PESTLE Country Analysis Report: ChinaML00002-035/Published 09/2016
Country Profile Series
China
In-depth PESTLE insights
REFERENCE CODE: ML00002-035
PUBLICATION DATE: September 2016
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PESTLE Country Analysis Report: ChinaML00002-035/Published 09/2016
OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure in China.
Each of the PESTLE factors is explored on four parameters, namely: current strengths, current challenges, future
prospects and future risks.
Summary
Key findings
The Communist Party of China is in firm control, but relationships with some neighbors are troubled
The CPC has governed China for over 60 years and remains secure in its position as the country's sole political party.
The party has been able to impose its decisions without going through the grind of democratic deliberations and
negotiations. The CPC has a formidable influence over the entire governing process—from policy making right through to
implementation—because of the party’s presence in every part of the government and its large grassroots penetration.
With over 70 million members in the country, the CPC is the largest political party in the world.
However, strained relationships with neighbors could hurt China’s political and economic interests in the region. China
has maritime and territorial disputes in South China Sea and East China Sea with neighbors Japan, Vietnam and the
Philippines, which have all accused China of creating instability in the region due to its quest for territorial expansion.
While disputes over Senkaku Islands (known as Diayou Islands in China) in the East China Sea, administered by Japan
but claimed by China, have fuelled diplomatic tensions with Japan, tensions with Vietnam, the Philippines, Taiwan,
Malaysia and Brunei stem from Chinese claims on almost the entire resource-rich South China Sea, while rejecting rival
claims to parts of it. Japan’s issues with China were aggravated in November 2013, when China expanded its Air
Defense Identification Zone (ADIZ). Tensions with Vietnam escalated in May 2014 after China Offshore Oil Corporation
placed an oil rig in waters claimed by both countries. This incident promoted anti-China rioting and induced acts of
violence in many foreign enterprises in Vietnam, which left six Chinese employees dead and several injured. In August
2016, Reuters (a news agency) noted that Vietnam has located mobile rocket launchers in the disputed waters of the
South China Sea. This has angered the Chinese officials.
China has strong economic fundamentals, but uncertainty lingers on the outcome of the US elections
China’s economic fundamentals are very strong with the country registering strong economic growth over the past three
decades. China’s strong external position is evident from its vast foreign exchange reserves, which amounted to $3.19
trillion by the end of August 2016. Large forex reserves help the Chinese economy in mitigating external shocks
emanating from the global macroeconomic environment. In addition, China‘s external debt was around 8.5% of GDP,
amounted $1.36 trillion, at the end of 1st quarter of 2016, which reduces exposure to volatility in the international market.
China had a buoyant current account surplus of 2.67% of GDP in 2015. Overall, the economy has very strong economic
fundamentals, which should mitigate any spillover from international crises.
The rhetoric used by the US presidential candidate Donald Trump has sparked fresh tensions to the Sino-US
relationships. He has labelled the country as “currency manipulator” and has asserted to impose a high tariff of around
45% to Chinese imports. Though this approach might just seem vague at the current juncture, with around one-fifth of
American exports coming from China, the fear of retaliation by the Chinese can also be not overruled. The US tariffs on
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