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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 99

China Business Intelligence No. 99

Samsung Economic Research Institute Beijing Office

Dec. 17, 2008

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Highlights:

I. Industry

In the wake of the global financial crisis, sales of Chinese consumer electronics companies are declining. As exports stagnate, companies' inventories and the cost to manage them are both rising, resulting in financial difficulty. Accordingly, on the back of the Chinese government's policy-based support, consumer electronics companies are trying to expand their market share in provincial areas in China and developing countries. Furthermore, they intend to reduce stocks by giving discounts and accelerating sales cycles. Sluggish exports will be a threat to small- and medium-sized companies but can also be a new opportunity for leading companies since export prices will rise while design piracy will diminish. Companies can only survive by investing in technical innovation and opening up new markets.

II. Economy

As the effects of the global financial crisis spreads to all economies it is becoming more and more evident that the international financial system will be changed to prevent recurrences and to better handle future turmoil. From a short term view, China , one of beneficiaries of the international stature of the US dollar, supports the maintenance of the current international financial system. Given that China holds a massive amount of US dollar assets in foreign countries, a significant change in the status of the US dollar could cause a big loss for China. From a long-term perspective, China plans to exercise clout in the international financial system in order to develop the yuan into a hard international like the US dollar, euro, and yen.

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