Business Financing Methods and China’s Economic Overview
Business Financing Methods
The goal of this essay is to show the advantages and disadvantages of various methods of financing. It includes three ways: credits, crowdfunding, and business angels, which are presented one by one.
Bank Credits
The most famous method of financing is bank credits. Banks may grant a credit, but most of the time, it includes a high price to pay when it comes time to pay back. The latest values actualized on the Bank of Spain’s web page are from 2016, when the Annual Percentage Rate rounded to 2.3%.
Crowdfunding
Another way to finance, which is currently becoming famous, is crowdfunding. It uses a collective platform on the Internet where its users decide if the proposed project is interesting or not. If they decide that it is worthy, they contribute with an amount of money they wish to provide because they really like the project and want it to become true. An advantage of crowdfunding is the opportunity to show the project and get feedback on it. Moreover, probably taxes are lower than other entities or even non-existent. Nevertheless, it might happen that the sum needed to start the project up is not totally obtained by crowdfunding.
Business Angels
Also, a great method to finance a project could be Business Angels. Business Angels are people whose job is detecting good projects and investing in these. These people finance the project with their own money, so they expect that it produces great benefits, and that is the problematic face of this method, that entrepreneurs cannot tell how their project will come out. In 2016, only 8% of projects were accepted by these people. However, Business Angels are experienced people that will give the project useful knowledge to improve the project and get its best.
After analyzing bank’s credits, crowdfunding, and business angels, the conclusion is that all these methods of financing a business have their positive and negative aspects, so the entrepreneurs are who will decide which outweigh the others and which is the most appropriate method.
China’s Economic Overview
China is the most populated country in the world and the first economic power by GDP. This country is a socialist state with a market economy.
Since 1949, China’s economy consisted of the free market, but from 1978, it started to introduce economic reforms. Since then, the economy of China has been the fastest in growth, being the largest exporter and importer of goods and the first industrial power.
Actually, China has a market economy based on the acquisition of private property. The government has power in the strategic sectors such as energy production and the heavy industries, but the private companies have grown and expanded enormously.
China is the global leader in the industry thanks to its high productivity, low labor cost, and great infrastructure, but the great use of energy has turned the country into the largest energy consumer and its industrial growth has damaged the environment. Furthermore, China has many national bank credits so its rate of growth started to decelerate from 2010, decreasing demand for exports and causing difficulties in the global economy.
In 2015, there was a big drop in the Chinese stock market which was coined “Black Monday.” It made investors afraid of a great fall in the stock exchange that shortly after, it was produced and as a consequence all problems of China were transferred to other countries.
With the significant devaluation of this coin, China’s businesses have managed to take advantage and it has helped Chinese exports, although it has led to a decline of foreign exchange reserves.
At the present time, it is unknown whether China is trying to subtract or increase the value of its currency so the foreign exchange rates have fallen making it clear that the government is trying to stabilize the yuan while it is injecting capital to the stock market.
However, these reserves have declined fast leading to the loss of millions of euros. It is also thought that this fall is due to mistrust which has led to massive capital flight.