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CHINA International Trade and Competitiveness
Economy • Unemployment Rate: 20% (2003) • Inflation rate: 1.9% (2005 est.) • GDP (purchasing power parity): $8.158 trillion (2005 est.) • GDP - real growth rate: 9.2% (2005 est.) • GDP - per capita: $6,200 (2005 est.) • GDP - by sector: agriculture: 14.4% (2005) industry and construction: 53.1% (2005) services: 32.5% (2005) • Second Largest Economy (PPP) After the U.S. (2005) http://www.cia.gov/cia/publications/factbook/geos/ch.html#top
Competitiveness • The collection of factors, policies and institutions which determine the level of productivity (economic growth) of a country. (World Economic Forum) - The macroeconomic environment (33rd), the state of a country’s public institutions (56th), and the level of technological readiness (64th). - Ranked 49th in the world out of 117 (2005) - Medium Competitiveness - “Marginal Deterioration” since 2004 • How one country competes with another country for FDI. - The devaluation of the yuan increased the attractiveness of FDI in China by increasing exports and decreasing imports. - Devaluation = reduced production cost = Increased profit of foreign investors = Higher Return that attracts more FDI inflows. http://www.weforum.org/site/homepublic.nsf/Content/Global+Competitiveness+Programme http://faculty.washington.edu/~karyiu/confer/beijing03/papers/xing.pdf#search='competitiveness%20FDI%20in%20China'
Competitiveness Cont. • Index of Economic Freedom. • The higher the score on a factor, the greater the level of government interference in the economy and the less economic freedom a country enjoys. (1-5) • 112th out of 157 (3.34) • Trade Policy = 3.0 (1.5 pts. better than last year) • FDI = 4.0 • “Mostly Unfree” http://www.heritage.org/research/features/index/country.cfm?id=China
Competitiveness • In comparison… - Both indexes are measuring different elements to achieve different goals, but the results of one index may effect the other. • World Economic Forum: Competitiveness is deteriorating when compared to previous years. • Could be due to the lack of freedom measured in the Index of Economic Freedom.
Barriers of Trade • High Tariffs - Down to 17% from 42% in 1996 • Investment Restrictions - Contract Provisions • Rules and regulations - Secretive, Hard to appeal • Trading Rights - Number and Types Imported http://cnie.org/NLE/CRSreports/Economics/econ-35.cfm#_1_10
International Trade • 1970’s Reforms - Centrally Planned System to Market Economy - Foreign Trade and Investment - GDP increased more than 10x’s since 1978 • World Trade Organization - November 2001 - Tariffs, Foreign Competition • China's primary trading partners include Japan, United States, European Union, South Korea, Taiwan • Exports: $436,100,000,000 (2005) - Export Partners: US 21.5%, Hong Kong 18%, Japan 14.9%, South Korea 4.8% • Imports: $397,400,000,000 (2005) - Import Partners: Japan 18.1%, Taiwan 12.8%, South Korea 9.7%, US 9.2%, Germany 5.6% • Major Export Products: Light industrial and textile products, mineral fuels, heavy manufactures, agricultural goods • Major Import Products: Machinery, steel, chemicals, miscellaneous manufactures, industrial materials, grain
Exports of goods surged 23.3% above the average and imports surged 21.2% above normal http://www.eco.utexas.edu/faculty/Norman/sup/E2-proj-S04/China-India-Russia/Whole%20Project.htm
Agriculture • Large Producer of: rice, potatoes, millet, barley, peanuts, tea, and pork • Non Food Crops: cotton, other fibers, and oil seeds • Before WTO - 1970’s = 40% of GDP - 1997 = 20% of GDP • Imports: $25.9 billion (2004) - 30% of Imports • Exports: $15.8 billion (2004) - 45% of Exports • Imports doubled between 2002-2004 - Basic Commodities - More open Trade (WTO) - Lowered Tariffs (WTO) • Half of Import growth: Oils, Raw Soybeans http://www.ers.usda.gov/publications/WRS0504/wrs0504.pdf#search='china%20%20agricultural‘ http://aic.ucdavis.edu/oa/iartccarter.pdf#search='china%20agriculture%20percent%20of%20GDP%20trade'
Agriculture Continued • Exports grew more Slowly- $3 billion between 2002 and 2004 • Major Exports: Corn, vegetables, fruits, processed foods • Exports to U.S.: Increased 17.70% (02-04) (Billions)
Trade with the U.S. • After WTO admission • U.S. is China’s Largest Overseas Market • China is U.S.’s 4th Largest Market (13% of imports) 2004 • Advanced Technology Sectors - Office and data processing machines, sound equipment. • Trade Surplus U.S.: $68.7 billion (1999) • U.S. Deficit with China = $15.8 billion (2005) http://www.usembassy.it/pdf/other/RL31403.pdf
Trade with the U.S. ( In Billions) http://www.uschina.org/statistics/tradetable.html
Conclusion • China has become the fastest growing country and has accumulated more FDI in the past seven years than almost every country in the world. However, according to the World Economic Forum and the Index of Economic Freedom, China’s economy is slowing down. Do you think these predictions are true? If you do, how long will China be able to keep up with the demands that other countries have placed on them when referring to trade?