Initially,China had imposed an 80% of tariff on automobiles that have an engine less than 300 CC and its 100% for those that have engines of three liters or more. After WTO the tariff rates have been reduced to 25% on automobiles and on the parts of the automobiles to 20%. Although these reductions in tariff rates will encourage foreign investments but they will prove to have a negative effect on the domestic producers. The WTO has had a great impact on the automobile industry of China and the regulations have driven out small and inefficient firms out of business. The prices of cars had fallen after WTO reforms which in the short run increased financial losses to companies (Stern, 2002).
The corporate governance law in China is developed and finalized by the National People’s Congress (NPC) along with itsStandingCommittee. The memorandum of associations plays a vital role in the law as to be produced by every company. The corporations according to the law are supposed to have three governing bodies in the business; shareholders, board of directors and board of supervisors. Appointing a chairperson and a chief executive officer (CEO) is essential as per the law. A simple look at the corporate law of China portrays it as a system with two-tiers whereas, the board of directors and supervisors are independent bodies and none has a hierarchical right over the other and the two bodies are elected by the shareholders that are the most important governing body for any corporation.
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