Business Do some research on the currency and banking situation in CHINA . We no

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Business

Do some research on the currency and banking situation in CHINA .

We normally think of currency and banking risks as being something confined to third-world or developing countries. But events in the past few years such as the Euro crisis or the financial crisis in the United States have shown that not even the wealthy, developed countries are without risks on the financial side. So it is important for any company doing business in your country to carefully consider the risks that they face.

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Explanation / Answer

China is the second largest economy in the world in terms of GDP, but in terms of Purchasing power parity it is already the largest economy in the world. China banking system and currency played a very important role in making China what it is today, but they can also play a spoil sport once the favor shifts to the other side,

China banking system is a socio-political banking system which is much more complex than the system that we can see else where in the world. Its main aim is to infuse money into economy at a very rapid rate and taking money from society in form of social security contributions. It mainly focuses on generating revenue rather than having a healthy economy.

The currency system on other hand is a very different system which has totally different structure. The Peoples bank of China controls the exchange rate with dollar and kept the exchange rate at less than 8 RMB per dollar for a very long time. This helped Chinese exports tremendously, making china the largest export country in the world. RMB right now has appretiated a lot due to political pressure on Beijing and also due to market circumstances. There is absolutely no doubt that China Currency RMB is one of the most stable currencies in Asia and much less volatile.

1. I am from India and our currency is Rupee. Rupee has a rich history and was one of the most stable currencies in british period. Its use was widespread and almost extended upto middle east. Now Rupee is much less significant and can be traded only locally, it has long way to become international currency., Rupee is highly volatile and fluctuates rapidly. there are several reasons why Rupee fluctuates, Indian tend to import a lot of Gold and Oil which inturn give rise to demand for Dollars, thus Rupee is actually very weak from last 2 years.

Rupee value also fell dramatically due to high inflation and political problems of the previous government

2. The banking system of India is one of the best in the world, the success behind the banking system is the framework provided by Reserve bank of India which strictly monitors banks in every possible way, which have given rise to very healthy banking system with not even one bank failing during economic slump

However, there are certain risks for Indian banks. Due to Global slowdown many of good companies became defaulters and have given rise to massive Non-performing Assets ( which are given to bank as collateral security) and payment defaults which forced the banks to search for new ways of doing business, but the fact is that these banks were very good and lend capital to good companies but still failed only due to global problems

3. Overall financial system in our country is quite messy, where laws from 1800s are left in the books which still govern investment policies. There is no easy way to do business in India and many of the multi-national companies are facing huge problems by doing business in this country, but the current government in the country is willing to change laws and regulations for making business much easier and the world has already taken a note of it.

The advice from me to companies coming to India is to avoid certain sectors where corruption is Rampant

1. Transportation: There are thousands of regulations that govern transportation in this country, Foreign players have no acccess what so ever in this sectory so just outrightly avoid it

2. Environmental Clearences: If you need one, be assured you wont get one so just any business that needs environmental clearences, Mumbai airport dint get one so you cant expect you to get one

3. Labor Laws: A foreign company in no way can deal with Labor Laws of the land which has clauses that date back to 1900s and laws formed by the british that are carried over. Labor can cause even riot here.

These are just a few i can think of there are many other things that foreign players need to avoid in this country.

Foreign companies must avoid the above businesses and they are very safe in this country, Basically most of the companies are just IT and ITES companies and some R&D centres. All the labor work goes to our neighbor Peoples republic of China.

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