Exporting Luxury Itallian Shoes into China

Political Factors

Strict Political Rule

The people's republic of China is a communist state based on civil law system; derived from Soviet and continental civil code legal principles; legislature retains power to interpret statutes; party organs exercise authority over judiciary.(1)

The P.R.C. considers Taiwan to be its 23rd province; it has 5 autonomous regions, including Tibet. (2) No substantial political opposition groups exist. One major political party controls state affairs: The Chinese Communist Party or CCP and eight registered small parties controlled by CCP. (1) It's a stringent region for anyone to conduct business.

Political Instability

Beijing says the island of Taiwan is a part of Chinese territory that must be reunited with the mainland. The claim has in the past led to tension and threats of invasion, but since 2008 the two governments have moved towards a more cooperative atmosphere. (3) It will be necessary to conduct business in a politically stable environment as this business makes its profit through sales of valued tangible assets.

Importation Regulations

The CCC safety license requirement by the government of China requires manufacturers to obtain the China Compulsory Certification (CCC) mark before exporting to or selling products covered in the CCC catalogue in the China market. The system was implemented on May 1, 2002 and made fully effective on May 1, 2003. Products not meeting CCC requirements may be held at the border by Chinese Customs and will be subject to other penalties. (4)

Conformation to World Standards

China has been a member of WTO since 11 December 2001. This means a maximum tariff level which is often referred to as "bound tariffs" or "bindings" (GATT Article II) have been set. This suggests a more stable tariff rate.(5)

As China joined the World Trade Organization, the country tried to strengthen its IPR laws to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).But still, twenty percent of all consumer products in the Chinese market at counterfeit. (6)

As part of the WTO, China has had to maintain a Universal Product Code system.

Tariff

Product code 64051090

Product Description Footwear, nes, with leather or composition leather uppers and other material outer soles

Country of Origin Italy

Year 2011

(7)

Applied tariff on import: $ 21.2 per Number of pairs (7)

Strict Rules Pertaining Media and Advertisement

In 2004, Nike spent $100 million on a TV commercial featuring a popular American basketball player: LeBron James; it was banned by China later that year following complaints by the mass media and general public that it insulted China's national pride.(3). Fashion especially high end fashion is marketing sensitive; thus care is needed in passing the desired message across without offending the Chinese government or its people.

Appendix A is a detailed description of the PRC's Advertisement Laws.

Economic Factors

Economic Strength vis-á-vis FDI

With a GDP of $4,985,461,200,586,(8) the PRC is now the world's second-largest economy, the biggest exporter, and an increasingly important investor.(9) It has sustained average economic growth of over 9.5% for the past 26 years. In 2009 its $4.814 trillion economy was about one-third the size of the U.S. economy.(2)

China is one of the world's top exporters and is attracting record amounts of foreign investment. In turn, it is investing billions of dollars abroad.(3).

Foreign-invested enterprises produce about half of China's exports, and China continues to attract large investment inflows. Foreign exchange reserves were $2.39 trillion at the end of 2009, and have now surpassed those of Japan, making China's foreign exchange reserves the largest in the world. China's outbound foreign direct investment has also surged in recent years, reaching $52 billion in 2008(2)

The collapse in international export markets that accompanied the global financial crisis of 2009 initially hit China hard, but its economy was among the first in the world to rebound, quickly returning to growth. (3)

The economy appears set to remain on a strong growth trajectory in 2011, lending credibility to the stimulus policies the regime rolled out during the global financial crisis. The government vows to continue reforming the economy and emphasizes the need to increase domestic consumption in order to make the economy less dependent on exports for GDP growth in the future, but China likely will make only marginal progress toward these rebalancing goals in 2011.(1)

Economic Challenges

Two economic problems China currently faces are inflation - which, late in 2010, surpassed the government's target of 3% - and local government debt, which swelled as a result of stimulus policies, and is largely off-the-books and it's potentially low-quality.(1)

China's per capita income is below the world average. The Chinese government faces numerous economic development challenges, including:

a) reducing its high domestic savings rate and correspondingly low domestic demand;

b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force;

c) reducing corruption and other economic crimes; and

d) containing environmental damage and social strife related to the economy's rapid transformation. (1)

Social Factors

Craze For Luxury Goods and 'FACE'

China's passion for luxury goods has increased in this past decade. With the largest population in the world, it poses to be a promising market.

Luxury demand has increased