China’s Economic Landscape: Consumption, Trade, and Negotiations

Posted on Mar 20, 2025 in Economy

China’s Economic Overview

Household spending in China accounts for just over one-third of the Chinese output, indicating that China has one of the lowest levels of consumption compared to its production. The Chinese government aims to raise middle-class incomes and is targeting a 7.5% growth rate for this year.

Contrary to some misconceptions:

  • The level of consumption of the Chinese is not higher than the British and the Japanese.
  • Chinese enterprises do borrow too much money compared with firms in other countries.
  • The Chinese government does not want the Chinese to spend money buying things.
  • Managing an economic slowdown in China is a complex task.

Business News Highlights

Recent business news indicates a further downturn in the economy this month, influenced by the ongoing recession in the United States and the Asia-Pacific region. The stock market experienced heavy trading with significant losses in share values. The near-future forecast remains unfavorable due to low market confidence.

Key Updates:

  • Paradise Lane: The struggling luxury hotel group is seeking new investment to avoid bankruptcy, burdened by a debt of nearly $5 billion. Rumors suggest rivals like GHN may acquire a large equity stake.
  • Phoenix Media: Announced a 15% increase in pre-tax profits on an annual turnover of $4.5 million. This strong performance is expected to result in an increased dividend of over 14% per share, pleasing shareholders.
  • Emerging Markets: Sales are rising in emerging markets.

Understanding Free Trade

Free trade involves the movement of goods into and out of a country without controls or taxes. Countries that support free trade aim to liberalize their trade by removing barriers, maintaining open borders, and minimizing customs controls.

Problems Mentioned:

  1. Tariffs
  2. Subsidies
  3. Quotas
  4. Expensive licenses
  5. Regulations related to documents

Deregulation Benefits

When there is a policy of deregulation, companies compete freely.

Benefits of Free Trade

Ian McPherson mentions the following benefits of free trade:

  • Greater choice of goods
  • Better-made products
  • A wider choice of jobs

Negotiation Strategies

Negotiation strategies range from highly competitive, win-lose approaches to very cooperative, win-win scenarios. The appropriate strategy depends on the circumstances.

Key concepts:

  • Unfair
  • Strategic
  • Compete

Negotiation Dynamics

During the negotiation, both sides agreed on the type of relationship they want.

The agent wants the contract to be longer than two years because it must be at least three years for them to be profitable.

Negotiation Points:

  • A non-exclusive contract would be perfect for us, too. (ND)
  • No, that’s no good for us. (ND)
  • We know the market conditions far better than you. (ND)
  • I suggest a rate of 15 per cent on all the revenue you obtain. (D)
  • Fifteen per cent is too low. We want at least 20 per cent. (ND)
  • We could help with this. (D)
  • How much will you pay us? (ND)
  • We’ll talk about the commission later. (ND)
  • To be honest, with a new distributor, we prefer a shorter period. (D)
  • It must be at least three years. (ND)

Order and Discount Discussion

The discussion includes the following points:

  1. Order
  2. Discount
  3. Offer you 10%
  4. If we placed a very larger order
  5. Would you be able to
  6. Deliver
  7. Insurance
  8. To be honest
  9. Were a regular customer
  10. 30 days credit