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China economic growth due to recent foreign policies

China’s 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

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.



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