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Volkov D.R.
Donetsk National University of Economics and Trade
named after M. Tugan-Baranovsky, Ukraine
Economics in China
The official support of a market-based economy that
came from Deng Xiao Ping in 1992 has resulted in a more open system of trade
for China, and subsequently a huge growth spurt in China's economy. The
economic reforms which Deng instigated culminated in a "socialist market
economy", a term which was actually incorporated into the Chinese
constitution during the National People's Congress in March 1993. Since that
time, China's economy has experienced a substantial boost in regards to living
standards, quality of food and spendable income.
While these elements expand
opportunities for U.S. exporters, factors such as inflationary pressure,
irrational foreign exchange controls, and restrictive trade practices have
created numerous barriers. In fact, China's official Gross National Product (GNP)
posted a 12.8 percent real growth rate in 2009 to about $435 billion, or about
$371 for each of China's 1.172 billion people- urban incomes grew at a real
rate of 8.8 percent. Rural incomes also grew, but at a slower rate of 5.9
percent.
These figures, however, may be tainted by the
disproportionate distribution of income and wealth that permeates China. The
Chinese, after all, have lower human rights standards than the United States
and the poor definitely suffer the consequences. Add to that the immense size
of the Chinese population, and suddenly any estimates of wealth, buying power,
or economic conditions appear to be quite diminished in their reliability. In
the end, these figures are based on national averages, which creates a
fictional middle class majority that simply does not exist. Realistically, a
very large proportion of China's economic growth comes from the collective and
private sector.
In
addition, China continues to maintain an illogical foreign exchange mechanism,
utilizing both an official exchange rate and a "swap center" rate,
which is influenced even further by the black market rate - none of which can
be properly measured. Other barriers include the fact that it can sometimes be
hard to decipher the rules regarding license requirements, as well as what type
of inspections are required. For those commodities which are still restricted
at the central government level, there is also confusion as to which agency has
the ultimate authority. These difficulties can be managed, but necessitate
perseverance and diligence on the part of U.S. exporters [1].
To date, China is one of the strongest players in the world in many
industries, such as metallurgy, machine building, macrobiotic, coal, chemical
and so on.
The
market and price reforms made by the China Communist Party in 2008 also fueled
dynamic changes in China's economic environment, especially in regards to
agriculture. With the population of China increasing by approximately 17
million people every year, it is easy to see why China can only meet demands by
increasing the number of agricultural and food product imports it receives.
Today, there are over 80,000 grain and edible oil markets as well as numerous
fruit and vegetable markets in China importing products for the domestic
market. China has signed agreements which force them to loosen the restrictions
on foreign trade, which has had a very positive impact on U.S. trade relations
with China, especially in regards to food products.
In
China, as in many countries throughout the world, the rise in incomes and
living standards has perpetuated a notable increase in the per capita
consumption of meat, fruits and vegetables, and most especially, processed and
convenience foods is increasing. In major urban markets, and most noticeably in
Beijing, Shanghai, and Guangzhou, consumers are literally "eating up"
fast foods, convenience foods, and packaged food products. The elimination of
price subsidies for grain, pork, milk, eggs and other products has caused some
increase in price, however this increase has caused little, if any, dissension.
This means that not only can Chinese consumers better afford to pay higher
prices, but are willing to, in order to increase the number of alternatives
that are available to them. Consumers in China today are demanding quality and
variety in the food they buy and the U.S. market is more than happy to fulfill
their needs. Unfortunately, there are still about 300 million people in China's
urban population who have not yet caught up with the rapid growth of the
Chinese economy. The good news for U.S. exporters however is that as long as
the economic trends in China continue to improve, more and more markets will
continue to open up. The bad news is that the high tariffs, technical barriers
and general lack of clarity that products of major interest to U.S. exporters,
such as beef, nuts, and fruit, have received only minimal reductions in tariffs
despite the many promises from China that international trade will be made more
cost-efficient. Quarantine barriers also officially prohibit U.S. fruit and
most fresh vegetables from entering China, due to fear of fruit fly
contamination. However efforts are being made to permanently remove all
restrictions that cannot be scientifically justified[2].
While market research is not exactly a prevalent
practice in China, some evidence has shown that an American label does
significantly help boost product sales. Subsequently, dishonest importers have
been known to put U.S. labels on other countries' products because it makes the
item sell better. This not only skews statistical data, but could have a strong
negative impact on the U.S. economy if the matter were to get out completely
out of hand. Labeling requirements are not very restrictive at the moment, but
the U.S. and China are working to eradicate this fraudulent behavior being
perpetrated. The China market for American products is swiftly freeing itself
from strict government control. The amalgamation of rapid economic growth and
market reforms is has fueled the interest in American products on the part of
the Chinese consumer. It is predicted that the hotel and restaurant industry
will continue to be the major market opportunity for U.S. meats, wines, frozen
potatoes, condiments and a plethora of other related products. In addition, the
telecommunications, financial and other service markets also offer great
potential for U.S. exporters. In spite of the plethora of trade restrictions
which still limit the overall import market in China, the latest trends are
pointing toward simplifying admission into the Chinese market. The number of
trade corporations, and factories, for example, has gone sky high in the recent
past. Because of its struggling economy, most emphasis in past China trade
relations was based on exporting. There is currently is a continually
increasing interest in importing products for the domestic market[3].
Foreign
trade corporations that were at one time part of a strict government structure
are now able to expand their scope of business and deal in more products and
distribute to more outlets than ever before. While still associated with some
level of the Chinese government, these corporations must now turn a profit and
are subsequently becoming more active in importing U.S. products. In virtually
all cases, these importers are also distributors. This has introduced an
element of competition in the import sector that did not exist just a few years
ago. It also means that at least some of these potential importers/distributors
are not familiar with U.S. products or international trading practices. . In
addition, the elimination of price controls and the establishment of wholesale
markets has allowed China to achieve a better balance between supply and
demand. One of the most recent notable developments in regards to China's trade
regulations is that, China and the U.S. finally signed a deal which allowed
China to enter the World Trade Organization. This agreement will benefit the
U.S. in a number of ways, including the new freedom of foreign investors to
partake in China’s internet market, and manufacturers are now allowed to import
and export their products without overt governmental interference.
Literature:
1) Mozias P.M. Counter-cyclical
macro-regulation of China's economy / / Modernization of the economy and the
state. Books. 3. M., 2009.
2) Mozias P.M. China's economy in the
early 21 th century.: New challenges and finding answers to them / / The
national economy in a globalized world. M., 2009.
3) Mau V.A. Drama 2008: from economic
miracle to economic crisis / / Problems of Economics, 2010, ¹ 2.