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Chinas economic growth due to recent foreign policies

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

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