Essay/Term paper: China's economic growth due to recent foreign policies

Essay, term paper, research paper:  Management

Recent Chinese economic policies have shot the country into the world economy at full
speed. As testimony of this, China's gross domestic product has risen to seventh in the
world, and its economy is growing at over nine percent per year (econ-gen 1). Starting in
1979, the Chinese have implemented numerous economic and political tactics to open the
Chinese marketplace to the rest of the world. Just a few areas China's government is
addressing are agricultural technology, the medical market, and infrastructures, like
telecommunications, transportation and the construction industry. Chinese reform
measures even anticipated the rush of foreign investment by opening newly expanded
industries to out-of-country investors. Effects of this sudden change in economic strategy
by a world power can be felt by practically every nation of the globe involved in
international trade. The change in the amount of imports and exports to and from China
will increase the demand on countless markets, from automobile, to petrochemical, to
pharmaceuticals, and optical fiber. Also, with all the foreign investment China is
receiving, the socialistic republic will only grow more and more interdependent upon the
world economy. However, the impressive growth rate of China's economy is not without
its shortcomings. Problems such as inflation and inefficient state-owned enterprises plague
the rise of the Chinese economy.
The main goal for China's modern foreign policies is the development of the
Chinese infrastructure. The significance of improved communication and transportation
cannot be over-stressed. Economically, enhanced means of communication and
transportation allows more expedient supply and demand scheduling. Two of the latest
Chinese reform measures to aid in the development of the country are the Provisional
Regulations on Direction Guide to Foreign Investment and the Catalogue Guiding Foreign
investment in China. Both these policies place specific industries including
telecommunications, machinery, and electronics on top priority. Funding for these
projects come from foreign investments and appropriations from the Chinese government
in the form of grant financing, and legislative or administrative support.
Yet another example of the Chinese emphasis on industrial based growth is the far-
reaching goal of having just under 100 million telecommunication lines by the year 2000.
China's Central Ministry of Posts and Communication said that in order to complete this
major task China will enlist the aid of major overseas suppliers and create manufacturing
plants within the nation. AT&T, Motorola, Northern Telecom, Alcatel, Erricsson, NEC,
and Siemens are just a handful of the multinational companies which hold a considerable
share of the Chinese telecom market, once again proving that China is becoming a party to
global interdependence.
The Chinese pharmaceutical market, much like Chinese industrial markets, is
experiencing rapid growth due to reforms in China's economic strategy. The nation's
government has decided to lower import tariffs and remove the necessity of an import
license to bring pharmaceuticals into the country. Also, patented foreign drugs, such as
Tylenol, are now being protected from counterfeiting by administrative action. The result
of these provisions are overseas contractual investments totaling $1.5 billion in the past
five years, and income from the medical industry's exports reaching 2.6 times the amount
five years ago, according to Zheng Xiaoyu, director of the State Pharmaceutical
Administration (scitech/med 1). The pharmaceutical market's growth is another example
of the economic progress China has made.
Even after accounting for all the economic benefits recognized by the world, the
Chinese still come out as the country with the most gains. However, there are more
motives behind China's market reforms than just purely economic. On the political front,
China is fast becoming an integral part of international organizations. The Chinese
government is making a conscious effort to reenter GATT (the General Agreement on
Tariffs and Trade), realizing the importance of creating a favorable trading status among
foreign nations. Slowing this progress, the 124 nation strong trade bloc has requested that
numerous conditions must be met by China before the nation can become a member of
GATT once again. Several of these provisions are the "elimination of import prohibitions,
restrictive licensing requirements and other controls or restrictions; lifting of all
restrictions on access to foreign exchange and full convertibility of the Chinese currency"
(china-tr. 2). Other important key themes behind China's Open-Door policies are
"economic and technological cooperation with the West" (china-tr 1) and that China's
government no longer supports Third World revolution. Instead, China realizes that
cooperation with developing countries would be far more practical.
Although Chinese foreign policy is aimed at opening the nation's entire economy to
the world, it neglects the agricultural market almost entirely, with the exception of
technical contracts. These contracts are designed to improve the transfer of technologies
to improve crop yields. "Technical contracts are made between farmers and village
economic cooperatives and a wide variety of offices and technical personnel from different
administrative levels" (int12 1). The funding for the technology used by the agricultural
industry can be traced to extension stations of political parties, finance bureaus, or local
insurance company. Since the groups funding technical contracts are nothing more than
investors, a portion of the profits from increased production due to the technological
advancements are returned to these groups. However, the technology providers also bear
the risk of investors, "if output and economic returns can't reach prescribed figures, the
extension administrations have to make up the losses" (intl2 2).
Like all good things, China's formidable economic growth has its downsides. A
few of these detriments are inflation, an under-aided agricultural market, government
inefficiency, and geographically uneven development. High inflation, caused by a demand
for more exchange medium on the Chinese market is causing Chinese currency to
depreciate relative to other national currencies. A lack of emphasis on the agricultural
market is causing that sector of the Chinese economy to fall behind, and soon the supply
of agricultural products will fall below the demand for these goods, resulting in a sortage.
Another problem is the inefficiency of large, state-owned production facilities can be
explained by excess bureaucratic red tape and corruption. Finally, there has been an
uneven distribution of development between the land-locked, western section of China and
the industrialized east-coast, consequently causing ineffective land use.
China has quickly become a world leader in trade and will only increase in
importance to the global economy. These facts are proven with China's current economic
statistics --growing at over nine percent per year-- and economists' projections of the
nation's future --China will double its gross domestic product of the year 2000 in the year
2010. The way the Chinese government achieved these impressive economic figures are
through a thorough renovation of Chinese trade policies. Reform measures in the country
range from reduced trade barriers and technical contracts for agriculture, to infrastructure
investment policies and improved standards for pharmaceutical products. However,
stemming from China's economic growth are dilemmas such as inflation and uneven
development of the country.
On a planetary scale, the effects of China's Open-Door policies are best described
through a visual representation like the attached graphs. These graphs represent the
supply of Chinese goods and services and demand for Chinese products by other
countries. As Chinese policies are placed in effect the supply curve shifts to the right
because of improved quality standards and higher production capabilities. Open-Door
policies also indirectly increase the demand for Chinese goods and services due increased
Chinese competitiveness on foreign markets.




Works Cited

http://www.wissago.uwex.edu/test/joe/1992fall/intl2.html.
http://www.china-embassy.org/scitech/med.htm.
http://www.chinesebusinessworld.com/business/bgeneral/econ-gen.html.
http://www.dfait-maeci.gc.ca/english/geo/asia/china-tr.htm.