Business Environment - China Vs India

  • Length: 1544 words (4.4 double-spaced pages)
  • Rating: Excellent
Open Document

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Text Preview

More ↓

Continue reading...

Open Document

Business Environment - China vs India
‘For Australian businesses looking to expand their operations overseas, China is a more attractive location than India.’ To what extent do you agree with this statement? Justify your answer.

In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.

China and India both have ponderous bureaucracy systems created by history and tradition. Since the opening of China’s market to foreign investors in 1978 and India in 1991, they have been gradually moving from centrally planned economic system towards decentralisation. However, besides their continuous movements in order to provide businesses a better environment, significant problems still exist.

In realising that foreign investments are the key source of the nation’s economic rise, the Chinese government has given special preferences to foreign investors (Financial Express, 2006). This is mostly done through reduction of most favoured nation (MFN) tariff rate. In India, on the other hand, fair competition exists between domestic and foreign investors. Although the Indian government states that it aims to reduce its MFN tariff rate, which currently doubles the rate in China, to other ASEAN country levels, it is in reality a big challenge because a large portion of the nation’s tax revenue comes from customs tariffs (Henley, 2004).

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

How to Cite this Page

MLA Citation:
"Business Environment - China Vs India." 23 Apr 2018
Title Length Color Rating  
Essay about India's Growing Economy - India is likely to overtake China very soon, this is what the two authors of „Riding the Indian Tiger – Understanding India, the World’s Fastest Growing Market” state. The authors who wrote this book together know a lot about doing business in India from their experience. William Nobrega is president and founder of The Conrad Group, LLC, a consulting firm specializing in emerging market strategic planning, advisory services for institutional investor groups, and mergers and acquisitions. Ashish Sinha is the COO of RocSearch, a UK-based research and analytics offshoring firm....   [tags: India China Economics GDP] 1034 words
(3 pages)
Strong Essays [preview]
Mcdonalds In India Essay - McDonald’s in India In America, we consider McDonald’s to be a beef serving, sometimes fatty fast food restaurant, but after a 6 year business plan to sway the Indian population, McDonald’s has transformed. If they can continue this growth in India, and all over the world, globalization will start to love McDonald’s even more. They seemed to have hit the right points, from playing it safe, investing their time doing marketing research, to find the best places to put a restaurant and finding out what it is that people in India like to eat....   [tags: International Busines Culture India Mcdonalds] 1814 words
(5.2 pages)
Powerful Essays [preview]
IT Sector Trends in India Essay example - IT Sector Trends in India The Indian information technology sector has been instrumental in driving the nation's economy onto the rapid growth curve. According to the Nasscom-Deloitte study, the IT/ITES industry's contribution to the country's GDP has increased to a share of 5.2 per cent in 2007, as against 1.2 per cent in 1998. Further, the IT and BPO industries are poised to clock revenues worth US$ 64 billion by the end of fiscal year 2008, registering a growth of 33 per cent with exports expected to cross US$ 40 billion and the domestic market estimated to clock over US$ 23 billion, according to a study....   [tags: India Information Technology] 1455 words
(4.2 pages)
Strong Essays [preview]
Essay on Everyone Should Care About The Environment - While walking through the park last Sunday, I observed a shocking scene. There were two cans: one for recycling and one for trash. The recycling receptacle had only an empty Dr. Pepper can and a few used Ozarka water bottles. On the other hand, the trash can had a plethora of half eaten meals, wrappers, banana peels and disgustingly even bottles, cans, newspapers and plastics that could have been recycled. Because people do not understand or do not care to understand about conserving our resources, many reusable items are being put in landfills when recycling these items could help save the environment....   [tags: Environment, conservation essay]
:: 1 Works Cited
1297 words
(3.7 pages)
Strong Essays [preview]
Business Ethics and the Global Dimensions of Business Essay - This essay will examine the possibility of XYZ Constructions, Incorporated expanding into the global market. In particular, the owners believe that Canada, Asia, and Mexico have niche markets and are the front-runners for expansion. Furthermore, the owners believe these markets will ultimately help increase their initial public offering (IPO) number because of the increased market penetration and market diversity associated with these markets. This essay will examine the issues present in the global market as it relates to ethics and social responsibility....   [tags: Business Ethics ]
:: 6 Works Cited
2194 words
(6.3 pages)
Term Papers [preview]
Corporate Social Responsibility and The Peace Panda Program in China Essay - ... This has also provided the employees with pride and fostered loyalty to stay on in this humanitarian company. As a result, BreadTalk reaped a higher productivity rate as its employees are being motivated and more committed to work. With such positive image and productivity, BreadTalk has certainly attracted more investors and current stake holders to have faith in the company that it does not operate in the dark but rather to have social responsibilities and is ethical in its work. In conclusion, this example of BreadTalk’s corporate social responsibility project had led them to a new high and created a positive image and reputation....   [tags: business, society, environment] 693 words
(2 pages)
Better Essays [preview]
Essay on European Business Enviroment - European Business Environment International trade can describe as the exchange of goods and services between two or more countries. International trade brings much advantage such as low production cost, like when a country is buying goods at a cheaper rate from another country. It will reduce their production cost because they will stop or reduce the production of those particular goods International trade serve some country as a major source of income like china that depends on trading with most countries for their major source of revenue Comparative advantage Comparative advantage exist when a country has lower opportunity cost over another country in production of goods for example...   [tags: Europe EU Business ] 1286 words
(3.7 pages)
Strong Essays [preview]
Business Model Change for Retailers Essay - “Variety is the only constant” such is the saying of Heraclitus. What was true a century back holds true even today. A gradual change is the undercurrent of time. Change is in the air and retail business cannot lag behind. Plan your change model, check out the long-term and short-term strategies and alter the entire retail landscape. From ancient times till now, it's always about survival of the fittest. Evolving your business to survive whether it’s a high end retail chain selling luxury watches, jewelry or handbag planning a good business scheme for international expansion becomes crucial....   [tags: change model, business retailers, e retailers]
:: 4 Works Cited
1434 words
(4.1 pages)
Strong Essays [preview]
The External Environment for the Development of Foreign Package Essay - 3.1.3. The external environment for the development of foreign package 1. China's global competitive environment, outsourcing Till 2002, the United Nations in July 2005 the development of national service outsourcing to a survey, China's service outsourcing industry has great potential for foreign direct investment. In inflows of foreign direct investment projects in the "Customer Support Center" A, China ranks 6th in the world, the project flows to 21; in the "Shared Services Centre" A, China ranked 8, the project inflows 9, while the top-ranked India 108; in the "R & D Center" A, China ranked second for the 368....   [tags: Business Management ] 2236 words
(6.4 pages)
Powerful Essays [preview]
Imperialism and India Essay - The domination of a country’s or region’s political, cultural, or economic life by one country is called imperialism. (Esler, page. 632) European imperialism began in the 1800s. “European nations won empires in the Americas after1492, established colonies in India and Southeast Asia, and gained toeholds on the coast of Africa and China. Despite these gains, between 1500 and 1800, Europe had little influence on the lives of the peoples of China, India or Africa.” (Esler, page.632) Then the Europeans industrialized and believe western cultures were superior to all other....   [tags: Nationalism]
:: 3 Works Cited
1083 words
(3.1 pages)
Strong Essays [preview]

Nevertheless, India overall has a better internal taxation system, with lower tax rates and easier ways of payments, according to a report by World Bank, IFC and PricewaterhouseCoopers (The Press Trust of India Limited, 2007b).

China, after joining the World Trade Organisation, is under the progress of developing a more comprehensive and enforceable judicial system to help ease business operations. It is also creating institutions that aim at improving commercial dispute settlement, patents and intellectual property rights protection (Siddharthan & Lakehera, 2005). As a legacy of the British colonisation, India, being the largest democracy in the world in terms of population, already has a well-developed commercial legal framework (Grainger & Chatterjee, 2007). However, the Indian institutions are not functioning efficiently because of poor government regulation in design and quality of implementation. For this reason, doing business in India is, in fact, more costly than in China, especially for smaller firms (Singh, 2007).

One issue that troubles businesses in both China and India at the moment is the complexity in setting up and closing down businesses. Despite the fact that there is no specific statute regulating FDI in India in contrast with China, it has much more excessive regulation of entry and exit than China (Henley, 2004).

Another issue businesses seeking to operate in China and India may need to consider is bribery. According to the Transparency International 2006 Bribe Payers Index, India and China ranked first and second respectively in exporting countries that are likely to bribe their way through to winning contract (Nevin, 2006). This well signals the internal corruption levels of both countries.

Overall, the political/legal environment in China appears to be more optimistic.

China and India are very much similar in terms of pure economic conditions. Both countries have huge market potential. China has a population of almost 1.3 billion and its real GDP growth rate between 2004 and 2006 averaged at 10 percent. India at the same time has an average real GDP growth rate of 8 percent, with a population of over 1 billion as well (Cetron, 2004) (CESifo Forum, 2007). Economic growth has led to increasing consumer spending. According to the World Bank, in 2004, China and India were already respectively the second and fourth largest economies in the world based on purchasing power parity (Henley, 2004). The trend is expected to continue for several years ahead.

Apart from being target sales markets, China and India are also among the ideal locations for production. Statistics show that the unit cost of labour is similarly low in both countries (Jain, 2006), with China having a higher literacy rate of over 80 percent compared to 60 percent in India (Cetron, 2007).

It is clear that while China currently has a great and still improving economic environment, and leads the world in growth prospects, India is not far from catching up.

Tradition plays a key role in the shaping of today’s Chinese and Indian economies. Confucianism is the major guidance of social norms in China, along with Buddhism and Taoism, each blended with the other two ideologies. Because of the absence of a legal-rational system, successful businesses in China generally depend on developing and maintaining strong social relationships and networks, which is compatible with Confucius teachings (Grainger & Chatterjee, 2007). It is therefore essential for foreigners to study Chinese customs before entering the market.

In the case of India, as a result of the traditional caste system, Indians have a preference for hierarchical relationships. In rural areas, many workers are still employed based on their caste rather than skill (Grainger & Chatterjee, 2007). This may be an obstacle for foreign companies investing in related areas.

One huge social advantage India has over China though is its English speaking background inherited from British colonisation. Although China has included English as a compulsory subject even in primary schools, it is still hard for most Chinese to master this language due to its considerable difference to Chinese. Furthermore, good English speakers in China generally demand salaries of $100,000US which is too much for back-office jobs (Aiyar, 2007).

India, thus, wins over China in the ease of conducting businesses at socio-cultural level.

Conducting businesses overseas inevitably involves electronic commerce (e-commerce). According to a study done by Raven, Huang and Kim (2007), China is notably ahead of India in infrastructure and internet penetration, among other factors that form an e-commerce environment. The Indian Finance Minister P. Chidambaram also admitted, “We wish to emulate China in the matter of infrastructure” (Organisation of Asia-Pacific News Agencies, 2007). However, there is also the argument that India is actually better prepared for e-commerce than is China because of its advantages in “legal support for virtual transactions and digital signatures, well-developed private sector and entrepreneurship, the regulatory environment including taxation, and openness to trade and investment” (Raven et al, 2007).

Indeed, China is yet to catch up with India’s world famous immense pool of skilled IT workers, which makes it the top outsourcing destination for research and development (R&D). Nevertheless, in 2006, China’s spending on R&D took second place in the world. The government is looking to increase its R&D spending from about 1.23 percent of GDP in 2004 to 2.5 percent in 2020. One of the reasons that give China the confidence in improving its R&D is the fact that 40% of undergraduates in China are engineering majors (Cetron & Davies, 2008).

In general, improvement in technologic environment is the area where China and India has to learn from each other.

It may appear to be true that China has an overall better business environment because it has a more foreign investor-friendly structure and top economic growth rates. However, India also has magnificent growth prospect, along with the advantage of being closer to the Western culture. Both countries are also on their way to improve technologies to create more business potential. Therefore, only time can tell which country, in the long term, will attract more foreign investments.


 Aiyar, S. S. (2007 Winter). Book Review: China and India: Learning From Each Other-Reforms and Policies for Sustained, Cato Journal, 27(1).
 CESifo Forum (2007 Spring). Recent Economic Growth and Challenges for China, India and Other Emerging Asian Countries, 8(1).
 Cetron, M. J. (2004 Jul/Aug). Prospects for the “Dragon” and the “Tiger”, The Futurist, 38(4).
 Cetron, M. J. & Davies, O. (2008 May-Jun). Trends Shaping Tomorrow’s World – Forecasts and Implications for Business, Government, and Consumers (Part Two), The Futurist.
 Financial Express (2006 Sep 20). What India and China Can Learn From Each Other, The Financial Times Limited.
 Grainger, R. J. & Chatterjee, S. R. (2007 Jul-Sep). Business Systems and Societal Context: Comparing Chinese and Indian Models, South Asian Journal of Management, 14(3).
 Henley, J. S. (2004 Oct). Chasing the Dragon: Accounting for the Under-Performance of India by Comparison with China in Attracting Foreign Direct Investment, Journal of International Development, 16(7).
 Jain, P. (2006 Dec). Offshore Outsourcing "India Vs China" An Empirical Investigation, The Business Review, Cambridge, 6(2).
 Kshetri, N. (2005). What Determines Internet Diffusion Loci in Developing Countries: Evidence from China and India. Unpublished manuscript.
 Nevin, T. (2006 Dec 1). India, China Lead Bribery Index, African Business, Issue 326.
 Organisation of Asia-Pacific News Agencies (2007 Feb 6). India ready for comparison with China: Chidambaram.
 Raven, P. V., Huang, X. & Kim, B. B. (2007). E-Business in Developing Countries: A Comparison of China and India, International Journal of E-Business Research, Idea Group Inc., 3(1).
 Siddharthans N. S. & Lakheras M. L. (2005 Jun). Foreign Direct Investment and Location Advantages: Japanese Perceptions of India Compared to China and ASEAN, Journal of International and Area Studies, 12(1).
 Singh, N. (2007 Jan 31). Productivity in India and China, Financial Express, The Financial Times Limited.
 The Press Trust of India Limited (2007a Dec 10). China, India Remain Top FDI Destinations: Study.
 The Press Trust of India Limited (2007b Nov 20). India’s Tax System Better Than China’s: PwC.

Return to