Chinas Economics
China has always been an important country in the world. With its increasing large population, it was determined by other countries that is has a lot of economic potentials. In just one decade and a half, China has transformed itself from a giant that use to live in poverty into a wealthy powerhouse to the world economy. With one-fifth of the world¡¦s population, China is now producing 4% of world merchandise and a proportion of global production. It has also one of the world¡¦s oldest and most influential civilizations. China has established three approaches to the world economy and they are establishing an alternative socialist system (1950s); isolating itself from the system (the 1960s to mid 1970s); and participating in the system again from the 1970s. China¡¦s economic system was quite similar to Soviet Union¡¦s because it is central planning system. However, after the 1950s, this central planning is broken into regional planning by different provinces in China. In anothe!r words, China has changed from a centrally based country in a regionally based country, in which different provinces produces different goods and servies. This change has encouraged the development of small enterprises, which are the main driving
ing to widespread bankruptcies and layoffs, the central government might choose to delay (or even rescind) certain economic reforms rather than risk possible political upheaval. The Chinese government has recently taken a number of steps in preparation for China's WTO entry. For example, In January 2000, Zhen Peiyan, Chairman of China's State Planning Commission, stated that the government would eliminate all restrictive regulations against private enterprises in China in preparation for China's WTO accession. Currently, private firms in China face a variety of discriminatory government policies, including lack of access to borrowing from state banks, that have made it difficult for such firms to develop. China's entry into the WTO will require the government to establish a level playing field for Chinese firms to compete against foreign firms. This could greatly expand the role of the private sector in China's economic development and accelerate China's transition to a market .-Sept. 1998 134.2 98.6 35.6 Jan.-Sept 1999 137.0 117.6 19.4 Source: International Monetary Fund, Direction of Trade Statistics and official Chinese statistics. Trading partners China's trade data differs significantly from its major trading partners¡¦ statistics. This is due to the fact that a large share of China's trade (both exports and imports) passes through Hong. China treats a large share of its exports through Hong Kong as Chinese exports to a foreign country. However, China treats the imports from Hong Kong as provincial trading. According to Chinese trade data, its top five trading partners in 1998 were Japan, the United States, the European Union (EU), Hong Kong, and South Korea (see Table 7). Chinese data shows that United States is its second largest export partner and the third largest source of its imports. China's trade with many of its Asian trading partners fell in 1998, while trade with the United States and the EU rose. Table 7. China's Top 10 Trading Partners: 1998 ($Billions and % Change over 1997) 1998 Merchandise Trade ($) % Change over 1997 Country Total Trade Exports Imports Total Trade Exports Imports All Countries 323.9 183.8 140.2 -0.4 0.5 -1.5 Japan 57.9 29.7 28.2 -4.8 -6.7 -2.7 U.S.* 54.9 38.0 17.0 12.1 16.1 4.1 EU15 48.4 27.9 20.4 12.6 17.2 6.3 Hong Kong 45.4 38.8 6.7 -10.6 -11.5 -4.7 S. Korea 21.3 6.3 15.0 -11.6 -31.3 0.4 Taiwan** 20.5 3.9 16.6 3.3 13.9 1.1 Singapore 8.2 3.9 4.2 -7.2 -9.1 -5.4 Russia 5.4 1.8 3.6 -10.5 -9.7 -10.9 Australia 5.0 2.3 2.7 -5.2 13.9 -17.2 Indonesia 3.6 1.2 2.5 -19.6 -36.4 -8.1 Source: Official Chinese trade data. *U.S. trade data on U.S.-China trade differ significantly with Chinese trade data. **China and Taiwan do not maintain direct trade links. Most trade takes place via Hong Kong. However, the US trade data differs significantly with Chinese trade data. According to the U.S. trade data, it indicates that U.S. market is an important market to China's export, but it is not reflected in Chinese trade data. Based on U.S. data on Chinese exports to the US, it is shown the exports have grown from 15.3% in 1986 to an estimated 38.7% in 1998. This would indicate that the United States is China's largest export market. The importance of the U.S. market for China's exports has increased in 1998 because of the global financial crisis in Asia. China has survived the financial crisis because U.S. imports from China have continued to rise, whereas imports by several East Asian economies from China have fallen. There is an increasing level of Chinese exports from foreign funded enterprises (FFEs) in China. According to Chinese data, the total share of Chinese exports produced by FFEs has risen from 0.1% in 1980 to 44.1% in 1998. Many of these FFEs are owned by Hong Kong and Taiwan investors because they have shifted their labour-intensive, export-oriented, firms to China to take advantage of low-cost labour. A large percentage of the products made by such firms are exported to the United States. Exp
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