THE REAL ECONOMY IN THE LONG RUN Abstract
Productivity is an important concept in economics as it guides the management in delivering value to the firm’s stakeholders. The productivity of an economy is mainly determined by the nature of businesses and their operations. China’s economy has experienced rapid growth in recent years. This growth is linked to factors such as technological advancement, skilled human resources and the status of the business environment. Government policies also play a significant role in the economic growth of a nation since they create a business environment that either attracts or scares away foreign investors. Business expansion is an expensive and time consuming process and requires elaborate planning to make sure that all business growth factors are taken into consideration. During expansion, a business may face various risks such as financial, operational, and miscommunication risks. To succeed, the company must find ways and strategies to deal with these risks appropriately.
Productivity refers to the measure of output per every injected into the production of goods and services. The major measures of productivity include revenues and labor productivity. In the recent years, China has experienced rapid growth rate of about 10% and is now regarded as the world largest growing economy (Ibbotson & Chen, 2003). China has turned out to be the world hub manufacturing center and the biggest manufacturing and exporting economy across the world. Additionally, it has grown to be the largest consumer market and recognized as the second biggest importer internationally.
Technological development has been a major development facilitator of growth in China’s economy. Manufacturing companies in China have embraced technology thus improving productivity in China (Hendry & Neale, 1998). Appropriate selection of technology has created competitive advantage for China worldwide since it has minimized the cost of production significantly. Innovation is one of the major steering force of production and China using this base, it has gained a competitive edge over other nations. Its raising GDP resulting from its imports of foreign technologies using capital goods and its internal foreign direct investment has facilitated China’s capabilities and enhanced productivity (Gohin & Chantret, 2010). Additionally, China’s increased productivity is also linked to its vast spending in research and development in technology as was regarded the spender in R&D 2011.
China’s capability to attract highly competitive human resources with the right skills, knowledge, and capabilities has played a significant role in its increased productivity and rapid economic growth. To improve its productivity, China focuses on importing more knowledgeable human capital than the existing ones (Ibbotson & Chen, 2003). To further its competitiveness globally, the China is enhancing labor mobility and more so minimizing skills misalignments in its human resources. Currently, the government is working hand in hand with other institutions in ensuring that the graduates have the right skills and knowledge needed by advancing its educational system that is meet the need of productivity-driven economies.
The good business environment resulting from friendly social and political factors have also facilitated productivity and the China’s economic growth. These social factors include but not limited to culture, norms, values and beliefs. For instance, the Chinese government supports and has embraced technology in its manufacturing industry creating a competitive edge for its economy. Additionally, it peaceful business environment has significantly attracted FDI making China one of the largest exporters of goods in the global market. FDI plays a significant in increasing productivity of China (Gohin & Chantret, 2010). Capital availability has played a significant role in attracting the huge FDI that China receives. Additionally, its competitiveness due to the availability of resources, advanced productivity and human resources has significantly enhanced FDI injection.
Policies and regulation play a significant role in facilitating economic growth of a nation. This means that when the government develops and implements policies whose major target is to favor government companies at the cost of other private owned companies, the business environment can be terrible and unfavorable to attracting FDI (Ibbotson & Chen, 2003). Therefore, the government has the capability to increase or reduce the economic growth of China. Too much regulation often deter entrepreneurial and business activities since top management must spend more time and capital to uphold with the rules and regulations set (Hendry & Neale, 1998). The good business environment involving less initiation cost and less legal compliance requirement attract the investors to China.
China’s rules and regulations has enhanced its political and economic stability. Due to the good business environment, the FDI injected has in the recent years dramatically increased. Little or no frequent social conflicts, riots and wars has made China a good destination for foreign investors (Ibbotson & Chen, 2003). Its capability to handle business challenges such as counterfeit currency and goods, violence and criminal activities has enabled has risen China’s economic growth significantly.
China is shifting to a coordinated micro-financial tactic to financial steadiness. Through other nations, China is learning a lot on proper fiscal management and acceptable global financial standards. China’s knowledge on risk scrutiny and financial stability assessment at the technical stages is rising dramatically (Hendry & Neale, 1998). Change in institutional structure and reforms are a major focus in China. Through the establishment of various tool to deal with financial risks such as active provisioning, reserve standards and variable capital requirements (Gohin & Chantret, 2010). The evaluation of the effectiveness of these tools is a major issue of focus to understand when the buffers and required standard are employed as the China progresses. The major problem revolving around financial stability include variables such as resources, capability and integration needed to follow up financial stability and corporate the results in other policies.
To relocate into China and reap all the benefits as Telbek Manufacturing Company, there is a need embrace various strategies to minimize the risk associated to relocation. First risk is operational risk (Gohin & Chantret, 2010). This entails losses associated to failure of people, procedures and systems. To minimize losses, Telbek must seek advice from consulting firms that have expertise in business relocation. This will enable Telbek be prepared before the relocation. The next risk is financial risk. Relocation is very expensive and Telbek must fast carryout competition analysis in China. This will enable the company to maintain its competitive advantage. Miscommunication is also another risk (Ibbotson & Chen, 2003). Communication barriers between top management and new employees often facilitates conflict and misunderstanding. Proper training of all employees to be deployed into China will eradicate this problem.
The measure of unemployment is the percentage of employees who currently do not have jobs excluding children, students and retirees. China’s labor participation rate is about 58% as compared to 65.3% that of the United States. The projected unemployment for the next five years will be 4.2% (Ibbotson & Chen, 2003). The unemployment levels will high in urban regions as workers travel from rural areas to urban region seeking for well-paying employments. On the other hand, the rural areas, the unemployment rate will be low.
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