CHINA Import & Export

8/3/2019 CHINA Import & Export

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BY--

VINOD JOSHI

TANVI CHUGH

RAHUL RATHEE

RAHUL RAUNIYAR

ROHIT THORAT

DAN

PRISIKLINA

BASUMATARI

GOPALKRISHNAN IYER

Project on-

CHINASFOREIGN

TRADE


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CHINAS MERCHANTALISM POLICY

High tariffs, especially on manufactured goods;

Monopolizing markets with staple ports;

Exclusive trade with colonies;

Forbidding trade to be carried in foreign ships;

Export subsidies;

Banning all export of gold and silver;

Promoting manufacturing with research or directsubsidies;

Limiting wages;

Maximizing the use of domestic resources;

Restricting domestic consumption with non-tariffbarriers to trade.
http://en.wikipedia.org/wiki/Staple_porthttp://en.wikipedia.org/wiki/Precious_metalhttp://en.wikipedia.org/wiki/Industrial_policyhttp://en.wikipedia.org/wiki/Industrial_policyhttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Non-tariff_barriers_to_tradehttp://en.wikipedia.org/wiki/Industrial_policyhttp://en.wikipedia.org/wiki/Industrial_policyhttp://en.wikipedia.org/wiki/Precious_metalhttp://en.wikipedia.org/wiki/Staple_port


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BASIC FACTS: CHINA

World largest Population:1,339,724,852

China is No.1 in Internet users 253 million.

China is Largest in Mobile Phone users with 574 million users.

China lead in Relative website usage. Worlds largest standing army

Worlds second largest defense budget

China is the biggest furniture producing country in the world.

The gross industrial output value for enterprises abovedesignated size1in the furniture reached 448.8 billion Yuan in

2010, up 32.4% year-on-year (yoy).


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CHINAS ECONOMIC GROWTH: CAUSESAND PROSPECTS

HISTORICAL PERSPECTIVEON CHINAS ECONOMIC MIRACLE

Prior to 1979, China maintained a centrally planned, orcommand, economy.

A large share of the countrys economic output was directed

and controlled by the state, which set production goals,

controlled prices, and allocated resources throughout most ofthe economy.

During the 1950s, Chinas individual household farms were

collectivized into large communes. To support rapid

industrialization. The central government undertook large-scale investments in

physical and human capital during the 1960s and 1970s.


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CONTD.

Foreign trade was generally limited to obtaining only thosegoods that could not be made in China.

Although some growth occurred, these policies kept theChinese economy relatively stagnant and inefficient, mainlybecause there were few profit incentive for firms and farmers.

Competition was virtually nonexistent, and price andproduction controls caused widespread distortions in theeconomy.

Chinese living standards were substantially lower than thoseof many other developing countries.

As a result, by 1978 nearly three-fourths of industrial

production was produced by centrally controlled state-ownedenterprises.

Private enterprises and foreign investment were nearlynonexistent. A central goal of the Chinese government was tomake Chinas economy relatively self-sufficient.


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CHINAS FOREIGN TRADEBETWEEN 1979-2006.

I

Year Exports($ billions)

Imports($ billions)

TradeBalance

1979 13.1 15.7 -2.01980 18.1 19.5 -1.4

1985 27.3 42.5 -15.3

1990 62.9 53.9 9.0

1995 148.8 132.1 16.7

2000 249.2 225.1 24.1

2005 762.0 660.1 101.9

2006 969.1 791.5 177.6


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TABLE 1: EXPORTSAND IMPORTSOF GOODSAND SERVICES, 19782010

Pdf file contains data


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WHY IS CHINA GROWING SO FAST?

High Savings and Investment

Foreign Direct Investment(FDI)

Productivity Increment


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High savings and Investment generated by SOE. (state owned enterprises).

Chinas trade and investment reforms andincentives led to a surge in foreign directinvestment (FDI) estimated to be at $633 billion in2005.

Increased productivity at 3.4% per annum,accounting for 36% of Chinas growth.

Reallocation of resources to more productive uses,

especially in sectors that were formerly controlled by the

central government, such as agriculture, trade, and

services.

FACTORSTHATCONTRIBUTEDTOTHE GROWTHOFCHINA FOREIGN TRADE.


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Growing advanced techniques of production(technology).

Economies of scale

International property rights (IPR). i.e. Promotes piracy thus

limited R&D.

Chinas exchange rate policy causes the Yuan to be lessexpensive than it would be if it were floating, it causesChinese exports to the international market to berelatively inexpensive and exports to China to berelatively expensive.


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CHINAS COMMERCIAL POLICIES

Inward-Oriented Strategy

China initiated reforms in 1978 to shift to a more openmarket-oriented economy.

The previous inward-oriented centrally-planned strategy hadcaused multiple economic distortions that hampered exportsand private sector activity.

The inward-oriented strategy introduced in the 1950s fosteredimport-substituting industrialization using stringentprotections and state control of resource allocation.

During the Maoist period, private sector firms, includingforeign-owned firms, were gradually taken over and privatesector ownership was completely eliminated in 1958 duringthe Great Leap Forward.

Instead, state-owned enterprises emerged at the forefront ofthe countrys industrialization effort.


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OPEN DOOR FOREIGN DIRECT INVESTMENT POLICYAND

OTHER REFORMS The post-1978 reforms marked the start of a gradual and highly coordinated

transition process in the China over the next 3 decades. The initial focus of reforms was to promote exports by attracting FDI. In

1979, an export processing law was passed that provided incentives for the

processing and assembly of imported inputs.

These incentives were expanded in 1987 to provide for the duty-free import

of all raw materials, parts, and components used in export production. Monopoly state trading was liberalized starting in the late 1970s and

replaced with a complex and highly restrictive set of tariffs, non-tariff

barriers, and licenses.

Reform of the complex import control regime was more cautious during the

early transition years, but was strengthened from 1992 onward by extensive

reforms that the china agreed to implement as a part of the WTO accession

process.

Accordingly, a dualistic trade regime existed from the mid-1980s onward

that promoted exports via FDI alongside controlled liberalization of

protected domestic sectors


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CONTD.

The growth in Export, especially among domestic enterprises there was the

liberalization of the system of export licensing and quotas. Only 8% of

exports were subject to export licensing and quotas by 1999,compared with

a peak of about 66% in 1991.

The foreign exchange system were initiated starting with unification of dual

exchange rates .

As a significant incentive for exporting, exporters were allowed to retain a

share of their foreign exchange earnings, which enabled them to finance

imports without needing to seek official permission.

Over time, the state also devalued the domestic currency and in 1997 moved

toward currency convertibility on current account transactions, making iteven easier for exporters to obtain foreign currency.

In 2005, the China moved more systematically towards a

managed floating exchange rate regime based on market supply and demand

with reference to a basket of currencies.


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COMPARATIVE ADVANTAGETHEORY:

Cheap educated labour.

Large amount of Manufacturing Units providingemployment to labours.

Developed Nations have set up their manufacturingunits since the cost of production and labour rate isless in China.

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CHINA Import & Export