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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 195

China Business Intelligence No. 195

Samsung Economic Research Institute Beijing Office

May 13, 2011

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I. Economy

The Central Bank has already raised the benchmark interest rate twice this year to rein in inflation after seeing the limits to reining in runaway inflation through various microeconomic adjustments. The CPI exceeded the 4 percent target and broke the all-time high set in August 2008: 4.9 percent, 4.9 percent, 5.4 percent in January, February and March respectively. Amid asset bubbles rising as a sociopolitical issue, additional belt tightening measures are unlikely to slacken economic growth. As the possibility of interest rate hikes in the EU and the US grows in the face of rising global inflation, China's interest rate hikes will ease worries over hot money influxes.

II. Industry

As China's global status rises, multinational companies are rushing to form partnerships with Chinese companies especially in the auto, railway, aviation and energy industries. Such trend was intensified as the global market has become sensitive to price since the financial crisis when Chinese companies started to seek globalization due to their price competitiveness. Unlike in the past, Chinese and foreign companies made success by producing optimum products and management model. Also, Joint ventures between Chinese and foreign companies have successfully entered foreign markets by compensating each other with price competitiveness and brand power, helping Chinese companies in eliminating barriers to the global market and obtaining much needed know-how.

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