China, India, and Multinational Enterprises

Presently the Asian economies, particularly the EMEs, depend increasingly on domestic demand (ADB [Asian Development Bank], 2012). Asian economy did not just recover from the global crises rapidly, but also helped to go into a recovery phase. In one of his articles D. K. Das states that, “Asian economy, in particular China, provided the much-needed support to the global recovery. What is beginning to be referred to as the Great Recession would have been deeper and longer without the support of the Asian economy.” (Das, 2011). According to Das, compared to the recovery after the Asian financial crisis (1997-1998),... ... middle of paper ... ...012.687618 Green, S. (2011, April).

National economics are often adversarial in nature, a global contest where countries seek to gain advantage over their neighbors, all in the name of wealth and gain. America is no stranger to the game; the U.S. has been the world’s economic leader for the better part of a century. China, however, is the leading contender for the economic top-spot (), and America continues playing directly into China’s hand. America’s current trading posture with China is drastically skewed in China’s favor; if America is going to preserve its position as the leading economic power, existing U.S.-Chinese trading agreements will need to be revised, and additional regulations must be introduced to promote balanced dealing. The consequences of losing the global economic contest are very real.

Domestic Competition: Helped or Hindered by Foreign Firm Entry The presence of foreign firms improves domestic competition; if the foreign entrant is bringing anything new to the table in order to expand in a new market, it brings technology and ideas that domestic companies can emulate. This is especially true in the case of countries new to capitalism, such as China. According to Crocker and Yi-Chung (2004) foreign firms entering China during the 1980s faced negligible competition from domestic businesses. Large multinational enterprises (MNE) such as Procter and Gamble (P&G) and Unilever were rapidly able to capture large market share in China. Within ten years, they began to encounter pressure from domestic companies that marketed less expensive, all be it lower quality, replacements.

To begin with, this research exposed a FDI puzzle between India and China through analyzing the current economic condition. Prime, Subrahmanyam and Lin (2011) stated, "Given their growth records, large markets, and reformed economic systems, both China and India appear to be equally likely candidates for foreign direct investment. Yet, China has received substantially more FDI" (p. 303). What's m... ... middle of paper ... ...a. Journal of Asia Entrepreneurship and Sustainability, 3(2), 60-80.

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).

The problem with China’s business culture. Harvard Business Review. Retrieved from http://blogs.hbr.org/2011/10/the-problem-with-chinas-busine/

China’s competitiveness in international trade: The impact of innovation and human capital – Review of empirical literature. WORLD ECONOMY RESEARCH INSTITUTE, 310. Krugman, P. (2013, July 18). Hitting China's Wall. The New York Times.

The recovery of China also contributes to the spring back of regional and global economy. After the global economic crisis, China has reduced the distance with America in economy, most importantly; China has built a “powerful” image in the world. Thus this image brings one standpoint that China is becoming another super power in the world; America cannot dictate the whole world any more. Based on this view, the global power structure is emerging “a G2 structure: China and US” (Stelzer 2009). This paper is aiming to analyze this G2 assumption.

Currently, China and India passed Germany and Japan in consumer purchasing power parity and are forecasted to become the leading global economy with China, US, and India sequentially (Figure 1). These two significant economic resurgence and auspicious expectations have made entering these two markets a critical step to a firm’s survival. Thus, it is obvious that the sum of these two emerging markets equal a new powerhouse within international trade. Yet, far to little is known about these two’s consumer markets. Even as these countries grow, their market demands has both grown alike and ever apart.

China stands out for the explosive growth in its industrial segment, which in turn was fueled by China’s willingness to act more quickly and aggressively to lower its trade barriers and to draw foreign investment. In contrast, Ind... ... middle of paper ... ...kets. Their economic systems subdued growth and left both countries in poverty. In 1980, per capita income stood at $556 in China and $917 in India (Department of State, 2010). To boost their economies, China and India shifted strategies, letting private enterprise prosper and opening markets to foreign trade and investment.