Political Regime

1853 words 8 pages
Essay Topic: Briefly compare the political regime type in China and India.
Which of the two would you prefer to do business in and why?
(You may specify the type of business.)

The Politic regime of a country is imposed to safeguard the interests of that country. However it can have the effect of limiting a country’s growth and development and can cause complications when attempting to do business within a country. China and India are two fast growing and very large countries with clear distinction in social and economic models as well as two very different politic regimes with their own unique characteristics. This essay will include a contrast look into the different political regimes in both China and India and the opportunities
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Since its economic reform in 1991 the Indian government have tried to limit their interactions in the marketplace to allow for the greater flow of free markets and an increase in modernisation. As (Das, 1997) shows the new reform policy was based on two principles the deregulation of Indian government’s economic control functions and to encourage more competition in the market with the main goal of achieving free flow of investment, product and technology across national borders. The reform has led to a steady increase in foreign direct investment (FDI) as well as an increase to the number of joint ventures and strategic alliances as a result of foreign businesses seeing potential profits on investments.

Tax policies within a country can be a major deterrent or advantage when deciding to conduct business internationally. Foreign companies in China over the past decades have experienced relatively low tax rates at around 15%. Their low tax rate was aimed at encouraging FDI growth and is one reason why China’s economy has boosted so much. The tax rate was considerably lower than that of the domestic market which was paying 33% in some instances and this preferential treatment to FDI’s was in hope of encouraging growth in specific industries that the Chinese government wanted. However the Chinese government changed the tax policy in 2007 which has led to higher

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