Transcript PowerPoint 演示文稿 - University of Jinan

The Economy and Foreign
Trade of China
Dr. Shoufeng Zhang
Associate Professor of Jinan University, China
E-mail: [email protected]
China’s Economic Conditions
 China’s Economy Prior to Reforms
 The Introduction of Economic Reforms
 China’s Economic Growth : 1979-2005
 Causes of China’s Economic Growth
 Foreign Direct Investment in China
 China’s Major Trading Partners and Commodities
 Major Long-Term Challenges Facing the Chinese
Economy
 Outlook for China’s Economy and Implications
for the United States
China’s Economy Prior to Reforms
 Enterprises according to centrally planned output
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targets.
By 1978, nearly 3/4 of industrial production was
produced by centrally controlled state-owned.
A central goal of the Chinese government was to
make China’s economy relatively self-sufficient.
Private enterprises and foreign-invested firms
were nearly nonexistent.
Foreign trade was only limited to those goods that
could not be made or obtained in China.
Introduction of Economic Reforms
 In 1978, China embarked upon incremental reforms
that transformed its command economy into a mixed
economy.
 Since initiation of economic reforms, China has
become one of the world’s fastest-growing economy.
 1979-- 2005, China’s real GDP grew at an average
9.6% annually.
Chinese economy as a whole in good shape
.
 Fast growth,
 Growing profits,
 Improving agricultural production,
 Expanding foreign trade,
 Surging fiscal revenue
 Constantly rising incomes for residents.
Inefficient state-owned
commercial banks(SOCBs)
 Due to its financial support of SOEs and its failure
to operate solely on market-based principles.
China’s banking system is regulated and
controlled by the central government.
 Currently, over 50% of state-owned bank loans
now go to the SOEs.
 Having extended far too many Non-performing
loans from Four major SOCBs were $221 billion
or 12.3 percent of GDP based on non-market
criteria to the SOEs in 2005..
Foreign trade
 Trade continues to play a major role in China’s
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booming economy.
In 2005, exports rose by 28.4% to $762 billion,
Imports grew by 17.6% to $660 billion, producing
a $102 billion trade surplus.
China is the world’s third-largest trading economy
after the United States and Germany.
China’s trade boom is largely the result of large
inflows of foreign direct investment (FDI) into
China.
China prudential in reforming RMB
exchange rates mechanism
 RMB exchange rate has never been frozen .
 Two directions will be followed in the reform,
keeping the RMB exchange rates basically
stable at a balanced, reasonable level and
exploring a market-based exchange rates
mechanism.
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Problem
 China experienced some inflationary
 pressures in 2004, fueled in part by
speculation in real estate, over-investment
in certain industries, and rising costs for
energy and raw materials..
 The government responded by raising
interest rates and using administrative
 controls to slow investment in certain
sectors
Foreign exchange rate
 On July 21, 2005, the Chinese government
announced major reforms to its currency
 policy.
 China appreciated its currency to the dollar from
8.28 to 8.11 (an appreciation of 2.1%)
 Replace its dollar peg with “a managed float
exchange rate regime” with reference to a basket
of currencies (including the dollar).
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 ,.
 China’s economic growth presents huge
 opportunities for U.S. exporters.
 the surge in Chinese exports to the United
States has put competitive pressures on
many U.S. industries.
BACKGROUND AND
ANALYSIS
An Overview of China’s Economic
Development
China’s Economy Prior to Reforms
 Prior to 1979, China maintained a centrally planned,
or command, economy.
 A large share of the country’s economic output was
directed and controlled by the state, which set
production goals, controlled prices, and allocated
resources throughout most of the economy.
 During 1950s, all of China’s individual household
farms were collectivized into large communes.
 by 1978 nearly three-fourths of industrial
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production was produced by centrally controlled
state-owned enterprises according to centrally
planned output targets.
Private enterprises and foreign-invested firms
were nearly nonexistent.
A central goal of the Chinese government
was to make China’s economy relatively selfsufficient. Foreign trade was generally limited
to obtaining only those goods that could not be
made or obtained in China.
The Introduction of Economic Reforms
 Beginning in 1979, China launched several
economic reforms.
 The central government initiated price and
ownership incentives for farmers, which enabled
them to sell a portion of their crops on the free
market.
 Establishing four special economic zones along
the coast and attracting foreign investment,
boosting exports, and importing high technology
products into China.
Comparisons of US, Japanese, and
Chinese GDP 2005 ($ billions)
 Country Nominal GDP Nominal Per Capita GDP
 US
 Japan
 China
12,473
4,605
1,912
42,180
36,150
1,460
Causes of China’s Economic Growth
 large-scale capital investment (financed by
large domestic savings and foreign
investment).
 Rapid productivity growth.
 Economic reforms led to higher efficiency
in the economy.
The principal driving force for economic
growth.
 Driven by growing domestic demand, China’s
economy was steadily up, with 8% of GDP growth.
 Increased investment.
 Considerable consumer spending in such hot spots
as housing, cars, telecommunications, tourism and
education .
High rate of savings.
 In 1979, domestic savings as a percentage of GDP
stood at 32%. and most savings generated by the
profits of state-owned enterprises.
 Substantial growth in Chinese household savings
now accounting for 50% of Chinese domestic
savings.
 Savings as a percentage of GDP has reached 49%
in 2005.
 The U.S. savings rate was 10.7% in 2005.
Foreign Direct Investment (FDI)
 a surge in foreign direct investment ---- a
major source of China’s capital growth.
China’s trade and investment reforms and
incentives led to
 Annual utilized FDI in China grew from
$636 million in 1983 to $61 billion in 2004.
 The cumulative level of FDI in China stood
at about $618 billion at the end of 2005.
Foreign exchange reserves
 Merchandise trade surpluses, large-scale
foreign investment, and its peg to the U.S.
dollar have enabled China to accumulate the
world’s second largest foreign exchange
(after Japan).
 China’s total reserves reached $769 billion
at the end of September 2005, up nearly
50% over the same period in 2004.
China’s Major Trading Partners
 Chinese top five trading partners: the EU, the US,
Japan, Hong Kong, and the 10 nations that constitute
the Association of Southeast Asian Nations (ASEAN
including Indonesia, Malaysia, Philippines,Singapore,
Thailand, Brunei, Cambodia, Laos, Myanmar, and
Vietnam.)
 China’s largest export markets were the US, Hong
Kong, and the EU.
 Its top sources for imports were Japan, the EU, and
Taiwan (the United States ranked sixth).
 Chinese exports to the United States as a
share of total Chinese exports grew from
15.3% in 1986 to 33.1% in 2004.
 Chinese data on its bilateral trade often
differ substantially from the official trade
data of other countries on their trade with
China.
Comparative Advantage
 China’s abundance of cheap labor has made it
internationally competitive in many low-cost,
labor-intensive manufactures.
 Manufactured products constitute an larger share
of China’s trade.
 A large share of China’s imports( raw materials,
components and parts, and production
machinery )is used to manufacture products for
export.
State-owned enterprises (SOEs)
 About one-third of Chinese industrial production
from State-owned enterprises. put a heavy strain
on China’s economy.
 Over half lost money and must be supported by
subsidies, mainly through state-owned banks.
 Government support of unprofitable SOEs diverts
resources away from potentially more efficient
and profitable enterprises.
Major Long-Term Challenges
 Public unrest over pollution, Government
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corruption, and growing income inequality
poses threats to social stability.
16 out of 20 of the world’s most polluted cities are
in China, and the direct costs to the economy
according to the World Bank.
Over 300 million people living in rural areas that
drink unsafe water.
Rising income inequality between the urban and
rural areas was among the highest in the world.
Growing government corruption
 China’s economy has shown remarkable economic
growth over the past several years,
 Many economists project that it will enjoy fairly
healthy growth in the near future.
 However, these projections are likely to occur
only if China continues to make major reforms to
its economy.
 Failure to implement such reforms could endanger
future growth.
The lack of the rule of law
 The lack of the rule of law in China limits
competition and undermines the efficient allocation
of goods and services in the economy.
 government “connections,” not market forces, are
the main determinant of successful firms.
 rules and regulations are generally not consistent or
transparent, contracts are not easily enforced, and
intellectual property rights are not protected.
Outlook for China’s Economy
Major Chinese Trade Commodities
 China’s top five imports: electrical machinery and
parts; boilers, machinery, mechanical appliances,
and parts; crude oil; plastics; and organic
chemicals.
 China’s top five exports: boilers, machinery,
mechanical appliances and parts; electrical
machinery and parts; apparel; furniture, bedding,
and lamps; and optical, photo, and medical
equipment and parts .
 China had 1.26 billion US dollars'
worth of trade barrier cases in 2004,
more than any other country,
according to an annual report issued
by the Ministry of Commerce (MOC)
on March 31.
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China sees more trade barrier
cases than other countries
 China had 1.26 billion US dollars' worth of
trade barrier cases in 2004, more than any
other country, according to an annual report
issued by the Ministry of Commerce (MOC)
on March 31.
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 China has finished adapting its laws in
accordance with WTO rules as part of its
WTO entry commitments.
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"The Foreign Market Access Report 2005"
covers 22 trade partners of China, including
Egypt, South Africa, Nigeria, Saudi Arabia,
Turkey, Thailand, the Philippines, Malaysia,
Indonesia, Vietnam, India, the Republic of
Korea, Japan, Russia, the European Union,
Canada, the United States, Mexico, Brazil,
Argentina, Australia and New Zealand.
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China's exports to these countries
accounted for about 68 percent of China's
total exports in 2004.
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Trade barriers were classified into 14
categories, such as tariffs and tariff
administrative measures, import restrictions,
customs barriers and trade remedy measures.
Investment barriers have three categories:
barriers to investment access, barriers to
operation and barriers to withdrawal of
investment.
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With the fast development of Chinese
foreign trade and investment, some trade
partners set up barriers to trade and
investment to protect their domestic
industries and home markets.
 According
to the WTO, a total of 16
countries and regions initiated 57 antidumping, countervailing, product-specific
safeguard investigations against Chinese
exporters. From 1995 to the first half of
2004, WTO members initiated 2,537 antidumping cases, 356 involving Chinese
products -- one seventh of the total.
The Trade relation of Sino-US
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By frequently using anti-dumping and
safeguarding measures, the US government
has practically restricted exports from China.
From 1980 to the end of 2004, it had initiated
110 anti-dumping investigations and 19
safeguard investigations against Chinese
exports. According to statistics from the US
International Trade Commission (ITC), 59
anti-dumping orders were still in force by the
end of last year. The United States initiated
six new anti-dumping investigations against
imports from China and 12 special safeguard
 There are many discriminatory provisions
against Chinese products in relevant US antidumping legislation. Many unfair practices
that exist in the investigations have also
constituted barriers to China's exports to the
United States.
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Market economy status
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In spite of China's accession to the WTO
and China's achievements in the
development of its market economy over
the years, the United States has
consistently treated China as a nonmarket economy and refused to grant
market-economy status (MES) to China.
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The US Department of Commerce (DOC) held
a public hearing on China's MES for the first
time in June
 Although most recognized the progress and
achievements China has made in developing
its market economy since the opening up, it
was deemed by most people that there was
still a gap China needed to fill before
becoming a market economy. Many US
officials have said publicly on many occasions
that unless China makes significant reforms
in its labor market and exchange rate
mechanism, the US Government will not
recognize China's MES.
Market oriented industry
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According to US laws, if the respondent
company in a non- MES country can prove
that its industry meets standards for Market
Oriented Industry (MOI), the US anti-dumping
authorities should adopt the cost data of this
respondent company or its industry when
calculating production costs and dumping
margin, rather than adopting costs in a third
country.
Surrogate country
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To non-MES countries, the US DOC usually
uses surrogate country data to determine the
normal value and calculate dumping margins.
The surrogate country should have a level of
economic development comparable to that of
the non-MES country and be an important
producer of the subject product.
Import control
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The US Government announced it would
remove all quotas on textiles on January 1,
2005, according to the World Trade
Organization agreement. In terms of
implementation, however, restrictive
measures still remain.
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The CITA declared on December 13 last
year that all shipments exported in 2004 that
exceed that year's agreed quota limit would
not be allowed to enter upon the removal of
the quota.
Export restrictions
 US controls on export of technology to China
have long been in place, and have remained
a big issue
affecting the trade balance
between the two countries.
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The intention is to prevent China from
benefiting from nuclear weapons, missiles,
chemical and biochemical weapons, and
other important military items.
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Visa issue
 The increasingly strict visa policies of
the US affected bilateral trade.
Banking service
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The US Government places stringent
restrictions on the marketing network
and business scope of foreign banks.
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If a foreign bank wants to set up a
new branch, it has to go through the
application procedures one more time
even though it has already established
itself in the country.
 a shift in the country's mode of economic
growth is an important and urgent strategic
task, noting it is crucial to maintaining
national economic and social development.
 A new growth pattern was in the making,
which were characterized by dual
driving forces of increased investment
and growing consumer spending, and
guidance by domestic demand.
China Sets to Build InnovationOriented Country
 China will embark on a new path of innovation
with Chinese characteristics, the core of which
is to adhere to innovation, seek leapfrog
development in key areas, make breakthroughs
in key technologies and common technologies
to meet urgent requirements in realizing
sustained and coordinated economic and social
development and make arrangements for
frontier technologies and basic research with a
long-term perspective.
 China became a Member of the World Trade
Organization (WTO) inDecember 2001,
after more than 15 years of difficult
negotiations.
China set to narrow rich-poor gap
 China's economy is likely to be heading for
another year of galloping development, but how
to make more Chinese people reaping the
benefits is still a challenge for the government.
Powered by domestic economic development
and worldwide recovery, China's economy is
expected to see stable development this year
following a growth rate of 9.8 per cent in 2005.
 China is taking measures to maintain
steady and relatively fast economic
growth and prevent major ups and
downs in development.
 Taking greater steps to improve conditions
for the rural poor, and bolster education,
health care, and the social security system
Resolute and decisive measure
 Chinese government will take forceful and
effective measures to address the existing
problems in the economy.
 Excessive growth in fixed asset investment,
 Bank credits
 Money supply ;
 Growing inflationary pressure.
 China will unswervingly push forward
reform of the investment system and the
financial sector so as to uproot of the
structural and institutional causes of the
existing problems.
 The economy will maintain stable,
relatively fast growth without major ups
and downs.
Outlook of Chinese Economy
 Average 8.0% of real GDP over the next 5
years.
 Double the size of its economy in less than
10 years.
 The world’s largest exporter by 2010;
 The world’s largest economy by 2020.