Nhóm 9 _ 49K01.

2 _ Chương 2

Thành viên: 6. Đặng Vân Anh

12. Trương Thị Minh Hậu

25. Nguyễn Hoàng Yến Ngọc

41. Đoàn Mỹ Trinh

43. Nguyễn Bảo Uyên

Case study: Property rights in China

1. Discussion about Emerging Property Rights in China
1.1. Property rights - the legal rights over the use to which a resource is put and over the use
made of any income that may be derived from that resource
Before 2007, China’s land system belonged to the Chinese government, while urban landholders
had been granted 40- to 70-year leases to use the land, while rural farmers had 30-year leases. This
caused significant damage to the benefit of the residents. At that time, because of the lack of legal
title for landholders, many landholders were given little or no compensation when large-scale
appropriation of rural land for housing and factory construction had rendered millions of farmers
landless.
As a consequence, some landholders drifted to the cities that caused an increase in urban
underclass. At that time, property and land disputes had become a leading cause of social unrest.
The 2007 law gives urban and rural land users the right to automatic renewal of their leases after
the expiration of the 30- to 70-year terms. In addition, the law requires that land users be fairly
compensated if the land is required for other purposes, giving individuals the same legal protection
for their property as the state. Combined with a 2004 change in China’s constitution, stating that
private property “was not to be encroached upon”, that can strengthen property rights in China.
However, the law still had its limitations; peasants still lacked full marketable ownership rights,
preventing them from selling or using land as collateral. Landholders just had the right to renew
their leases after the expiration or be fairly compensated if the land was required for other purposes.
Landholders cannot sell their land, some underemployed farmers might not find other productive
work, and those landholders who stayed could acquire bigger landholdings that could be used more

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efficiently. Also, because land could not be used as collateral, landholders were unable to borrow
funds to invest in productivity improvements.
1.2. Hybrid political system (Totalitarianism and Democracy)
 Hybrid political system (Totalitarianism and Democracy)
- Totalitarianism:
Although the new law recognizes longer-term land use rights, all land remains legally state-
owned (because it does not yet grant peasants commercial ownership rights over the land they
cultivate). This is consistent with Marxism ideology, where the state controls the means of
production. This shows that the Chinese government still maintains centralized power, a
characteristic of totalitarianism.
Before the 2007 law was passed, thousands of protests (23,000 “mass incidents” in 2006) broke
out over property disputes, but the state kept control through administrative and security measures.
The 2007 law – law’s passage after 14 years of debate showed resistance from hardliners within the
government, but in the end, the state decided to change it to reduce social unrest rather than to truly
grant economic freedom.
- Democracy (economic liberalization):
The 2007 law gives urban and rural land users the right to automatic renewal of their leases after
the expiration of the 30- to 70-year terms. In addition, the law requires that land users be fairly
compensated if the land is required for other purposes, giving individuals the same legal protection
for their property as the state. This reflects the trend of economic liberalization, especially in
market-based economies where two-thirds of economic activity is in the hands of private
enterprises, showing that the state accepts some principles of a market economy while still
maintaining a political monopoly
Nevertheless, the law has its limitations; most notably, it still falls short of giving peasants
marketable ownership rights to the land they farm. This disadvantage demonstrates the state still
wants to control the countryside.

Therefore, China has a hybrid political system, which is totalitarianism with economic liberalization,
where China allows market-based economic activities while maintaining strict political control.

1.3. Market – based economy:

An economy with market elements but still subject to government intervention or regulation.

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 Stronger property rights despite continued state oversight: The 2007 law allows automatic
renewal of land leases for urban and rural land users after the 30- to 70-year terms expire. This
increases stability and protects individual property rights. In reality, all land is still state-owned,
reflecting a combination of centralized planning and market forces, with the state maintaining final
say over how land is distributed.

Limitations on the land ownership rights of farmers: Peasants are still not granted
marketable ownership rights over the land they farm, meaning they cannot freely buy or sell
it. Thus, China has not fully transitioned to a free market system, as the state still controls key
resources like land.

Protection of private property: The 2004 amendment to China’s constitution states that private
property “shall not be encroached upon”. This is an important stage in the shift from a planned
economy to a market-oriented one, where private property is safeguarded but yet subject to
government regulation.

Economic and social impact: State control over land has led to widespread land disputes and
social unrest, with around 23,000 mass incidents in 2006, many related to property rights conflicts.
This emphasizes the conflict between government control and market-oriented changes, which is a
characteristic of a market-based economy.
Therefore, China’s market-based economy combines government regulation with market
forces. Farmers’ ownership is restricted since state-owned land persists despite advancements in
property rights. This is indicative of a market-based economy in which the government controls
market activity.

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 Critical Thinking and Discussion Questions
2. You are a senior manager in a U.S. automobile company considering investing in
production facilities in China, Russia, or Germany. These facilities will serve the local
market demand. Evaluate the benefits, costs, and risks associated with doing business
in each nation. Which country seems the most attractive target for foreign direct
investment? Why?
2.1. China:
2.1.1. Benefits:
 Market size: The current population in China is 1.4 billion people. With gradually
increasing living standards, in 2022, Chinese GDP per capita in 2022 was $12,720.22. China
also has diverse mineral resources, including valuable industrial resources such as coal,
petroleum, and non-ferrous metals.
 Purchasing power: With a large population and high GDP, China's purchasing power has
increased significantly over years from necessity to luxury products. Moreover, the growing
middle class in China contributes substantially to the demand for mid-range goods and
necessities. That means businesses will have the opportunity to expand their market share in
this country.
 Likely future wealth of consumers: From 1960 to 2022, China's GDP per capita has grown
significantly, which means that its growth is predicted to be maintained in the future.
Additionally, as a developing country, China continues to adopt strategies such as "Made in
China 2025," which emphasizes smart manufacturing and focuses on high-tech industries.
Additionally, policies of boosting domestic consumption also help expand the domestic
market, enabling the nation of over a billion people to maintain its development in the future.
2.1.2. Costs:
 Politics: Although China is a potential market, foreign businesses still face a complicated
political environment when investing in this market. To operate in China, companies must
comply with strict regulations. Additionally, with a high corruption rate (40% of Chinese

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 officials were investigated in 2023), corruption remains a serious issue in diverse fields in
China.
 Economy: As one of the world's fastest-growing economies, China has a well-developed
infrastructure, allowing businesses to eliminate construction and infrastructure investment
costs. However, the income and development gap between rural and urban areas remains
significant. Investing in rural areas may cause high operating costs due to the demand to
build production facilities and supply chains. However, China's urban-rural integration
policies may help mitigate these challenges.
 Policy: China's legal framework for product safety, environmental protection, and labor
rights is becoming gradually strict. Regulations such as social security for workers and
retirees and product quality standards - especially for FDI companies and businesses in
major cities - can lead to higher operational costs for foreign investors. Additionally,
intellectual property laws remain a controversial issue in China, with counterfeit goods and
trademark squatting still prevalent. This means businesses risk losing their intellectual
property to local competitors.
2.1.3. Risks:
 Political risks: The rise in violent attacks driven by "social revenge" in China reflects
growing dissatisfaction and tension in society due to economic pressures, unemployment,
and perceived injustices. If the government fails to manage these issues effectively,
escalating violence could undermine public trust in the political system, threatening state
stability and control. For example: In September 2024, a 37-year-old man carried out a knife
attack at a supermarket in Shanghai, resulting in three deaths and 15 injuries. (1)
 Economic risks: Economic risks are closely tied to political risks. One clear indicator of
poor economic management is a country's inflation rate. Another important factor is
corporate and government debt levels. In 2022, China’s inflation rate reached 1.97%, up
from 0.98% in 2021 but still significantly below the government's target of around 3%. This
is a critical issue for China because excessively low inflation can lead to deflation, where the
prices of goods and services gradually decrease over time. Deflation can cause businesses to
delay investments and consumers to postpone spending in anticipation of further price drops,
ultimately slowing economic growth.
 Policy risks: Legal risks in China mainly stem from a complex, non-transparent legal system
with inconsistent law enforcement. For example: Despite China's efforts to strengthen

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 intellectual property protection, issues like copyright infringement, product counterfeiting,
and technology theft remain significant. In a 2018 lawsuit between Wuhan Zhong Jun
Campus Services Co., Ltd. and TRAB, the Supreme People’s Court of China (SPC) ruled
that a registrant had applied for over 1,000 trademarks similar to well-known brands.
Additionally, some Chinese competitors have copied Vietnamese companies' trademarks and
filed applications with the China National Intellectual Property Administration (CNIPA)
nearly six months before Vietnamese firms submitted their domestic applications, rendering
the priority in international registration meaningless. (2)
2.2. Russia:
2.2.1. Benefits:
 Market size: Russia has a population of 143 million. With gradually increasing living
standards, GDP per capita in 2022 reached $12,830. Additionally, Russia owns diverse
natural resources, particularly oil and natural gas.
 Purchasing power: Despite a relatively high GDP per capita (around $12,830 in 2022),
Russia’s purchasing power is weak due to rising inflation, ruble depreciation, and
international sanctions. As a result, consumers shift toward domestic goods and reduce
spending on luxury items amid economic downturns.
 Likely future wealth of consumers: As a major global producer of oil, gas, and energy,
Russia relies heavily on energy export revenues. If Russia reduces this dependency, its
economic growth potential could improve. However, international sanctions and geopolitical
tensions remain major obstacles
2.2.2. Costs:
 Politics: Foreign businesses entering Russia may face high government intervention in
international trade. Additionally, sanctions have disrupted financial operations and business
activities within the country.
 Economy: Russia’s heavy reliance on energy exports makes its economy vulnerable to
global energy price fluctuations. Furthermore, after launching a “special military operation”
in Ukraine in 2022, Russia restructured its economy and allocated significant funds to the
military, reducing capital available for other industries.
 Policy: Russia has tightened regulations on product safety, environmental standards, and
labor laws, particularly for foreign businesses and those operating in major economic hubs.
Companies must meet strict production and distribution requirements. Additionally,

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 intellectual property rights remain controversial, especially amid political and economic
uncertainty. Some domestic businesses pre-register trademarks or receive government
intervention, leading to risks of intellectual property from competitors.
2.2.3. Risks:
 Political risks:

Over the last few decades, Russia has been attracting foreign companies from all over the world
and it has become the third most attractive country for foreign direct investment (FDI) worldwide
after the US and China. Moreover, Russia is currently the second-largest emerging economy after
China. However, at the same time it is one of the most corrupt countries in the world. Political
corruption remains one of the main problems for Russian political and economic development and
the primary challenge to business activities there. In addition, unstable property rights and the
Russian state’s growing control over business activities and the business community has harmed
Russia’s business environment. (3)

 Economic risks:

The Russian Ministry of Economy report identified the growing likelihood of a rapid economic
slowdown leading to a technical recession, while inflation falls more slowly.

The report also warned that high interest rates are stifling lending and investment, threatening
Russia’s growth prospects. In other words, the current lack of investment will lead to lower GDP
growth over the next two years.

Moreover, in recent months, widespread labor shortages, a weakening ruble and interest rates at
their highest levels in more than 20 years have weighed on Russia's growth prospects. (4)

 Policy risks:

Russia presents significant policy risks for businesses and investors due to sanctions, state
intervention, and legal instability. Firstly, Russia faces severe Western sanctions (2022–2024)
targeting finance, technology, and energy sectors. In retaliation, Russia has imposed export bans and
asset seizures on "unfriendly" countries. Secondly, the Russian government tightly controls strategic
industries (oil and gas, banking) and can force foreign businesses to sell assets or transfer
technology. The last problem is that Russian laws change frequently, with new taxes and regulations
coming into effect suddenly. Enforcement is opaque, posing risks to foreign businesses. (5)

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 2.3. Germany
2.3.1. Benefits:
 Market size:

Germany is the largest economy in the European Union (EU). As of 2022, its population stood at
84.3 million, with a GDP per capita of $55,798, making it a significant consumer market.

Being the economic hub of Europe, investing in Germany grants access to the broader EU
market due to the region’s common trade policies.

Additionally, Germany is one of the world’s largest automobile markets, dominated by premium
brands like BMW, Mercedes-Benz, and Audi. However, there remains ample opportunity for
investors to enter the mid-range car segment or expand into the growing electric vehicle (EV)
market.

 The Present Wealth & Purchasing Power

High GDP & stable income: Germany's nominal GDP in 2023 was approximately $4.5 trillion,
ranking 4th globally. The per capita income reached $53,000 per year, indicating strong purchasing
power.

Quality-conscious consumers: German consumers prioritize branded, high-quality products and

are willing to pay a premium for them.

Shift towards green consumption: Increasing environmental awareness among German

consumers creates opportunities for eco-friendly products, especially electric vehicles (EVs) and
renewable energy solutions.

 Likely future wealth of consumers

Economic stability & growth: Germany's economy is projected to grow at a 1.5–2% annual rate
from 2025 to 2030, leading to rising consumer incomes and stronger exports.

Strong investment in technology: Germany is at the forefront of AI, electric vehicles, renewable
energy, and automation, enhancing productivity and income levels in the long run.

2.3.2. Costs:
 Politics

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 Influence from European politics: As part of the European Union (EU), Germany is subject to
EU-wide policies and regulations, including tariffs, labor immigration policies, and environmental
regulations.

High labor costs and strong worker protection: Germany has strict labor protection policies and
high social security contributions. Compliance with rigorous labor laws can increase business costs.

 Economy

High labor costs: Germany has a high minimum wage (€12.41/hour as of 2024) and higher
overall labor costs compared to China or Eastern Europe. (6)

Slow economic growth: Post-pandemic, Germany faces slow economic growth, declining
investments, and inflation challenges. (7)

High corporate taxes: Germany has a combined corporate tax rate of approximately 30%
(including corporate income tax and local business tax).

 Policy

Environmental protection and green economy policies: The German government aims to reduce
greenhouse gas emissions by 55% by 2030 and 80-95% by 2050 through the expansion of renewable
energy and improved energy efficiency. (8)

Germany has the strictest emission standards in Europe, particularly for the automotive and
manufacturing industries.

Intellectual Property (IP) protection: Germany maintains a robust IP protection system,

though the registration and enforcement procedures can be costly and time-consuming.

Skilled labor shortage: Germany is facing a shortage of highly skilled workers, yet
immigration regulations remain complex

2.3.3. Risks:
 Political risks

Since Germany is part of the European Union, policy changes from the EU can significantly
impact businesses in Germany, particularly in areas such as tariffs, labor immigration, and
environmental regulations.

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 Germany has a stable political system with a parliamentary democratic government and is one of
the world's least politically risky countries.

The Russia-Ukraine war has affected Germany's economic relations, disrupting energy supplies
from Russia and putting pressure on production costs. (9)

 Economic risks:

Economic growth slowdown: Germany's GDP grew by only 0.2% in 2023, lower than many
other EU countries due to the impact of the global economic downturn.

High inflation in 2022–2023 (peaking above 8%) eroded consumer purchasing power.

Severe aging population: By 2023, Germany has been facing a serious demographic aging crisis,
leading to an increasingly tight labor market as it has one of the lowest birth rates in Europe.

Shortage of skilled workers: Key industries such as IT, engineering, and manufacturing are
experiencing a shortage of highly skilled labor, forcing businesses to recruit talent from abroad.

 Policy risks:

Germany's complex tax system, which varies by state (Bundesland), can pose challenges for
foreign businesses. (10)

Germany has strict labor protection laws, requiring businesses to provide long-term
employment contracts and comprehensive benefits. In addition, terminating employees in Germany
is more difficult and costly compared to many other countries.

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 TABLE OF CONTENTS

1. Nghiên cứu Quốc tế. (2024, December 31). Nguồn gốc của những cuộc tấn công 'trả thù xã
hội' ở Trung Quốc.
2. Bross & Partners. (2024). Hệ thống sở hữu trí tuệ Trung Quốc: 5 rủi ro và thách thức về bảo
hộ nhãn hiệu và chỉ dẫn địa lý ở Trung Quốc.
3. Kuznetsov, A., & Kuznetsova, O. (2017). Doing business in Russia: The main political risks
and challenges for international companies. Journal of East-West Business, 23(3), 212-231.
4. VietnamPlus. (2023). Kinh tế Nga đối mặt với nhiều trở ngại và thách thức [Russian
economy faces many difficulties and challenges]. Retrieved March 31, 2025.
5. Economics Observatory. (2024). Sanctions effectiveness: What lessons three years into the
war on Ukraine? Retrieved March 31, 2025.
6. CMMB Việt Nam. (n.d.). Cách đọc bảng lương ở Đức và mức lương tối thiểu ở Đức.
7. Báo Cáo Viên. (2024, December 17). Kinh tế Đức tiến gần đến ngưỡng suy thoái và nguy cơ
không thể quay đầu.
8. Tạp chí Môi trường. (2021, February 3). Chính sách phát triển kinh tế xanh ở Đức và bài
học kinh nghiệm đối với Việt Nam.
9. Trung tâm WTO và Hội nhập. (2022, April 4). Xung đột Nga-Ukraine có thể đẩy nền kinh tế
Đức đối mặt với 'những hậu quả tàn khốc'.
10. Edugo Vietnam. (n.d.). Thuế độc thân ở Đức là bao nhiêu? [How much is the single tax in
Germany?]. Retrieved March 31, 2025.

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