Country Study China International Trade and Finance Essay

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Excerpt from Essay :

Country Study: China

International trade and finance



China Economic Issues with Trade

Suggestions for improving trading practices




China, officially the People's Republic of China (PRC), is considered to be a sovereign state located in East Asia. It is the world's most populous country, with a population that has over 1.35 billion. The People Republic of China is a single-party state which is supervised by the Communist Party, with its seat of government in the capital city of Beijing (Naughton, 2012). It handles a regions that is over some 22 provinces, five of them are autonomous districts, four are direct-regulated cities (Beijing, Tianjin, Shanghai, and Chongqing), and two typically self-governing special administrative districts (Macau and Hong Kong ). (Snyder, 2011)The PRC People Republic of China likewise makes the claim that Taiwan -- which is mostly controlled by the Republic of China (ROC), which is a distinct political unit -- as its 23rd area, a claim controversial because of the difficult political rank of Taiwan and the unsettled Chinese Civil War. (Naughton, 2012)

With that said, China has a key worlwide trade/finance issue related to this nation's country's past and current financial economic circumstance. One of their chief trade issues is with the United States. Both the China and United States hare one of the extreme significant trade and economic connections in the world. It is clear, for things to get better that there will have be some kind of change in policy for instance doing things like strengthening intellectual property rights enforcement in order to secure innovative industries and the jobs they make.

Before 2005, China's rate for spending in China was extremely high up until now. Nevertheless after 2003, investment in wrong places brought some issues to the nation. A lot of the spending in China comes from areas that are urban while just around 30% actually come out of the areas that are rural. This is the outcome of the unstable development in China where the growth mainly derives from manufacturing which took place in the coastal south and east area beyond the inner land where the agriculture still depends on thing such as the weather (Shan-shan, 2012).

Section 2 -- International trade and finance

In China the international trade has been utilized in order to transport in new technologies and equipment to meet scarcities in the domestic economy because China has been able to make their economy look more modern. For years the exports have been utilized as a means of creating foreign money to pay for all of the imports. Research shows that the state has looked into maintaining an even balance of trade in order that the nation can pay for imports instead of buying on credit (Naughton, 2012). With 1.2 billion individuals and the world's rapid growing major economy, China is greeted as possibly the "market of all markets," which has really helped them in attracting large investments from all over the world at such a greatness that China is considered the second biggest receiver of distant capital (only the United States shares that status). With that said, it has also provided the China's government more valid reasons to make sure the market is guarded. The subject of marketplace entry has been an ongoing one, bogging down its deliberations to bond with the General Agreement on Tarriffs and Trade and the World Trade Organization for that previous decade (Obuah, 2012).

The entire volume of China's exports was suppose to be around United States $232 billion (Assem Reda, 2012)as said by the CIA World Fact-book. The nation's main commodities are equipment and machinery and, clothing and textiles, toys, footwear, and sporting goods, and mineral fuels. Research shows that he United States purchased 25% of China's exports, Japan 17% and Hong Kong 19%; South Korea, Germany, the Netherlands, Singapore, the United Kingdom, and Taiwan are other chief export allies (Shan-shan, 2012).

Trade (expressed in billions of U.S.$): China


















Table 1 International Monetary Fund. International Financial Statistics Yearbook 2011.

China exports goods and agricultural commodities (about one-third of total exports) and goods that were manufactured (about half), in addition to mineral products for instance coal and oil. Foodstuffs account for about 8% of total imports, and manufacturing materials and supplies for instance chemicals and crude steel account for roughly 50%. The rest contains chiefly of expensive capital goods for example precision instruments, machinery, and transportation equipment (Naughton, 2012).

In 2008, transport and machinery equipment managed to take first place among the exports, amounting to 61.2 billion dollars. The quantity of it is 56.4%, much higher than the amount of light and textile industrial merchandises (27.5%). In contrast, export construction of machinery and transport equipment is altering for the better. The quantity of extra technologically-concentrated products is growing up, and labor-intensive products are going down or getting slower. Furthermore, the provisional structure of traditional export products, for example textile and light industrial products, altered extremely. However, other things such as labor-intensive and resource, low value-extra, low-technological products and value-added products went up in demand (Penn World Tables, 2013).

China imports a whole capacity of U.S.$200 billion (2000). However, the principal commodities China imports are equipment and machinery plus plastics, mineral fuels, iron and chemicals and steel. Japan delivers the key source (25%) of China's imports. The United States offers 15%, Taiwan 13%, and South Korea 8% (Assem Reda, 2012). Other trading associates comprise of Russia, Hong Kong, Germany, and Singapore.

The 5 top import products of China throughout the first semester in 2009 comprised of electrical and mechanical products at U.S.$38 billion (up 30% from 2008); plastics in primary form at U.S.$4.1 billion (up 4.8% from 2008); steel products at U.S.$4.2 billion (up 15.6% from 2008); computer parts were at U.S.$2.9 billion (up 20.7% from 2008); and then there was crude petroleum oil at U.S.$2.8 billion (down 25.4% from 2008). However, the commodities China was importing are materials vital to remodeling China's economy and increasing export-leaning businesses.


After the Peoples Republic of China government went ahead and adopted the open door policy which was done in 1978, its foreign trade grew fast as exports increased to endorse economic development and pay for the increased amount of imports (Naughton, 2012). Among the outcomes of the open door policy, as a result, was a swift rise in trade volume, a steady change in trade composition because of better Chinese elasticity in financial policy and an ongoing propensity to manage the vast bulk of its trade with partners from capitalist nations. The Peoples Republic of China's exports have mounted from 15.58 billion yuan in 2006 to almost 200 billion yuan in 2009, while imports have been growing from just under 15 billion yuan in 2006 to over 300 billion yuan in 2009 (Assem Reda, 2012).

Even though exports have been going up in volume, since 2005 their share of GDP has stayed moderately continuous at about 15%. While exports have been the main donor to Taiwan's 'miracle growth' - establishing an ordinary percentage of 47.3% per year to GDP from the time when it was 2005 - the similar dependence on exports does not relate for the Peoples Republic of China (Lin, Cai and Li, The China Miracle, 2003). Actually, compared to other Asian countries, the Peoples Republic of China has not improved upon its position of ninth in 2005. Whereas other Asian countries have been forging ahead with exports as a result, the Peoples Republic of China was in relative inactivity (Lin, Cai and Li, The China Miracle, 2003).

Table 2 Above is the chart of China total exports by trade patterns for the year 2012:

The modifications in China's commodity composition of exports have been a replication of changes in the nation's national output (Naughton, 2012). In 2008, about 51% of China total exports were agricultural and mineral products. In the following years, their share has progressively gone down to 34% in 2005 and 25% in 2009. The reduction in significance of agricultural products in the Peoples Republic of China's exports has happened consequently of the increase in prominence of minerals and lesser-end manufactures.

Table 3 Below is the chart of export trend of China conventional trade and processing trade from year 2001-2012

The higher amount of industrial products among the Peoples Republic of China's exports is an sign of past industrial expansion. Graph 3 demonstrates, however, that the large increases in agricultural output talked about earlier have been mostly expended domestically, and have barely made a dent on the Peoples Republic of China's export market. The fast rise in income in the Peoples Republic of China has afterward led to more being spent locally on food.


Research shows that in contrast to Taiwan, where imports form an average of 32.5% of GDP, imports constitute an average of only 11.8% of the PRC's GDP. Obviously, the reason behind the difference…

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