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Ashraf Ali Ahmed

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Recognising the growth of chiness economy and political influence in the world but

nothing also the potential for internal social unrest,discuss the implication that theses

factor may have on strategy development of container shipping company engaged on

route between china and europe.in your discussion also consider the influence that

europe currency union may have on the stability of the economics of individual

european countries.

1.0 Introduction

Chinas economy is now growing stronger and faster than ever. After being in a stand still for

two decades under the rigid authoritarianism of early communist rule, China now has the

worlds fastest growing economy. China is everywhere these days. The words Made in China

are as universal as money. China has become the worlds largest maker of consumer

electronics, pumping out more TVs, DVD players, and cell phones than any other country.

China is rising even higher still, moving quickly and expertly into biotech and computer

manufacturing. No country has ever before made a better economic development all at the

same time.

However, the purpose of this assignment is to identify and evaluate the growth of Chinese

economy and the remedies involved strategic development of container shipping company in

between China and the European Union as well as the influences on individual European

nations.

2.0 Social & political influences of China

Many accuse the Chinese communist government of not promoting human rights among its

people. Human rights abuses by the government remained numerous throughout recent years.One area criticized by the international community, is Chinas legal system. The government

is also criticized because of the lack of political freedom in China. The strict rules regarding

speech have grabbed international attention. Ironically, during a visit by a U.N. human rights

expert, officials arrested several critics of the governments attitude towards the freedom of

its people under arrest. This attitude has caught foreign attention. The U.N. has ordered China


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to improve its judicial system by separating it from the political party (Elezabeth J. Perry &

Mark Selden, 2010, pp-31).

During recent years, the government has slowly transformed the formerly dominant

communism to a free, privately held, economy. Capitalism has brought new wealth to the

Chinese people, but still needs to progress more to end human rights abuses. Today, private

business accounts for thirty to forty percent of Chinas gross domestic product. In recent

years, the communist party has allowed for greater internal debate among its selected

members. Moreover, child labour has flourished in recent years, especially in rural areas.

There, wages are less and so many families cannot afford to send their children to school. A

recent labour shortage in the southern, rural provinces has prompted many businesses of

seeking alternate sources of workers. Estimates for the number of child labours are up to ten-

million. Although, Chinese law forbids employment of anyone less than sixteen years in age,

it is rarely enforced.

Because of the advancements in Chinas economy, the international community is focusing

more attention on trade and its human rights practices. The economic progression is expected

to develop China into a modernized nation by 2050. Debate has arisen over trade with China.

Many believe trade sanctions cannot solve the serious abuses by China. Trade with China is

now about 95 billion dollars, an amount that benefits both parties. Trade supports million of

hard-working Chinese who depend on industrial employment. However, many also support

the World Trade Organizations rule that prohibits trade with communist nations (Gregory

C. Chow, 1987, pp-41). All stress that China should be dedicated to improving Human

Rights within its borders.

However, for many years, the international community has attempted to assist the abused

people through aid and diplomacy. Though the international community has achieved great

progress in human rights, many still live in appalling conditions. Until the government of

China is improved and poverty abolished, human rights abuses will continue.


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3.0 Growth of Chinese economy

The growth of Chinese economy is comparatively rapid in the history. China is relentlessly

positioning itself for even higher levels of industrialization. There are giant capital flows

from industries to China in present days. China is the right place for business where the world

is investing in. For example, Chinas phone system is more wire less than wired and many of

its big cities will soon have the most advanced rapid transit system in the world. In the past,

Chinas enormous population was hard to feed and employ. Now this enormous population

are the greatest asset of global market ever.

Surprisingly, China is not home to the cheapest workforce in the world. Even at 25 cents an

hour, Chinese workers cost more than labours in the poorer countries of Southeast Asia or

Africa. Lately, immigration of hundreds of millions of peasants from the countryside is

happening now because the government allows them to leave. This migration is the largest in

human history. The estimates of the number of people who have left to find work in the cities

range from 90 to 300 million, numbers that even near the lower end match the entire

workforce of the United States (Gregory C. Chow, 1987, pp-3). Move up to the higher range

and the number tops the U.S. and European workforces combined. What these numbers mean

is that the productive power of Chinas vast low cost manufacturing machine, along with the

growing appetites of its billion plus consumers has turned Chinas people into what is

arguably the greatest natural resource on the planet. How the Chinese and the rest of the

world use that resource will shape our economy and every other economy in the world, as

powerfully as American industrialization and expansion have over the last hundred years.

Chinas effects on the world are so great that its been hard for people to grasp the idea. For

example, executives at the Harley-Davidson plant in Milwaukee said that a cold front was

blowing in from China. The United States had lost 2.9 million manufacturing jobs over the

previous 5 years. Wisconsin had lost 90 thousand, or one in six of its manufacturing jobs

since 2000 (More Than a Motorcycle: The Leadership Journey at Harley-Davidson,

2000, pp. 7-9). They said that China is the top issue in their economic lives. China is the

worlds factory floor and its the worlds greatest market opportunity. Chinas industrial

might saps opportunities from the developing world but its hungry economy pulls poorer

countries upward.


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However, Chinese government statisticians declared that their official measure of Chinas

economy had been underestimating its. After the statistical revision, the government

expanded its estimate of Chinas GDP or Gross Domestic Product by nearly 17% and tagged

the economys output at $1.98 trillion. The new numbers pushed China ahead of Italy as the

worlds fourth largest economy. The economy of the United States however, is still by far the

worlds largest with the year 2004 Gross Domestic Product of $11.75 trillion which is 6 time

larger the size of Chinas GDP out of the worlds GDP of around $37 trillion in 2004

(Elezabeth J. Perry & Mark Selden, 2010, pp-41). In Chinas capitalist society right now,

they are trying to overlook the bad side of modernization, seeing economic progress as the

solution to all the countrys challenges. While many people may think that Chinas economy

is going smoothly, that may not be true. Not all of China is as confident that just the desire

for growth alone can ensure it. Recently, Chinese economists have been trying to discourage

people from having too high of expectations and over enthusiasm as they know will lead to

economic bubbles.

3.0 Strategic implications involving Container shipping companies

Container shipping companies involved in between China and the Europe has some

significant implications in terms of business developments. The first and the foremost issue

arises such problem like cultural and different port efficiency system.

3.0.1 Cultural implications

Cultural implications mainly depend on the governments of two different countries in terms

of corporate governance. The Chinese corporate Governance is completely reverse in some

aspects from the Europeans corporate Governances.

Main business type is an important issue when each side performs new development in

business strategies. In China most of the business are mainly stock owned on the other hand

the most European countries does practices of public shares. Board structural difference is

also a significant problem in term of business development. Moreover, there are some other


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issues which have to consider for developing strategies in the field of container shipping

industry. Such, issues are the legal system, board structure and predominant ownership which

cause serious problems in business development.

Country Main Business

Type

Predominant

Ownership

Legal

System

Board

Structure

Important

Influence

China State owned &

Joint Stock Co.

State Civil law Dual Communist

Party

Denmark Public or private

companies limited

by shares

Institutional

investors or

foundations

Civil law Dual Many shares

have multiple

voting rights.

Germany Public or privatecompanies limited

by shares

Financial & non-financial

companies

Civil law Dual Compulsoryemployee

representation

Italy Limited Liability

& Partnerships

Non-financial

holding co. or

families.

Civil law Unitary Board of

auditors

required

Fig.1: Corporate Governance in the International Shipping Industry

(Source: www.auditcommission.gov.uk/changehere/content/intro.htm)

4.0 Influences on European Countrys Currency

The European currency is almost common and comparatively almost same valued. However,

if the foreign currency of European countries, get lower valued will be more profitable for

them. Besides, the respective country relates to Europe is also an influence for the betterment

of individual countrys economy.

However, every time the worst is predicted for Chinas economy, it seems to grow faster,

create stronger industries like container shipping, import and export more and attract more

foreign investment money. Since China starting reforming its economy a generation ago, it

has grown at an official rate of 9.5 %. The country is closing in on a 30 year run during which


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its economy has doubled nearly 3 times over. Neither Japans nor South Koreas post war

booms came anywhere close. Given United States recent rates of economic growth, it would

take the U.S. 25 years to double just once. If the U.S., which boomed in the 80s and 90s, had

grown at Chinas rate since 1978, the U.S. economy would now be roughly its current size

plus 2 Japanese economies added on (web#2). Americans and the Europeans tend to focus on

the huge inequality in trade between the two countries. Its worrying Americans that they

help to create what Chinas becoming by the continual buying from Chinas factories.

According to Forbes and Fortune magazine, Chinas goods are much cheaper compared to the

U.S. as much by 50% sometimes (Elezabeth J. Perry & Mark Selden, 2010, pp-41).

4.0.1 Benefits as a major manufacturer

The reason that China are able to keep their prices so low is because they keep their currency,

the Yuan, fixed at a set rate against the dollar and is undervalued by as much as 40%

(web#1). Other companies say that they can never compete with that because Chinas

manipulating the rates of exchange. Republican Tim Ryan quotes that If China wants to be

part of the global trade system (web#1). As good as it is that Chinas products are supplied

cheaply to some businesses, it is hurting a lot of others and putting them out of business. Its

strength has been sapped almost entirely by China alone. It shows how China can come after

the specialty businesses of any country and destroy them in short. For other countries, China

has become essential as a customer as well as a supplier.

However, Japan and Germany have recently greatly benefited from the large trade surpluses

with China because they have been the worlds largest buyer of factory machinery and it

needed the equipment Germany and Japan make in order to produce the machinery and

electronics. Resource rich countries do well selling China the raw materials that get reshaped

in its factories, and the energy sources it needs to power them. For example, in 2003

according to the calculations of Stephen Roach, chief economist at Morgan Stanley, the

Chinese bought 7% of the worlds oil, a quarter of all aluminium and steel, nearly a third of

the worlds iron ore and coal, and 40% of the worlds cement(web#2). The most intimidating

thing about China is not that it does so well at low-end manufacturing industries. America

and other countries are more worried that manufacturing shifts overwhelmingly to China


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from all directions including the U.S. The far bigger shift thats just happening is that China

might own the infinite number and variety of components that make up everything else that is

produced. China is taking on those industries too. Such components consist of for example,

the hundreds of parts in washing machines, computers, and airplanes as well as the big

products themselves such as cars, trucks, and ships. Also people may start switching their

networks for national phone systems, factories, satellites, and rockets.

As China have world-wide business relations, their biggest market is in the Europe. So, China

could be a huge profitable field for European countrys business as well as shipping

companies between two different economies.

5.0 Conclusion

One big reason China is growing is that the world keeps feeding it capital. According to

Japans research institute of economy, trade and industry like shipping, one third of chinas

industrial production was put in place by the half a trillion dollar of foreign money that

flowed into the country since 1978. In 2003, foreigners invested more in building businesses

in China than they spent anywhere else in the world. Every day China receives a river of

Europeans, Asian, and American experts in manufacturing, banking, computing, advertising,

and engineering. In 2003, the exports and imports by foreign companies operating in China

rose by over 40% (web#2). No more than half of Chinas trade is controlled by foreign firms.

Foreign companies have pumped up Chinas trade volume enough to make the country the

3rd largest trading country in the world behind the U.S. and Germany and now ahead of

Japan. Most of the worlds countries now analyse Chinas growth as a critical engine for their

own economic growth. News everywhere tells the worlds daily balancing act to keep China

happy as a customer, efficient supplier and as a competitor. For this currency exchanges in

between China and the European individuals brings more economical potentiality on both

sides.


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References (Part B):

1. Gregory C. Chow, 1987, The Chinese Economy, 2 nd edition, World ScientificPublishing Co. Pte. Ltd, (pp-3,41)

2. Elezabeth J. Perry & Mark Selden, The Chinese Society, 3rd edition, Routledge, 2010,(pp-31).

3. More Than a Motorcycle: The Leadership Journey at Harley-Davidson, 2000, HarvardBusiness School Press, Rich Teerlink & Lee Ozley. (pp- 7-9).

4. Web#1, Fortune Magazine.(http://www.magazine-stand.co.uk/business)

Accessed on: 01-03-11

5. Web#2, Free Reports.(http://www.elliottwave.com/club/Insights-into-China-Economy-and-Japan-

Economy/default.aspx?code=43540 )

Accessed on: 30-03-11

6. Web#3, Chinese Economy(http://www.auditcommission.gov.uk/changehere/content/intro.htm)Accessed on: 01-03-11

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