C. Table and Chart of break-even point analysis
10. Risk Factors and Opportunities
In this report, ICT risk matrix created by Queensland Treasury and Trade will be followed to identify and evaluate the risk that might have negative effects on Venture World
development (Queensland Government Chief Information Office, 2018). Detailed rating scale of likelihood scale, consequence scale, and types of impact can be seen in appendix.
Figure 7. ICT risk matrix
(Source: Queensland Government Chief Information Office, 2018)
10.1 US - China Trade War
United States waged the trade war against China on 22 March 2018 by launching Section 301 investigation into China policies, laws and actions (Morrison, 2018). The first round of tariff increase is effective on 6 July 2018, it raised 25% tariff on 818 Chinese products which worth 34 billion US dollar (Brew et al., 2018). On 1 August 2018, another 200-billion-dollar worth of Chinese product was announced to be charged 25% tariff (Rapoza, 2018).
10.1.1 Risks
The likelihood of the trade war is certain, and the consequence is critical, as Shandong Sunrise Group, one of the China 500th biggest company had filed for bankruptcy (Kwok, 2018). The growth of China's economy, "Made in China 2025" program are slow down, and China stock market plunge on account of US-China trade war. This is an extreme politic risk, many manufactures have moved out from China to Southeast Asia (Morgan, 2018). In this circumstance, people might be unwilling to start up their business, and the number of Venture World's potential customers might decline dramatically.
10.1.2 Opportunities
A. Protection of intellectual property:
Responding to the request of intellectual property protection, China government has amended the "Law of the People's Republic of China Against Unfair Competition"
and "Trademark Law of the People's Republic of China", the growth of "payment for the use of intellectual property" is increasing 17% per year. In 2017, China paid 28.6 billion dollars for the use of intellectual property. Besides, there is no "Forced
technology transfer” policies in the amended "Law of the People's Republic of China on Foreign-Capital Enterprise".
With higher standard security and protection of intellectual property, the risk to Venture World open innovation program is become lower, and the process to cooperate foreign entrepreneurs or foreign companies will be more convenient than before.
B. China opening up of the economy:
"White Paper: China and the World Trade Organization" was published by China's State
Council on 28 June 2018. In this document, it is stated that China will be more proactive on the fundamental national policy of opening up to provide a more liberal and facilitating environment for international trade and investment (China.org.cn, 2018). In the next 15 years, forecast for total value of China import is 24 trillion US dollars (cnyes.com, 2018).
As China's door of opening up are opened wider, Foreign Direct Investment (FDI), foreign companies now have multiple ways to move into China market. Venture World, a bridge links UK and China entrepreneurs and investors, can have the
opportunity to provide services for British entrepreneurs, SMEs or investors who look for entering China marketplace.
C. Industry transformation:
Due to US – China trade war, China's industries and economy are forced to transformed.
China is starting convert form world's biggest manufacturer to World's largest market.
Which means the growth of China's economy will be more rely on domestic demand and consumption rather than export trade. China has the biggest population of
bourgeois (500 million people), total retail sales in 2016 had reached 4.89 trillion US dollars (surpassed American's 4.82 trillion dollars) (udn.com, 2018).
Although this transformation could slow down China's economy growth in the short run, it can make China's economic structure more sustainable.
This transformation has a positive effect on China entrepreneurial environment, as there will be a huge gap need to be filled, in terms of service industry, import trade industry.
These entrepreneurs will have a better chance to build up successful businesses with the help of Venture World's enterprise education and social networks. Venture World can also assist original corporations in building up internal innovative culture and adapt their business to fast changing environment.
10.2 The one belt one road
10.2.1 Risks
It was stated that the more loans and investment China provides to Central Asia, the more local anti-Chinese resentment local people show (Fang, 2018). Because there already are 8 countries fall into BRI (Belt and Road Initiative) debt trap, some of them have to hand over their airport or harbor to China as they cannot pay back the loans (The Economic Times, 2018).
It could postpone the progress of one belt one road initiative and affect the
development of China's entrepreneurs who want to operate an international business trading with those countries. This is a likely major social risk to Venture World, as Venture World will set at Xi'an, capital of Shaanxi province which plays a key role on OBOR. The success or failure of OBOR will have great impact on the development of Xi'an, Venture World will also be susceptible to this considerable influence.
10.2.2 Opportunities
There is a great opportunity accompany with the risk. The most effective way to ease anti-Chinese sentiment in Central Asia area is letting Central Asian people realise the benefit that OBOR can bring to them. Venture World can ask for China government support to encourage China entrepreneurs trading with Central Asian people, then provide useful services and resources to these new business founders.
Moreover, OBOR improve the international trade and exchange between China and Europe due to the shorter shipping time and larger quantity of transshipment
(Mokhtari, 2018). Mature international e-Commerce will accelerate the development and demand of CBBS (a new retail concept proposed by Jack Ma), and Venture World can provide qualified enterprise education and adequate support to these new
generation of entrepreneurs.