International Business Policy Essay Example | Topics and Well Written Essays - 2250 words

International Business Policy - Essay Example Added to that the purchasing power dazzled one and all and Multinationals of all hues went headlong to get a piece of the action. It has been ascertained that both India and China are quite similar and are perusing similar liberalization policies. Culturally too there is affinity and therefore investing in China will be a wise move. As a growing garment exporter to the world with an annul turnover of over Rs 5000 crores, equivalent to $ 1.25 billion the House of Pearl Fashions Ltd (HPF) are faced with a dilemma of competition from China. With the onset of a quota free regime US and European countries are free to buy their requirements from any country of the world and China as a source of cheap labour as well as due to its effective control on the Yuan has emerged as a strong contender against export of Indian garments. HPF is actively considering converting this threat into an opportunity. They already have a trading presence in China through a wholly owned subsidiary Northwest Trading, the next logical step should be to set up a manufacturing unit in one of their special economic zones and make it another exporting hub taking advantage of their labour and currency factors. (House of Pearl). Prior to reforms the Chinese maintained an overvalued currency but with expansion in foreign trade IMF estimates that the Chinese currency lost about 70 percent of its value against the dollar in real terms over the period from 1980 and 1995, substantially enhancing the international competitiveness of China-based export operations. (International Monetary Fund 1996, 50a) China has a free currency system and conversions are allowed freely. But the currency of the land the Yuan is frozen against foreign currencies of the world. As against this there is no free conversion of currencies in India but the Indian Rupee is kept on a floating basis viz-a-viz foreign currencies and this is the reason of our competitiveness being challenged by