Economics
The definition of a small-medium enterprise (SME) is most commonly based on the number of employees that usually with fewer than 500 employees; In China, the definition of an SME is complex, which depends on the industry category and based on the number of employees, annual revenue and total assets, and this criteria on small and medium-sized enterprises are based on the SME Promotion Law of China (2003), which sets the guideline for classifying SME’s. 1. The relevant size of the SMEs is significantly smaller than the large and listed companies inChinadue to the size of their capital stock, credit allowance.According to Guo and Li (2007) ,the Structural characteristics of SMEs in China are: However, in recent years, some SMEs have grown really large in size due to their continuous improvement and technological improvements. 2.>After the reformations of government legislations in 2005 for the favour of SMEs in China, nowadays, SMEs have been operating in different branches of businesses such as manufacturing, services, construction, transport and retailing. This support has helped the emergence of many more SMEs inChinawhich means there is even greater demand for financing all these SMEs. 3.> Small enterprises also make up huge proportion of SMEs in China which usually lack the degree of specialization and cooperation in the production areas. This is mainly due to the fact that there is lack of government legislations that supports and shows guidelines for SMEs inChina. 4.> The main market for SMEs is the domestic market of China which is due to the fact that SMEs can not cope with fierce competition in the international markets or does not have advantage over foreign-invested companies with high-tech. Due to shortage of funds, most SMEs operate mainly in labour-intensive small and medium industries as the technological progress is slow for them.…
The clear advantages of free market economy above centrally planned economy were confirmed with the fall of USSR in 1991. However, free market economies have differences in their variations as well, the main of which are liberal market economy and coordinated market economy. The fundamental differences between liberal and coordinated market economies can be summarised in a way that in liberal market economies hierarchies and competitive market arrangements coordinate the activities of businesses, whereas coordinated market economies mainly focus on non-market relationships in terms of coordination of their activities (Vestergaard, 2009). NewAge-Bio is a biotechnology company that is considering opening a research and development centre abroad and has to choose between the USA, a country with liberal market economy, and Germany a classical coordinated market economy. This article represents a report for NewAge-Bio CEO Mr Mark Phillips and gives advices backed by research and justifications regarding the choice of the country to open a research and development centre. The article starts with general discussions about advantages and disadvantages of liberal and coordinated market economies in cases of USA and Germany and proceeds to focusing on five main aspects of the issue: industrial relations, employee relations, education and training, inter-company relations, corporate governance and financial markets. Moreover, a personal letter is also included to NewAge-Bio CEO Mr Mark Phillips that gives specific recommendations regarding the choice of the country, providing detailed justifications for each of the points being recommended. Advantages and Disadvantages of Liberal and Coordinated Market Economies for Opening NewAge-Bio Research and Development Centre: USA or Germany? Liberal and coordinated market economies are the two forms of free market economies that have specific differences which would have direct impact on various aspects of practice of NewAge-Bio Research and Development Centre. The basis for the distinction between liberal and coordinated market…
According to Goodhart and Xu (1996, p.24) China had a dual exchange rate system: official artificially high value of RMB, and its lower value in the swap market, and these two markets were unified on January 1, 1994. The analysis by Goldstein (2003) regarding China’s currency regime resulted in five conclusions: Chinese RMB is under-valued within 15-25 percent range. This is resulted by China maintaining controls on capital outflows, running surpluses on overall current and capital accounts in its balance of payments and accumulating international reserves in large amounts. The revaluation of RMB will benefit China and the global economy, otherwise net capital inflows and the large accumulation of international reserves will continue. Adopting a flexible exchange rate and opening its capital market will benefit China, but the economy is not ready for this. China should be persuaded to change its exchange rate policy, and trade measures should be imposed against China’s exports by United States. The effect of medium-size revaluation of RMB within external accounts of US must not be exaggerated. Wu (2006, p.3) argues that before revaluation of RMB 2 per cent in 2005 The People Bank of China had four options to consider as its short-term policy options: Option 1: Increasing the supply of money without revaluing the RMB. This option would have contradicted the macroeconomic objectives of The People’s Bank of China Option 2: Waiting for the tightening of the Federal Reserve without revaluing the RMB. Option 3: Aiming to lower revaluation expectations tightening macroeconomic environment, without revaluing RMB. Option 4: Revaluing the RMB Marsh and Diaz (2008, pp.2-4) suggest following forecast methods to forecast the exchange rate of a currency for a future period: Technical forecast method. This method involves analysing relevant historical data with the aim of forecasting…
By John Dudovskiy
Category: Economics
A vast amount of literature reviewed recognize following factors as determinants of the strengths of currency exchange rate: Inflation If the inflation rate is low in a country the value of its currency and its purchasing power towards other currencies rises, meaning its currency becomes stronger. Alternatively, countries with high inflation rate experience their currency depreciating against the currency of countries they trade with. The relationship between inflation and the exchange rate is that fixed interest regime can be practiced by countries with the aim of controlling the inflation rate. Initially it was done on the basis of Bretton Woods agreement before it was annulled in early 1970’s, which allowed other countries to fix their currencies against US dollars. Although fixed interest rate regime does help governments to control their inflation it has negative sides as well in the forms of vulnerability to the speculation and inability of undertaking domestic monetary policy. Interest rates Interest rates and exchange rates are correlated. Higher interest rates cause the exchange rates to increase, because higher interest rates would generate more profit for lenders, at the same time, attracting foreign capital. Conversely, if interest rate in a country is lower, exchange rates tend to be lower as well. Speculation According to Economicshelp (online, 2010), a fixed exchange rate can be a victim of speculation if the following three conditions apply: The currency is at the wrong market value .The Government doesn’t have sufficient reserves to protect the currency. People have no Confidence in the government intervention. Relative strength of other currencies For obvious reasons the relative strength of other currencies are going to affect the exchange rate of a currency of a country. If the strength of any other country currency increases for various range of reasons the exchange rate of…
By John Dudovskiy
Category: Economics