too strong to absorb all the other international trade also in the country. The analysis is done on the economic environment of China. The environment of China found to be relevant for establishing the business in country. The country is found to be good in the economic environment as the country has many options to explore business. The Malaysian businesses can explore more in the China market as it is rich in resources. In Malaysia market, the downfall in the manufacturing sector has been seen (Financial Times, 2018). The Nikkei-Markit manufacturing purchasing power of the managers falls to 49.9 in February and coming to 50-point line when separating growth from contraction. The Malaysian manufacturing companies can expand their business in the China market as the country is planning to do so. From the article, it can be seen that the China has targeted a huge development in the field of manufacturing blueprint. Country has targeted that by 2025; the China’s manufacturing sector will become the world largest market and have a dramatic effect on the global trade.

The recent changes in the economy of China are highlighted in the paper that how the economic changes affect the business, how much the GDP has been grown due to changes in the economic policies. China has fewer entry barriers because of this Malaysian market can take the entry in China market in manufacturing sector as the use of comparative cost advantage is there in Chinese economy. Another factor to invest in China is the low-interest rates in the country as compared to another country market. The GDP has been increasing in the China because of the changes in the policies of the economy (The Wall Street Journal, 2018)

China’s strong economy and its effect on the global market

China’s economy is found to be the strongest and stabilized economy in the world in manufacturing sector. Each and every company wants to explore its business there as there is use of the concept of economies of scale in the operations. China is rich in resources. Resources include the raw material and labor. In China cheap labor and resources are available. In the global economy, the crisis in the year of 2008 has grown at a moderate but a steady pace is seen in the market. According to The Economist Intelligence Unit (EIU), the world’s GDP is expected to increase by 2.7% in 2018 just slightly less than the 2.9% marked in the year 2017. China is considered to be the biggest contributor in the world GDP. China is reported at 5.8% to grow in the global market (China Daily, 2018). However, this percentage is quite lower than marked in the previous year. But this figure is found to be good in number and will be a good amount for another country to invest in China economy. The economy is showing the high level of development for the expansion and diversification of business (Asian and Pacific Edition, 2018). 

The first indicator which is shown by the economy of China is that there will be purchasing manager indices in the country. Beijing has tried to rein in the local government debt several times over the past few years. But the central government was planned to the locked debt-driven growth model. With the opening of rubber-stamp parliament in Beijing, Li Keqiang announced a fiscal deficit target of 2.6 percent of the gross domestic product.  At a Congress party in October, President Xi Jinping declared a new era in which achieving the high-quality growth, reducing pollution and risk control would take precedence over numerical growth targets (Economic Freedom, 2018).

But the party remains committed to the previous goal of doubling or increasing the per capita income and gross domestic product by the end of 2020. In the planning committee of China, it was recommended that there will be a separate report of both money supply and broad credit in the books. Both of these combined known as social financing, which is growing at the stable rate from the last year. It will be beneficial for the country which going to diversify its activities in the China economy. China economy has many exposures from which organization can make easy profits. But from this profit exposure, many risk exposure will also be there, which will affect the working of the business when internationalized in new countries (SCMP, 2018).

The Malaysian downfall in the manufacturing sector and decrease in profit margins

Countries which are planning to internationalize its business in other countries, China will be the most suitable country for them because of its political and economic and other advantages present in that country. The government of China also promote the investment in manufacturing by the other country also. It will increase trade relations in the country. But the country is suffering from the lower fiscal deficit, so-called quasi-fiscal spending by local government-linked financing platforms is also expected to slow down due to new rules intended to restrict disguised borrowings by localities (The Wall Street Journal, 2018).

The Malaysian and China market culture is found to be similar, so doing business there will be ease. Before a decade, it is a challenge for SME’s of Malaysia to have their entities there. But now, Malaysia is ready to expand its business there with full-fledged speed. As Malaysia is considered to be the largest exporter in the country so it can also have its entities in China where it can use the economies of scale concept. Using this concept, the country can make a huge amount of profit from the China market. Malaysia already has the 23^rd largest exporter in the world out of 168 countries in the WTO (The Guardian, 2018).

There was trade wars scenario is going to China which will ultimately hamper the economic gowth of the country. If the country is gone in the war times then the expansion in the business will be of no use to both countries and business (The Guardian, 2018). China has stabilized the government and has great faith in the power of technology to do well (The Star Online, 2018). The first article relates to the factor that if there is a war in US and China, it will go to affect the whole world economy. Investment decisions in the economy would affect the employment decision and tax raised.

Investment in China is found to be small but feels they have large. That is the reason it becomes hard to know the actual data and figures. The acquisition of the China market is more growing as compared to other countries and economies. It depends on the capital market in the country, if this market grows country will have development and growth phase and vice versa. In Malaysia market, the economic powers are increasingly in the region of a political superpower. These will negatively impact the investment in the market of Malaysia and this is the reason the Malaysians wants to expand their business in China market, not in Malaysia. It is true that China has made the existence of Australia more in the global market (The Sydney Morning Herald, 2018).

China’s economic environment and opportunities for businesses

China is the world largest exporter and second largest importer of the commercial services. China has 94% of all merchandise exports are manufactured goods and rest are the agricultural and mining products. China becomes the leader in the economic market. China is rich in resources of aluminum and steel. The reason for growth in the manufacturing sector in the China is because of its mines and other resources availability in the country. Business expansion in these resources will benefit the other country. China is covering almost more than 25% share in 2018 in this sector. The country grows its business more in the technological field and increasing the revenues in the country (The Economists, 2018).

In the market of China, the macro and micro factors are playing well in the market. The interest and inflation rate in the country is also adequate. The interest in the country is low which will benefit the new investors and entrepreneur. Due to low-interest rates, the expansion of the business is done easily. There is easy availability of the loan to the new entrepreneurs.  The cyclic duration in the economy is always in favor of the business houses as the most are the manufacturers in the country. The tax imposed by the government in China is too low that is the reason that the cost per unit of China is comparatively low as compared to other countries. The tax imposed by the Chinese country is too nominal and low (The Economists, 2018).

The people in China are enjoying their high standard of living and have high status. The people in the country China are less in poverty. That means there are very few persons who lie under the poverty line. Housing prices in China are skyrocketed as low interest fuelled speculation. High growth level have comes at the cost of the consumer safety. The different food safety and scandals measures are made by the Government to control the risk in the country and to have a safer working environment (Financial Times, 2018). 

In the end, it can be concluded that the working environment of China is good than any other country. From the above discussion, it can be easily seen that the economic factors in China are in favor of the manufacturing sector.  Establishing a business in China has its own advantages. The biggest advantage that any business will enjoy in China is the availability of cheap raw material, labor and other natural resources.  The economic policies made in the country are in the favor of the businesses. The trade restrictions in the country are too less and less amounts of barriers in the entry and exit of the company. But there is high capital requirement in establishing the business in manufacturing the goods. This will give more freedom and liberty to the business is to operate in the market freely. The other advantage the Malaysian establishment will be enjoying in the country is the comparative cost advantage and the high GDP rate and population in the country. There produce will not going to waste in the country. China’s production always has a market to sell its product at low cost. China market is having the advantage of cost leadership in the market due to this they are taking the advantage and are earning supernormal profits in the long run.

References

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China Daily. (2018) The future of China-Malaysia trading relationship.[online] Available on: https://www.Chinadaily.com.cn/opinion/2017beltandroad/2017-06/05/content_29619515.htm [Accessed on: 29^th April 2018]

Economic Freedom. (2018) China. [online] Available on: https://www.heritage.org/index/country/China [Accessed on: 29^th April 2018]

Financial Times. (2018) China targets 6.5% economic growth in 2018. [online] Available on: https://www.ft.com/content/3cc9e6d8-2044-11e8-a895-1ba1f72c2c11 [Accessed on: 29^th April 2018]

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The Economists. (2018) The fastest growing and shrinking economies in 2018. [online] Available on: https://www.economist.com/blogs/graphicdetail/2018/01/daily-chart-3  [Accessed on: 29^th April 2018]

The Guardian. (2018) China’s fuel trade war fears with new tariffs on US goods- as it is happened. [online] Available on: https://www.theguardian.com/business/live/2018/apr/04/China-us-trade-war-tariffs-wpp-markets-eurozone-jobs-business-live [Accessed on: 29^th April 2018]

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