published_or_final_version / abstract / toc / China Area Studies / Master / Master of Arts

Thesis (MA)--Stellenbosch University, 2002. / ENGLISH ABSTRACT: Since the beginning of the economic reforms in 1978, the People's Republic of China (PRC) has attracted continuous interest from foreign investors, both in the form of foreign direct investment (FDI) and international trade, making the PRC the second largest host of FDI in the world. Despite occasional declines in foreign investment, foreign investors remain very interested in the long-term prospects for doing business in the country. The PRC's phenominal economic growth, large consumer market, the accession to the World Trade Organisation (WTO), and the government's commitment to open markets, economic reforms, and restructuring of the economy are amongst the factors that continue to attract foreign investment and trade. Despite the huge market potential and strong desire by foreign investors to do business in The PRC, the track record of foreign companies and investments in the country have at best been mixed. While some foreign investors have reaped large profits, others have failed to meet their performance targets. Foreign investors have faced a number of problems that are not market or trade related, but associated with economic, political and social trends and developments, including corruption, nepotism, crime, poor infrastructure, a depleted banking system, inefficient legal system, unemployment and poverty. Therefore, it is not surprising that many foreign investors are asking themselves whether the benefits of doing business in the PRC are worth the risks. In an increasingly uncertain and instable international trade and investment environment political risk assessment and management have become essential components of any profitable foreign investment strategy. Consequently, numerous political risk-rating agencies and a large number of both qualitative and quantitative risk assessment methods have emerged over the years. There is, however, neither general consensus regarding the definition of political risk nor a comprehensively systematic method of conducting political risk assessment. The definitions of political risk include a wide variety of indicators, ranging from governmental actions to all non-market developments. The number of methods available for political risk analysis range from informal, unsystematic assessments by a few individuals to formal, systematic, and sophisticated risk analysis models. There are, however, some similarities. The main objective of political risk analyses is to describe, explain, and forecast political conditions and events that affect the interests of foreign investors operating abroad or planning to enter a foreign market. In addition, political risk analyses attempt to forecast losses, and recommend means of managing the risk, avoiding the losses, and seizing the opportunities. Scenario planning is one of the qualitative methods used to analyse political risk. Scenario planning, however, differs from most other approaches as it does not try to accurately predict what will happen in the future or to provide the right tool for foreseeing the future developments, but to offer a range of possible futures. The underlying assumption is that the future cannot be forecast or predicted with certainty, but that the very process of thinking about the future and exploring the implications of possible future scenarios may have a profound impact on foreign investment and trade. Scenario planning is a method that provides insightful information necessary to understand, anticipate and respond to change and uncertainty in the future PRC. The development of four 20-year scenarios in this study demonstrates that the prospects for foreign investment can be both positive and negative. When the economy continues to grow strongly, and the government is able to maintain a stable environment and successfully implement the necessary changes foreign investors are expected to reap the desired benefits. However, if the problems facing the PRC at the moment further deteriorate foreign investors could expect increased risks, and the possibility of failure. / AFRIKAANSE OPSOMMING: Vanaf die begin van die ekonomiese transformasie in 1978, het die Volksrepubliek van Sjina voortdurende belangstelling van buitelandse beleggers geniet. Hierdie belangstelling was gemanifesteer in die vorm van direkte buitelandse belegging asook internasionale handel. Sjina het so aanloklik vir buitelandse beleggers geword, dat dit tans die wêreld se tweede grootste ontvanger van buitelandse belegging is, en beleggers stel veral belang in die lang termyn moontlikhede van besigheid doen in die land. Die Volksrepubliek van Sjina se merkwaardige ekonomiese groei, groot verbruikersmark, toetreding tot die Wêreld Handels Organisasie, en die regering se verbintenis aan die ontwikkeling van 'n oop ekonomie, ekonomiese transformasie en die herstrukturering van die ekonomie as sulks, is sommige van die faktore wat toenemend buitelandse belegging en handel aanlok. Ten spyte van die groot verbruikersmark potensiaal en die sterk begeerte van buitelandse beleggers om besigheid te doen in die Volksrepubliek van Sjina, is die ervarings van buitelandse maatskappye tot dusver gemeng. Alhoewel sommige buitelandse beleggers groot wins gemaak het, het ander minder sukses ervaar. Buitelandse beleggers word ook gekonfronteer met baie probleme wat nie noodwendig met die mark of handel gepaard gaan nie. Hierdie probleme word geassosieer met ekonomiese, politieke en sosiale gebeure en faktore insluitend korrupsie, misdaad, nepotisme, swak infrastruktuur, 'n ledige bank sisteem, 'n ondoeltreffende regssisteem, werkloosheid en armoede. Baie buitelandse beleggers betwyfel dus moontlik die vraag of besigheid doen in die Volksrepubliek van Sjina tog meer voordele inhou as risiko. In 'n wêreld waar internasionale handel en belegging met onsekerheid en onstabiliteit gepaard gaan, het die aspekte van politieke risiko skadebepaling en -bestuur belangrike komponente van enige winsgewende buitelandse belegging strategie geword. Gevolglik het verskeie politieke risiko-analise agentskappe asook 'n verskeie risiko-analise metodes van beide kwantitatiewe en kwalitatiewe aard hul verskyning gemaak. Ten spyte van die bogenoemde is daar nog steeds geen veralgemeende konsensus oor die definisie van politieke risiko, of 'n oorsigtelik sistematiese metode van politieke risiko-skatting onderneem nie. Die definisies van politieke risiko sluit in 'n groot verskeidenheid van indikatore wat wissel van regeringaksies tot mark-onverwante gebeure. Die verskeidendheid van metodologië wat gebruik word in politieke risiko-analise wissel van informeel, onsistematiese skattings, tot formele, sistematiese en gesofistikeerde risiko-analise modelle. Die primêre doel van politieke risiko-analise is om te beskryf en te verduidelik, en ook om politieke omstandighede en gebeurtenisse wat die belangstelling van buitelandse beleggers affekteer te voorspel. Addisioneel beoog politieke risiko-analise om ook die moontlikheid van verlies te voorspel en om 'n strategie vir die bestuur van die risiko aan te beveel, om sodoende verlies so ver moontlik te vermy asook om moontlike geleenthede aan te gryp. Senariobeplanning is een van die kwalitiatiewe metodes wat gebruik kan word in die analise van politieke risiko. Senariobeplanning verskil van ander benaderings in die sin dat dit nie akkurate voorspellings vir die toekoms as sulks maak nie, maar eerder 'n verskeidenheid van moontlike toekomstige omstandighede weergee. Die ontwikkeling van vier 20-jaar senarios vir die Volksrepubliek van Sjina in hierdie studie illustreer hoe die uitsigte vir buitelandse belegging positief sowel as negatief kan wees. Indien die Sjinese ekonomie verder groei en die regering in staat is om 'n stabiele omgewing in stand te hou asook die nodige veranderings te implimenteer, kan buitelandse beleggers verwag om beoogde voordele van buitelandse belegging te ervaar. Maar as die probleme wat die Volksrepubliek van Sjina op die oomblik ervaar voortduur en lof verswak, kan buitelandse beleggers verhoogde risiko sowel as die moontlikheid van mislukkings verwag.

Thesis (MA)--Stellenbosch University, 2004. / ENGLISH ABSTRACT: This research assignment has investigated the overall nature of the investment climate in the People's Republic of China (PRC).The investment climate was analysed using a Political Risk Analysis (PRA) framework, whereby the PRC was scrutinised closely for its most defining socioeconomic features and, especially, for its most salient political risk factors. Based on this, the assignment evaluated this climate with specific relevance to the investment plans of the South African company SAB-Miller. Since its accession to the World Trade Organisation (WTO)in 2001, the PRC has intensified its economic restructuring process, a necessary and inevitable process, in order to comply with the terms of the WTOframework. This period of adjustment has heightened the anxiety over the strength of the Chinese economy, and the repercussions and/or opportunities for the multinational SAB-Miller.To remedy this uncertainty, this assignment has drawn up an in-depth qualitative scenario, in order to forecast the major trends of the PRC's short-term socio-political future. The main findings of the assignment indicate that a 'high-road' scenario is the most likely to occur in the PRC in the short-term. Clearly, this favourable forecast 1S dependent on the continuation of the current economic and socio-political restructuring process in the PRC. With regards to the main macro-political risks factors, the assignment draws attention to several critical areas of concern. Firstly, the lack of legitimatisation from the 'bottom-up' is a worrying feature, especially in light of the growing economic disparities between citizens and between provinces. Secondly, the financial and governmental sectors need a thorough restructuring, according to WTO criteria. Thirdly, the fragmentation of the market inside the PRe undermines the potential of the PRC government to diffuse the benefits of economic growth and to absorb the downsides of globalisation. Micro-specific risk factors for the company SAB-Miller are focussed predominantly on the speed and the depth of the implementation of the guidelines of the WTO. Especially with regards to the lowering of intra-provincial trade barriers and the efficacy of the distribution networks. Lastly, SAB-Miller should eliminate any risk factors, which may originate from inside the company's behaviour, such as the effects of its adopted labour policies. Lastly, it should maintain a clear level of transparency in their associations with governmental institutions. Throughout the assignment, these risk factors will be investigated and related to the overall political risk climate and utilised to draw conclusions concerning the potential of the investment plans of SAB-Miller. / AFRIKAANSE OPSOMMING: Hierdie werkstuk het die beleggingsklimaat van die Volksrepubliek China (VRC) ondersoek. Die beleggingssklimaat is ontleed deur gebruik te maak van 'n model vir Politieke Risiko Analise (PRA), waarby die VRC sorgvuldig onderwerp is aan 'n ondersoek van sy mees kenmerkende sosio-ekonomiese faktore en van die belangrikste risiko faktore. Hierop gebaseer, het die werkstuk ook die beleggingsklimaat ontleed met spesifieke betrekking tot die beleggingsplanne van die Suid Afrikaanse maatskappy SAB-Miller. Sedert toetreding tot die Wêreld Handelsorganisasie (WHO) in 2001, het die VRC sy transformasie proses versnel ten einde te voldoen aan die WHO se toelatingskriteria. Hierdie tydperk van aanpassing het kommer gewek oor die Chinese ekonomie asook oor die gevolge daarvan vir die maatskappy SABMiller. Om hierdie onsekerheid aan te spreek het die werkstuk 'n kwalitatiewe scenario voorgestel, ten einde die hoofpunte van die VRC se sosio-ekonomiese kort-termyn toekoms vooruit te skat. Die gevolgtrekking van hierdie werkstuk toon aan dat 'n 'high-road' scenario die waarskynlikste is gedurende die kort termyn. Dis ook duidelik dat die gunstige vooruitskattings afhanklik is van die voortsetting van die huidige sosioekonomiese transformasie proses van die VRC. Met betrekking tot die vernaamste makro-politieke risiko faktore het die werkstuk aandag gegee aan verskeie kommerwekkende aspekte. Eerstens, die gebrek aan elektorale regmatigheid van die 'grond-af, waarskynlik in die lig van die toenemende ekonomisiese verskille tussen burgers asook tussen provinsies. Tweedens, moet die finansiële- en staatssektore grondig herstruktureer word volgens die WHO riglyne. Derdens, ondermyn die fragmentasie van die mark van binne China die mag van die VRCse regering om die voordele van die ekonomiese groei gelykmatig te versprei, asook om die nadele van Globalisasie te absorbeer. Mikro-spesifieke risiko faktore vir die SAB-Miller maatskappy het hoofsaaklik gefokus op die spoed en die diepgang van die implementering van die WHO riglyne. In besonder met betrekking tot die hoë interprovinsiale handelsbelemmerings en die optimale effektiwiteit van die verspreidingskakels. Laatstens, moet SAB-Miller enige risiko faktore elimineer wat as gevolg van die maatskappy se eie gedrag kan onstaan, byvoorbeeld die maatskappy se arbeidsvoorwaardes. SAB-Miller moet ook 'n duidelike aanspreeklikheidsfunksie daarstel, in hulle betrekkinge met Chinese staatsinstellings. Deur die hele werkstuk word hierdie risiko faktore ondersoek en in verband gebring met die algemene politieke risiko klimaat, en word ook gebruik om gevolgtrekkinge te maak aangaande die potensiaal van SAB-Millerse beleggingsplanne.