CHINA CASE STUDIES
“Case China: Big Opportunities, Complicated Risks”
From 1949 to the late 1970s, China was autarkic, championing a self-sufficient economy that relied
entirely on its own resources. Leaders of the governing Chinese Communist Party (CCP) feared
interaction with foreigners would corrupt China’s politics and pollute its culture; hence, they prohibited
foreign investment and restricted foreign trade. Near the end of the 1970s, China’s increasing economic
struggles pushed its leaders to rethink this outlook. In 1978, China instituted the Law on Joint Ventures
Using Chinese and Foreign Investment and began opening its market to the world. Since then, China’s
economic liberalization has fueled booming exports and attracted waves of foreign investment.
Undeniably, the CCP maintains its monopoly on political power. As one Beijing scholar observed, “The
Party (CCP) is like God. He is everywhere. You just can’t see him.”2 Free market principles, however,
steadily shape the country’s business environment.
Transformation yielded astonishing results. Over the past three decades, China has prospered more
from globalization than any other country, outsmarting and outperforming many on the world stage.
Many of its citizens have moved from mud huts to high rises. China’s per capita income increased
fivefold between 1990 and 2000, from $200 to $1,000. Between 2000 and 2010, its per capita income
rose by the same rate, from $1,000 to $5,000, thereby moving China into the ranks of middle-income
countries. Chinese companies have spun from woeful state-owned enterprises into world-class
multinationals. Steadily, China has accumulated the greatest financial reserves in the world.
Consequently, many see its ascendency as a global event without parallel.
Since the 1980s, MNEs of virtually every sort, size, and nationality have opened Chinese operations.
Total FDI in China, literally nonexistent in 1980, headed toward $2 trillion in 2016 on investments in
more than 600,000 ventures. Why have so many made huge bets on China? Quite simply, they see
stunning opportunities in terms of consumer demand, worker productivity, ingenuity and
innovativeness, infrastructure buildouts, and market potential.3
After reading and the attached case study titled “China Big Opportunities, Complicated Risks”, recommend a perspective a multinational corporation could use to make sense of the political situation in China, especially during the Covid-19 pandemic outbreak.
How would you advise a potential foreign corporation to manage the intricacies complexities and risks of China’s political-legal environment?
Remember that a foreign corporation is the one investing, outsourcing or doing business with China.
