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 Peoples 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.
* Chinas 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 corporate management
* There is an absence of consumerism in the workforce due to the legacy of State Owned
Enterprises
* Expatriates often find it difficult to adopt culturally to life in China
* Corporations seeking to hire from the Chinese labour market find it difficult to get
employees to leave the State Owned Enterprises.
* The skill sets of Government bureaucrats have to be transformed if they were to run
private sector corporations
Technological Factors
* Chinas leaders (Hu Jintao, Wen Jaibao, Jiang Zemin & Zhu Rongji) have been described
as technocrats as they were all trained as engineers, therefore scientific and technological
