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... re to become a member of the WTO, countries are required to conform to certain fundamental trading exercises and are required to offer equal and expanded market access to other members of the organization. The EU and the United States both played an integral part in China's succession into the WTO. Before China could join the WTO, an agreement with the EU needed to be reached.
After 14 years of on and off negotiations, they finally reached an agreement. China had jumped over their largest hurdle to gain access to the WTO when reaching an agreement with the fifteen member EU. The agreement with the EU said that tariffs on 150 items that Europe produced would fall an average of 40 percent. China's market is also very important in relation to the United States commercial interests. The reason the United States would like China to join the WTO is that it would make them a more global, market-based trading system.
This would then give the United States exporters and investors easier access to the Chinese market. As China's economy continues to grow and develop, their need for imported goods and services will continue to grow as well. The United States economy will then grow by supplying for some of these needs. The United States and the EU countries will not be the only countries benefiting from China's accession into the WTO.
China's recent inauguration into the WTO will cause economic growth in other WTO members as well. Since it is so early in China's career with the WTO, it is hard to say how China will do in relation to trade, especially with the recovery of the world's economy since September 11 th. Most economists predict that China's implementation of the WTO agreements will not be easy. Some predict that China's economy will continue to grow at the rate that it has been, while some think the economy may slow for a little while and then pick back up. One thing that China needs to work on is the improvement of their many free trade zones throughout the country. The free trade zones that existed before the WTO will lose some of their appeal.
Officials say, .".. China's entry into the WTO will not mean the end of its free trade zones but a chance for their improvement and perfection. " China and Hong Kong's "one country, two system" policy could be translated into "one country, two markets." Hong Kong is one of the world's most open marketplaces. They are the world's fifth largest trading entity. Hong Kong also acts as a large re-export center into China and other countries of the region. It is estimated that a third of the United States exports to Hong Kong are re-exported to China.
Before China's accession into the WTO, products moving from Hong Kong to China were subject to the tariffs and import requirements of mainland China. These tariffs should be much lower now that China is a Member of the WTO. Hong Kong became a member of the WTO before China. Now that China and Hong Kong are both members of the WTO, Hong Kong should be able to export more easily to the mainland. This means that Hong Kong's domestic exports should increase distinctly.
More foreign companies may also locate their regional headquarters in Hong Kong to facilitate their entry into the Chinese market. Hong Kong's support of China's entry into the WTO shows that Hong Kong is a supporter of global trade. APEC is a primary agreement in the Asia region to promote open trade and economic cooperation. APEC now has 21 member countries, which include the major countries of the region, and some of the fastest growing countries in the world. The United States, Japan, and Hong Kong are members of APEC. APEC is not a formal trade agreement like the WTO and NAFTA, or a market like the EU.
APEC operates under the intent of three main themes. These themes are trade and investment liberalization, trade facilitation, and economic and technical compensation. In relation to trade, member countries of APEC are forced to focus on tariffs and non-tariff measures. APEC regulates its members to make trade easier and less costly. Because of China's economic expansion in recent years, it is essential that China maintain its international trade relations. Access to their market has become a critical element in the growth of many countries.
China's participation in the global economy should not only help with economic reform in many countries around the world, but it should increase China's stake in the stability and prosperity of East Asia as well. Economic Environment: Looking at the environmental factors of China, the economic development it has undergone in the past 15 years is of increasing interest to marketers. It has developed and continues to grow into a great trading partner. If this growth pattern continues, China will someday have significant economic influence on the world. One reason China could have a particularly large effect is due to the number of Chinese citizens. China supports over 1. 29 billion people and this number is increasing by. 93 %.
If the standard of living persists and income levels rise, it would be possible to accept the Chinese as potential consumers that would unlock a huge market of individuals. The massive population has been a burden on China because the economy, as it stands now, cannot bear to support such a number of citizens. The government is trying to gain control of this problem by limiting the number of children to one per household, with exceptions to ethnic minorities and those living in rural areas. Other countries are offering their services to attempt to control the birthrate by showing the government that population control can be managed without a coercive and involuntary approach.
The government has been losing its authority due to political changes and popular resistance that make population standards difficult to maintain. Therefore, some projections still approximate that 1. 6 billion will make up China's population by the year 2025. Countries wishing to take advantage of China's emerging opportunities are investing a large amount of time, effort and money in order to access such a vast market. These possibilities were made possible when China started its reform in 1978, opening its doors to foreign investments and trade. This changed a self-reliant central economy into a mixed economy that combined state owned enterprises and private businesses. China could now allow individual citizens to have different amounts of incomes.
The results have changed China dramatically making it the fastest growing economy for 15 years. When the reforms began in 1978, 60 percent of the population earned less than $ 1 a day. Since the reform, GDP has grown steadily by an average of 9 percent. In the year 2000 GDP grew by 8 percent.
Currently, per capita is equivalent to $ 3600 and as the economy continues to expand the purchasing power of individuals will increase as well. The new economic reform policy intends to reduce central planning and increase business autonomy and spread income. Many problems still exist, despite the success of the policy and rapid economic growth. There is a movement for more privatization of some State Owned Enterprises because many remain unprofitable.
In the year 2000, 46. 5 % of the SOEs were running at a loss. These problems stem from the socialist system that is still in place under their Constitution. Under the Chinese Constitution, it is the responsibility of the government to manage the economy by means of production quotas and price setting. This apparent contradiction between the reform policy and the Constitution (1982) seem to work against each other. China will never succeed at full potential unless it retires the Marxist views and embraces a market directed system. There is no denying the growth that China is undergoing places China in the Take-Off stage of economic development.
For the past two decades China has experienced a steady growth that appears to be continuing for a time. If this growth, at 6 - 7 percent, continues over the next 20 years, China will have the second largest economy next to the U. S. The thought of China having so much economic strength is undoubtedly an interesting concept to grasp. Nevertheless, there are obstacles that China will have to elude if the economic success is to endure. One of these obstacles includes the unemployment problem.
The current urban unemployment rate is 10 % but as the economic growth shrinks from 8 % to 6 - 7, less jobs are going to be available as more and more people flood urban areas to pursue job openings. There will be fewer openings than people coming into the urban areas, and will result in millions of people needing work. In order for the success of the country to endure the problem must be solved. China is taking the necessary steps to move forward towards an economic drive to maturity.
It is moving rapidly through the less-developed stages and it is feasible that China may work its way up in the next 20 years or sooner. China has expanded rapidly in agriculture and industry, which are qualities of a country in Take-Off. In the 1980 's agriculture output doubled in a country where only 10 percent of the land is appropriate for farming. Making up 50 % of the workforce, agriculture only accounts for 15 % of the GDP. Although, Chinese exports can only expect to increase with the advancement of technology, and with more efficient production methods. Industry has also significantly improved with main exports consisting of machinery and electronics.
In spite of the major developments in agriculture and industry, China is looking to focus on being service-oriented in the future. In 20 years it is expected that agriculture will only make up 20 percent of the workforce, as China becomes more service oriented. There is an increasing importance being placed on science and technology that persists because foreign direct investment was initiated in 1978. As the developed countries move into China looking for opportunity they take with them jobs and knowledge. This expansion of knowledge can educate the Chinese and raise their standard of living as more money flows into their country.
The world can benefit from such action because the people of China are converted into potential consumers, which could raise the standard of living for many economies because of China's size. Foreign involvement in China was certainly evident in 2000 when it more than doubled. A year later, the total market value of technology research and development deals in Beijing City grew 36 percent. The foreign businesses understand China's potential and recognize that while obtaining a part of the market now may be costly, it is most likely crucial to remain advantageous in the long wrong.
As China becomes technologically advanced the communication lines are broadened and trade becomes cheaper due to the depletion of barriers. China must also lower the tariffs placed on imports in order to take full advantage of a market system and spur on development. China has a tariff rate of greater than 19 percent, however this is expected to decrease with China's accession into the World Trade Organization. As China's infrastructure develops, concerning transportation and communications, the demand for technology increases. Thus, foreign technical businesses have the opportunity to expand their market of consumers.
The development of science and technology is apparent in the programs that have been established. For example, China's National Space Administration is evidence that an importance is placed on emerging technology and while they have yet to send a man to space, they have successfully launched a satellite in 1970. The Ministry of Science and Technology is another example of the magnitude that exists in the effort to expand the knowledge of technology and science in an effort to speed up the economy. The MOST was set up to research, analyze and widen China's science and technological advancements. China may still be considered an underdeveloped country, however, it's acknowledgement of the sciences and consideration being placed on the economy will prove beneficial in rising up out of the Take-Off stage. Since the economic reform, private firms have emerged and now hold 27 percent of the GDP.
Nonetheless, investment is low among these firms accounting for only 1 percent of bank lending. The concern lies in light of the fact that these companies may not be able to withstand pressure that the future may hold with the current growth rate. One thing we have learned from the recent past is that in order to stimulate the economy and keep the system growing, people must be investing and spending money. The Chinese economy works with the same principles as the U.
S. economy despite the differences. However, the State Owned Enterprises find it easier to obtain loans because the Chinese government offers guarantees to the banks that private firms cannot uphold. In this case, many private firms are faced with higher return rates in order to obtain the loan. This can choke economic growth and lead to greater challenges in the future. The People's Bank of China functions as a central bank for the country.
It is responsible in formulating and implementing monetary policies to ensure the currency remains stable and the economy continues to mature. In doing so, the PBC would have control over interest rates and regulation over financial markets. The bank must also have authority over other financial institutions to be capable of implementing any regulation deemed necessary for the development of the economy. However in China there is a high level of government involvement, perhaps even corruption, within the entire banking system that could have negative effects on growth. China will remain a critical area of influence and interest for developed countries in the years to come.
The growth that China has sustained over the past two decades is unprecedented and undoubtedly will be observed as more and more businesses take advantage of the emerging opportunities. The economic changes stemming from reform has given power to China that has never existed in the purely socialist world under Mao's People's Republic of China. Even with the economy being influenced by both market and state-owned powers, China has flourished and will most likely continue to flourish for years to come. Political Environment: Relevant political history begins in 1949 when Mao Zedong established the People's Republic of China and labeled their country with the term "New China." The new government established Communism and made economic progress a necessity in order to revive China from the state of repression from years of war.
Under the leadership of Zedong, the country closed its borders and proceeded to attempt a form of utopia within Chinese walls. The strong military and police presence enforced the power of the Communist party that gained more control during this time. Economic hardship hit China once again and the country underwent major economic changes. After Mao Zedong's death, a new thought was introduced that combined Capitalism and Communism. The country opened their doors to trade and started entertaining a new form of government. Regardless, their country continues to be based on a form of socialism that is comprised of thoughts of Marxism, Leninism, and Mao Zedong and remains heavily influenced by central government.
The success of this system remains unknown even with the development of the economy throughout the past two decades. Their Constitution was written in 1982 and outlines the combination of socialism and democracy into what is named democratic centralism. There are strong socialist undertones that link every aspect of the Constitution under the Communist Party. While the form of government allows for elections of officials, the Chinese Communist Party remains dominate in government with more than 63 million members. This is due to the fact that any insubordination or disloyalty towards the Communist Party can be punishable by law.
Thus there are few opposition groups standing against the Communist Party. Even so, an apparent movement for democracy is threatening Communism because central authoritarian rule is difficult in a country of China's size. The future style of government remains unsettled and unstable because of rising controversies and adversary groups opposing communism. The administration of the government was arranged in a democratic style under the direction and influence of the Communist party. The goals have been to implement party policies ensuring the progression of the...
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Research essay sample on State Owned Enterprises People Republic Of China
