Pestel Analysis - Banking in China

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Using PESTEL analysis to understand the macro-environment that impacts the Banking Industry in China.

Political Factors
• China has a socialist political system
• China has entered into the WTO and as part of the commitment to open up the banking industry, has issued the Rules for Implementing the Regulations Governing Foreign Financial Institutions in the People’s Republic of China , which allows Foreign financial institutions to provide foreign currency services to Chinese enterprises and individuals, provide local currency business to all Chinese clients and they can now conduct RMB denominated business in 9 cities, namely, Shanghai, Shenzhen, Tianjin, Dalian, Guangzhou, Zhuhai, Qingdao, Nanjing and Wuhan. • Foreign Banks enjoy a 15% tax rate compare to 33% for local banks.

Economic Factors
• The economy has changed from a centrally planned one to a more market-orientated economy that has a rapidly growing private sector and is a major player in the global economy. • China is the second largest economy in the world after the United States measured on a Purchasing Power Parity basis. • China’s per capita income had grown at an average annual rate of more than 8% over the last three decades. • China has been the fastest growing major nation for the past quarter of a century with an average annual GDP growth rate above 10%. The growth rate for 2007 is 11.4% • The currency, RMB, is pegged to the USD and is currently undervalued. • As at December 2007, the benchmark deposit rate (one year) is 4.14%, one year lending rate is 7.47% • Inflation is approximately 7%

Social-Cultural Factors
• China has a population of 1.3 billion, with 7.7% over the age of 65 • 42% of the population is in the urban area and 57% in rural. • 3.6% of the population over the age of 15 has postsecondary education and 51% with just primary education or below. • Very limited people with qualifications necessary for successful...
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