A PESTEL analysis is a tool used by management to identify factors that can impact a company’s growth. The analysis of China explores political, economic, social, technological, environmental, and legal factors.
A PESTLE Analysis of China
China is one of the largest markets that exist in the current world, due to its sheer population. This makes the country a highly attractive market for foreign brands. However, this market is constantly shifting due to various factors. In this article, we will analyze the factors that affect the country of China as a whole. These will include political, economic, socio-cultural, technological, legal, and environmental factors. With the help of this analysis, a clearer picture of the Chinese economy will be portrayed to the reader.
Here we will perform a pestle analysis of China.
One of the primary political factors that interfere with the Chinese market is its government regulations. The socialist Chinese government is known for making unsettling changes to policies overnight, and this affects both Chinese and foreign traders. As a result of this, the creation of long-term marketing plans becomes almost an impossible concept in China.
The strong presence of the Communist Party is also another factor that all businesses must keep in mind at all times. If any product or service or any of its peripherals are deemed to be against the ideals of the Communist Party, then it will be strictly banned. So, all advertisements and marketing strategies need to be revised accordingly when dealing with the Chinese market.
The last political factor that affects the Chinese market is the government’s international policies. The recent trade war with the USA had deep impacts on the Chinese market and the American traders who operate in that sphere.
The Chinese economy is currently performing at an all-time high, and with the present GDP rate, it will soon surpass the U.S. economy. Consumer purchasing power is constantly increasing, and at the same time, labor costs are some of the lowest in the world. As a result, foreign brands profit from hiring Chinese workers as much as selling to Chinese consumers. The urban growth factor in China is also helping expand its economy to become a more consumer-friendly one, which in turn is attracting more foreign brands to invest in this economy.
The two primary factors that can act as deterrents to Chinese economic growth are its current inflation situation and the rise in property rates. There seems to be no strong step being taken to control inflation as of now, although there is a notice from the central banks asking other banks to lend less money. As a result, there is a steady growth in interest rates, which is not helpful for the growth of SMEs.
Trade politics are another major factor that affects the Chinese economy. Many large brands are unable to enter the Chinese market due to its high import duties, and only some of them have been able to penetrate the market recently.
Cultural values dictate a large portion of the social trends in China. Factors such as family size and population growth dictate how the market operates, and as a result, it also ensures that social values are kept in line with cultural needs. The Chinese literacy rate is over 90%, and a huge portion of the population has access to the internet. At the same time, consumer behavior is quite different in the U.S. market.
Chinese culture is deeply tied to its Communist political setting. This means that goods are often regulated, and the population is mostly in support of such regulations. The current wave of urbanization is also affecting the social behavior of China, and economists claim that there will be a strong surge towards internet-based buying in the near future.
The biggest technological factor aiding the Chinese market is its internet usage. There are almost 450 million internet users in China, and this dictates their purchasing pattern. But at the same time, there are hardly any stable online payment methods in China and barely negligible credit card penetration. E-commerce is another huge factor that has aided the Chinese population’s purchasing power. The website Taobao is China’s biggest e-commerce store, and a huge percent of the population accesses all their goods from this platform.
There is also a strong trend towards physical shopping in the country. This is partly tied in with the old-school social values of China, which many generations still choose to uphold, and also due to the various risks that are associated with online shopping.
The burning legal issue relating to the Chinese economy is the formation of e-commerce legislation and its various peripherals, such as intellectual property rights, consumer rights, tax policies, etc. E-commerce is still a fairly new sector in China, and the development of its legality will largely aid the current developmental model that the economy is following.
Another such issue is trade-related legalities. This is something that is under constant change and is usually poised towards prohibiting the establishment of a neoliberal economy. However, it is expected that there will be a reduced import tax once the economy reaches its full capabilities.
China is currently one of the most polluted countries. As a result of this, many industries need to spend extra on securing environmental standards for their production. This in turn increases production costs and reduces profit margins. So, China’s immediate concern should be dismantling systems that adversely affect their environment and ensuring a viable state for their various industries.
Apart from this, China is aiming to enter the electrical vehicle market, which will also help reduce pollution levels in their urban areas. Environmental factors need to be kept in mind by all countries operating within the Chinese Republic and globally as well.
Concluding Pestle Analysis of China
These are the primary PESTLE factors that affect the Chinese market and ensure its prevailing conditions. This market is expected to face major growth in the near future, and some of these factors will be the primary drivers of this growth. The Chinese government is still the biggest factor that dictates the movement of the country’s economy and is expected to remain so under the current political regime.