Compare China and US Global Competitiveness Report Index

China vs The USA
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China Vs The USA
Over the last four decades, China has jumped from a poor countr to match and compete with the world’s giant economy, United States, after making major reforms in their market policies. The US has been the biggets and dominant economy for approximately 140 years, accounting for approximately 22% of the products an services in the global market (Schwab, 2016). The US tops in terms of GDP, but China is now ranked as the leading economy based on its stronger Purchasing Power Parity (PPP). A stronger PPP simply means a country’s currency has the ability to purchase more in different countries. Statistically, the Chinese economy is now worth $17.92 trillion, comparing to that of USA $17.8 trillion, indicating that the later is no longer the world’s largest biggest economy (Schwab, 2016). Although, Some economic critics suggest that the claim on China being the biggest economy today is misleading and inaccurate since China’s global presence and weight is limited to smaller region. Nonetheless, China’s economic rise cannot be ignored as it has been among the fastest growing economy in the world with a strong GDP and a substantial PPP. China’s success is majorly attributed to her decision to open up foreign market and investment alongside free-market reforms since 1979. Therefore, the paper employ the use of Global Competitiveness Report Index (GCR) and the PESTLE analysis tool to compare and explore the difference between the USA and the People Republic of China.
Global Competitiveness Report Index
GCR refers to an economic report index that is published by the World Economic Forum and used in ranking countries based on their economic competitiveness at the global level. GCR index specifically evaluates how nations provide better living conditions and prosperity to their citizens. The tool takes into consideration both the macroeconomic and microeconomic factors to establish the countries’ degree of competitiveness under a single index. In others words, the GCR index simply determines whether a country uses its resources productively or not
PESTLE Analysis
Political Factors
China has an particaly fabourable and unfavorable political environment for foreign business as the environment is characterized by political risks and instability. The political risk in China occurs as a result of frequent battles between the local, provincial and the country’s central government over the applicable business laws, thus making it difficult for companies to know what are the exact required regulations (Morrison, 2018). As a result, businesses in the tourism and foreign investment are hugely suppressed. By contrast, China business regulations and policies are also favorable to the locals and foreign firms as well (Morrison, 2018). For instance, since the 1979 trade reforms, the country has experienced dramatic economic growth as there has been an increase in personal freedom, social mobility, employment opportunities and access to information. Relatedly, China government has prioritized innovation through high profiles initiatives such as “Made in China 2025,” a plan that has inspired many businesses, especially in the manufacturing sector be more innovative (Morrison, 2018). The policy is majorly designed to favor China’s reliance on home-based technologies over foreign ones.
The United States, on the other hand, has a strong political profile that not only affects her internal activities but also meddles with matters of the other nations. The USA intervention policies that affect some parts of the world have always been criticized by global business ambassadors (Morrison, 2018). In addition, the USA political stability, advanced technology, advanced infrastructure, readily available labor tranformed the country into the leading global business hub. In other words, the USA has always been the major destination for Foreign Direct Investment (FDI) over the years. The policies are designed to promote both the local and foreign business.
Economic Factors
In the last decade, China economy has enjoyed a steady increase in GDP. The countries success has been as a result of high saving rates, abundant expertise, high urban growth and extensive exports to Africa, Asia and some parts of Europe (Morrison, 2018). Also, China’s great GDP suggests that her citizens are contributing comprehensively to the national’s basket. The rapid contributions also indicates that Chinese citizens have a high purchasing power, and a sign of an existing favourable policies to the SMEs sector (Morrison, 2018). The labor cost in China is considerably low, thus attracting FDI. On the contrary, China faces high inflation rate and high property prices in spite her impressive growth rate. The People’s Bank of China has increased interest rates and a riased the miniume reserve rate for commercial banks to reduce lending capacity and rates.
Similar to China, the US has a great GDP and a hub for major multinational corporations such as Coca-Cola, McDonald's, Apple, Microsoft, Google, Facebook, and Subway. The USA economy has been at the forefront of shaping and leading the global economy for many years. Although, after the 2009 recession, many US company’s recorded massive slump leading to collapsing of few companies and an increase in the rate of unemployment (Morrison, 2018). In addition, the labor cost in the USA is extremely high forcing some companies to flee and invest in countries such as Mexico, India, and China which are characterized by cheap labor.
Social Factors
As China’s demography is in constant change, the aspect of social and cultural elements plays an important role in the commercial sector. The societal and cultural values are affected by any kind of change in the size of the population and the fluctuation of age distribution. For instance, the size of families and social behaviors are useful in determining valuable decisions. Business people often rely on factors such as consumer lifestyle, religion, education level, and immigration policies to formulate marketing-related decisions (Morrison, 2018). Based on Geert Hofstede’s value dimensions, China has a collectivist culture, which is dynamic and flexible to switch with the technological applications on products and services. On the basis of education, 90% of China’s population is literate. High literacy level has consequently boosted the number of China's internet users to approximately 420 million, an aspect that eases the process of product promotion in China as many Chinese shops online (Morrison, 2018). The consumer habits have changed dramatically following the intensive use of e-commerce in China in the recent year...