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China, a new Eldorado for the European investors?

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  1. A required change
    1. An inventory of current systems
    2. Leading to new accounting philosophy
  2. The many impacts on the accounts
    1. The priority of the new IFRS balance sheet and the front line assets
    2. Liabilities and income statements
  3. Varied consequences
    1. Advantages for some companies...
    2. Necessity to minimize the possible secondary consequences

As of today, a major goal of everyone is to make maximum benefit and China is at the heart of the economic debate. It attracts more European investors than the United States. It has thus become the sixth largest economy. Besides, the excitement driven with the upcoming Beijing Olympics is palpable; the Chinese are no longer content to produce goods at low prices. Hence, they have now acquired real expertise regarding production, which enables them to attract more investors.

The rapid economic development of China creates many opportunities and demands. Indeed, it seems inexorably attractive to foreign companies because of its strong growth, and also since it joined the WTO in 2001. However, we must keep in mind that this country is still in transition, and therefore important market research is essential before considering an investment in this promising market. Thus, one might wonder if China is really a new Eldorado for European investors. We will study the factors that encourage European companies to invest in the "Middle Kingdom" and then in the second part, we will consider the limitations that are often underestimated by many investors.

Because of its cost and quality, the Chinese labor is effective and is not found in a developed country or in a developing country. Whatever the reasons given by one or the other to invest in China, seeking cheap labor is always an implicit element. And the average hourly cost of a worker in China is 18 times lower than European workers: 0.6 euros per hour.

This parameter is obviously a very significant factor for European investors. In addition, the quality of local engineers and managers can benefit from the European people and is more effective as working on site, working closely with manufacturers are conducted. In addition to this quality, as workers Chinese engineers and managers are much cheaper in China than in European countries. Finally, with 752 million Chinese assets, China is a reservoir of unlimited manpower.

Encouraging measures
The reduction of customs duties: Customs duties and other taxes are certainly high, but we must take into account that they continued to fall significantly since 2001. In 2001 the average tariffs stood at 15.3% and in 2004, Beijing reached 10.4%. Knowing that China was to go down to 10% by 2008, we can say the contract is for the time being fully met. Furthermore, it should be noted that these fees have been abolished for companies that operate in areas called "free".

Tags: European investors, Beijing Olympics, Chinese labor, Chinese assets, Customs duties

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