StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

If you invest $20 million in China - Research Paper Example

Cite this document
Summary
Making decisions over which economy to invest in may require analysis of microeconomic and macroeconomic factors of economies of interest for evaluation and comparison of involved risks and benefits. This work is about China’s macroeconomic indicators. …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.9% of users find it useful
If you invest $20 million in China
Read Text Preview

Extract of sample "If you invest $20 million in China"

? Investing $ 20 million in China Supervisor: May 8, Investing $ 20 million in China Introduction Business organizations are established with the prime objective of making profit through entrepreneurial ventures that may identify diversified economic risk. It is therefore necessary to analyze economic environment around a business in order to understand its possible risks and benefits before deciding on establishing a business. Making decisions over which economy to invest in may require analysis of microeconomic and macroeconomic factors of economies of interest for evaluation and comparison of involved risks and benefits. Similarly, an investor who has focused on one economy needs to evaluate the economy’s factors before establishing a venture. I, in this paper, evaluate the potential and risks of investing $ 20 million in China, based on the country’s macro and microeconomic indicators. Analysis of macroeconomic indicators Macroeconomic indicators are good factors for evaluating a country’s economy. The indicators reflect on the level of activity of the economy and the potentials of successful commercial venture. While positive prospects of macroeconomic indicators communicate probability of entrepreneurial success because of good economic environments, negative aspects of the indicators identifies risks towards caution in investing in the economy. Real domestic product is one of the measures of a country’s economic performance and determines the level of the economy’s output after adjustments of possible changes in money value. The measure is therefore an accurate determinant of a country’s production capacity. A review of China’s real gross domestic product indicates a consistently increasing trend over the past decade. The real gross domestic product that was reported at 10.1 in the year 2004 was consistent at remained at 10.4 in 2007 and 2008, and indication that the productivity level of the economy is stable and similar levels can be expected in future. China’s real gross domestic product has also reported growth in the past decade at rates that are higher that other economies. It can therefore be deduced that the economy has high productivity capacity that is likely to continue expanding in the future. The economy’s growth potential therefore identifies room for more investments and capitalizing $ 20 million dollars is not likely to stretch the economy’s resources (Oecd 33). Another significant macroeconomic indicator for determining investment decision in a country is the trend in inflation rate. Inflation defines a steady and significant rise in commodity prices. It can similarly be defined as a continuous decrease in the value of money in an economy. Inflation would therefore induce a loss in invested money because the investment’s value will be lower than the original one and even derived profits might not be able to compensate for the loss from inflation. Inflation trends in China however offer a good indicator because it has conveyed a decreasing trend. The inflation rate was for example reported at 6.9 in the year 2004 and the value had steadily decreased to 2.5 by the year 2008. The steady trend further projects high probability of lower inflation rates in future and this means that an invested amount in the economy is not likely to lose its value. The trend that can be forecasted to persist further shows that an investment in China has high chances of gaining value as the country’s inflation rate continue to decrease (Oecd 33). A review of the past trend of China’s consumer price index also offers a basis for determining prospects of investing the $ 20 million in the economy. The macroeconomic indicator defines percentage change in a group of commodities’ weighted prices and is related to inflation. A fall in consumer price index, as represented by the Chinese economy therefore implies economic stability and improving money’s value with time. The index was for example reported at about four in the year 2004 and registered a steady decrement to about 1.5 in the year 2008. The trend in the index’s decrease also offers confidence for similar projections and this identifies security of investment in the country. Trend in data for China’s foreign direct investment also identifies potentials in the economy. More investors have been channeling their resources into the economy and the increment rate has been high in the past two decades. While the country’s foreign direct investment was less than $ 5 billion in the year 1990, the value rose to about $ 40 billion five years later and was reported at $ about 60 billion a decade later. This trend identifies confidence in China’s economic potentials among global investors. Similarly, the value of foreign direct investment into China is significant and rates among those of major economies such as the United States, “Germany,” “France,” “Canada,” and the United Kingdom (Oecd 33). Unemployment rate is another significant indicator of an economy and China has maintained a constant rate, at about four percent. While the rate is not too high for adverse economic impacts, it is significant to ensuring that organizations access labor (Oecd 33, 34; Uschina 1). Microeconomic indicators China’s economic environment, through its microeconomic indicator in supply and supply growth rate also identifies potential for investing the $ 20 million because the country’s supply has been registering an increasing trend since the year 2000. One segment of the economy realized a rise from less than 1500 in the year 2000 to more than 5000 in the year 2011 while another market segment realized an increment in sales volume from 13461 in the year 2000 to 85159 in the year 2011. The trend that can be assumed with confidence means that the country has a potential market for an investment’s supplies (Uschina 1). Risk factors The country’s major challenges are however its banking system that is strictly regulated by the government and its currency that does not reflect real value against other currencies. The government’s regulation may hinder delivery of quality and unbiased banking services and may allow for government control on investments. Virtual management of the currency against international currencies may also have adverse effects on investors, especially in global transactions that involve other foreign currencies (Morrison 28). Conclusion Trends in China’s macroeconomic indicators identify investment potential in the economy that indicates high probability of further expansion and favorable economic factors. The increasing real gross domestic product, decreasing inflation rate, and falling consumer price index indicates the economy’s trend of increasing stability that is safe for investments. Trend in increasing sales volume also identifies domestic market for investment in the country. Even though government control over banks and the country’s currency are threats to investment in China, the identifiable potentials are more significant. I would therefore invest my $ 20 billion in China because the involved potentials outweigh the risks. Works cited Morrison, Wayne. “China’s economic rise: History, trends, challenges, and implications for the United States.” Congressional Research Service. March 4, 2013. Web. May 8, 2013. < http://www.fas.org/sgp/crs/row/RL33534.pdf >. Oecd. OECD reviews of innovation policy: China 2008. Paris: OECD Publishing, 2008. Print. Uschina. “China’s economic statistics.” The US-China Business Council. 2013. Web. May 8, 2013. < https://www.uschina.org/statistics/economy.html >. Read More
Tags
Cite this document
  • APA
  • MLA
  • CHICAGO
(“If you invest $20 million in China Research Paper”, n.d.)
Retrieved from https://studentshare.org/business/1477875-if-you-invest
(If You Invest $20 Million in China Research Paper)
https://studentshare.org/business/1477875-if-you-invest.
“If You Invest $20 Million in China Research Paper”, n.d. https://studentshare.org/business/1477875-if-you-invest.
  • Cited: 0 times

CHECK THESE SAMPLES OF If you invest $20 million in China

Foreign Direct Investment in India and China

if you go further, China had attracted a phenomenal amount of US $ 60 billion in 2004 while India had received a meager sum of US $ 5.... This essay "Foreign Direct Investment in India and china" is about the two growing economies in Asia that have been frequently making news with regard to the FDI.... hellip; Statistics reveal that in 2001 alone, china received around the US $ 53 billion FDI while India's figures did not cross the even US $ 4 billion indicating that it was below 10 % of what china had attracted ( Internet, Ong, china, FDI: china V....
14 Pages (3500 words) Essay

Economic Relations between South Korea and China

In this paper, I will discuss the relations that exist between South Korea and china in terms of trade and look at it from an… For centuries, china stood as a leading country, easily outpacing other countries in the fields of arts and sciences.... In the 19th and the earlier part of the 20th century, however, china was overwhelmed by civil unrest, major famines, military defeats and It seemed like china would never catch up with the Western developed countries economically, but after the 1978 reform period, Deng Xiaoping, a hero of china, focused on market-oriented economic development and by the year 2000, output had quadrupled....
8 Pages (2000 words) Essay

Finance - Securities Analysis

om and a home page will appear to request you to put in your credentials that are if you have an account in.... The asking price for FB at about 11:20 to 11:30 was 200 bucks.... Simply I can invest in facebook.... Alternatively if, one does not have an account you can still register for one by following basic steps.... This is because facebook can guarantee you a triple income of what you invested....
4 Pages (1000 words) Essay

Socially Responsibility of a Walmart

Most of the international stores of Walmart are in Africa, Argentina, Brazil, china, Japan, Canada, Chile, Mexico, UK, and Central America.... It includes 1 to 2 million square feet of post attainment investment connected to the companys Massmart acquisition.... In Fiscal Year 13, Walmart plans to add between 45 and 49 million square feet.... This is in addition of 4 to 5 million square feet of post acquisition investment, which includes additional square footage growth in the Massmart operations, as well as square footage acquired from the recent procurement of the Zellers assets in Canada....
3 Pages (750 words) Assignment

Taking Business Abroad

Today, Thornton's has annual sales revenues of £221 million which are provided by 350… Thornton's is a publicly traded company on the London Stock Exchange, with a current stock value of £99 per share (Bloomberg 2014).... million to £5.... million between 2013 and 2014 as a result of reduced selling, general and administrative costs in its operational model (Bloomberg)....
10 Pages (2500 words) Essay

Does Increase Trade Between the U.S. and China Benefits Both Countries International Trade Economic

and china Benefits Both Countries International Trade Economic?... gives an insight on the trade between the US and china; it provides import and export figures as well as, benefits and protectionism of this partnership to both countries.... nbsp;… Though china is still, by and large, a developing country, when one looks at the trade between the country and the United States, one will be shocked to find that the balance of trade is actually in favor of china....
14 Pages (3500 words) Essay

Chinas New One Child Policy

One particularly worrisome result is a 13% differential in female to male children in china, which portends a future social problem for China's fragile hot growth economy.... eople in china respect visible authority and obey it, but if a law is considered unjust and not useful then a large proportion of the people will ignore it whenever authority is not visible.... According to the research findings of the paper “china's New One Child Policy”, it will take more than a generation to balance the genders and the ratio of elders to youth, even if every family allowed multiple children exercises their right....
7 Pages (1750 words) Essay

China's Economic Geography Is Changing

The development of the market economy in china can be categorized into two distinct phases.... During the pre-reform period in china, there was an “autarchic socialist command economy system based on the Soviet model, with a strong focus on government-directed resource allocation, development of heavy industry, large state-run enterprise and price controls”.... The implementation of decentralization was the key movement in the reformation of the market in china....
14 Pages (3500 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us