Political regimes between China and India Essay
Political regimes between China and India
When people are seeking new opportunities in other countries, China and India is popular choices for investor as the two most populous on the Earth. Both are emerging economies that have illustrated average GDP growth greater than 7 percent over the few years*. Noticeably, both India and China are largest avoided by the global economics crisis in 2010,maintaining above GDP growth when western countries are suffering economics contraction.
Despite of successful changes, we still need to consider further elements for our investment. It includes regimes, laws, economy environment and population.
However, if I want to do a mobile game company, I will choose China. In this essay, I will discuss above elements in China and India and also describe why China is better to do a mobile game company.
At first, the regime background and regulation are two basically part to decide investment. Over the past 30 years, China has witnesses a continuing transition a capitalist political economy with a highlighting on market competition, international economic integrations and capital accumulation. In other words, It has opened its door to the direction of liberalization. Therefore, China requires to join the WTO for the demand to open its markets in anticipation, which is a new program of legal reform motivated. Thus, Chinese government is reducing to control business whose ownership is government-dominated or state-owned enterprise (SOES) but consolidate SOEs in some sectors to be global leader in their areas. As a result, foreign company can enter these fields but difficult compete. On the other hand, China is encouraging foreign direct investment (FDI) in almost sector, especially germinated industry. It is a great opportunity for e-business. However, in this stage, of approximately 130.000 SOEs four thousands are privatized per year.
For regulation, while destination of investment will strictly limited or altogether closed, the law allows foreign inventors to decide a diversity of investment entities in China. Chinese regulatory agencies have divide business actions and sector in three categories: encouraged, prohibited, and restricted. It also sets out that sector or industries fall in to the encouraged, restricted and prohibited sectors. It is not only determining how much and through what legal entity the investment can take place, but also foreign investment is allowed (Sweeney, 2010). A further point is that if we specify these polices in e-business, we will find that e-business is easy to enter and also be encouraged by Chinese government. In addition, in e-business this sector, the tax remains vague, generally lower than other nations, because China has developed their e-business later than others and is immature. Yet it also means more intellectual property issues.
Similarly, a process of market liberalization is also building in India. Some have claimed that (Vollmer, and Sabine, 2013) that, prior to 1991, FDI was extremely regulated and was banned in almost sectors by Indian government. Yet a second wave of reforms has forced the liberalization process from 1991. It has opened the India economy for foreign investment in almost categories. A variety of measures were taken by India government, such as current account convertibility, allowing foreign institutions to invest in securities and shares of India companies.
However, foreign investment in some sectors of economy was restricted by India. The Foreign Exchange Management Act (FEMA) Regulations, which is most import law for foreign invertors, has banned some sector like atomic energy and banking. In other sectors, such as mining, telecommunications, and pharmaceutical, the proportion of investment in a company is covered by the FEMA regulations. Lately, many FDI has required Foreign Investment Promotion Board (FIPB) approval. Obviously, industries are requiring a license to operate, and to need for approval for restricted industries.
A of critical goals for government is that to increase the FDI approvals to actual percentage. According to survey evidence (Bajpai and Jeffrey, 2000), FDI approvals were of the order of $54,268 million from April 1991 to September 1998, while actual FDI during the same time was a mere $11,806 million. Thus, actual FDI as a proportion of FDI approved was only 21.7 percent the same ratio is much higher in China.
Furthermore, in India, FDI approval is base on the national level. Therefore, licensing requirements, registration, and mandated. Investors have to control separate negotiations at the local level should like approvals be required because approval are not managed through national level offices. So, if we do business in India, we cannot avoid a complex of approval and also face some corruption from government. As a result, a mere $3.2 billion was settled by India while China succeeded actual FDI inflows of around $45.3 billion in 1997.
Second, we also consider another a significant element that tariff, when we decide to do business in a country. For tariff, since 1990 a dual corporate income tariff regime has maintained by China: one regime for Chinese Delivered Ex Ship (Des) and another regime for Foreign-Invested Enterprises (FIEs). According to An (2012), to compare with Des, FIEs receive preferential tariff treatments provided by the Chinese government, base on dual corporate income tariff. Many Foreign investments were enticed into China because of the dual corporate income tariff.
In order to compare with India, the tariff rates are approximately the highest in the world (Mohommed,2014). This limits its attractiveness as an export platform for labor-intensive manufacturing production. Nirupam and Jeffrey (2000) have found that, on quotas and tariffs, India out of 59 countries being ranked. India is ranked 52 on average tariff rate in 1999. Reductions of tariff rates (between 0 and 20 percent) required much greater openness to averages in East Asia. Most significantly, as many exporting countries of East Asia has been successful over past several decades, tax tariff on imported goods used for export and on imported inputs into export production should be duty free.
For instance, tariff in agriculture, An (2012) has argue that the average bound rate in other developing countries for agricultural imports such as China and Brazil is 16 percent and 35 percent respectively, whereas India is 113 percent and higher than its 37 percent average bound rate for non-agricultural products. Therefore, tariff will be a huge barrier for foreign investor to enter India market but China has not this major impediment to larger FDI inflows in.
Lastly, why I want to do business, especially mobile game in China? In above, we can find these reasons: (1) easy to create a company because of the regime, (2) e business is a support industry by Chinese government and (3) Lower tariff than India. In comparison, India has several main barriers to expand FDI into marker: (1) Restrictive FDI regime because of the approval (2) Lack of transparent sectorial polices for FDI (3) High tax rates by international standards (Sebastian, Rodney, Parameswaran, Ashvin and Yahya, Faizal 2010,8) .
These advantages and disadvantages just are creating an e-business, mobile game, company. When we enter a foreign market, we have to recognize such as buying power, consumption behavior, and labor cost. In these points, India has some unique strength. As we all know, IT industry is dramatically prosperous and has a huge population as well, which means e-business company use lower price to hire employees. In other words, we can get cheaper IT human resources in India than China. In order to compare the market, we have to recognize more about guanxi, which is controversial terms in China’s political economy. It is a complex consumption behavior.
However, the number of mobile phones has been growing at about 9 million monthly in India. India is making the second-largest mobile phone market after China because the total number is potentially to exceed 330 million by the end of 2008.It is most significant thing when we want to do a mobile game company, incredible market. Despite of some drawback in China, it is still a more reasonable choice for a mobile game company.
In conclusion, India and China have emerged impressive GDP growth rates over the past few decades. Both are largest population and market on this plane. For India, a new and free market, stable business environment, and lower labor cost are magnetically for settle business, yet some major barriers are still considerable. For China, while a comparatively complex market and a part of sectors, it is a better opportunity to do a mobile game company. Largest mobile phone market brings great platform for a mobile game. Numerous mobile phone users can experience. Fantastic GDP growth is promising these demands in a new entertainment industry. Low tariff is a important element for a foreign company more competitive. Therefore, at this time, we want to do a mobile company in both China and India, China is a worth choice.
Sweeney, M. (2010) ‘Foreign Direct Investment in India and China: The Creation of a Balanced Regime in a Globalized Economy’, Cornell International Law Journal, 43(1), pp. 207-247. Sebastian, Rodney, Parameswaran, Ashvin and Yahya, Faizal. 2006. ‘Doing Business In India’. New Zealand Journal of Asian Studies. 8(1): 17-40.
An, Z.2012.’Taxation and Foreign Direct Investment (FDI): Empirical Evidence from a Quasi-experiment in China’. International Tax and Public Finance, 19(5), pp. 660-76 Vollmer, and Sabine.2013.’How to Do Business in India’. Journal of Accountancy.215(3):26-31.
Aggarwal,and Alok.2008.’ Emerging Markets: India’s Role in the Globalization of IT’. Communications of the ACM.51(7):17-19. Mohommed .2014.’A Comparative Sample Study on the Determinants of Foreign Direct Investment In the East, South and South East Asia’. Ritsumeikan Asia Pacific University Press. Joshi, A. (2011). Two Competing Asian Giants: Some Facts. China Report, 47(3), pp. 201–21. —- Nirupam, andJeffrey,D.2000. ‘Foreign Direct Investment in India: Issues and Problems’ .Development Discussion.3(1),pp .75-79.