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It is noteworthy that most recently the government started soliciting opinions from legal academies, interested groups and the general public when drafting a major piece of legislation, to achieve democratic lawmaking and advance further compliance with the law (Lo, V.I., 2007).
The most important economic event at this stage or in the years following the 1978 economic reform in China is undoubtedly its accession to WTO at the end of 2001. Following 15 years of numerous negotiations and adjustments of policies, China eventually entered the mainstream world economy and started enjoying the benefits and facing the challenges of WTO.
In response to WTO requirements, China underwent a "make-over" in many aspects. A brief summary of China's WTO promises is shown in Figure 9A. According to the WTO agreement, China is subject to reviews by the WTO in the 8 years following its accession. The most recent one was announced in May 2008, acknowledging China's great efforts and commending its integration into world economy, marked by the secretary's report and Chairperson's praise (OECD, 2003). The OECD also concluded that China has made significant progress in providing a business environment conducive to FDI (Halverson, K., 2004).
5. Stable and Growing Economy
Many of the speculations and uncertainties before China's accession were answered by the results of China's growth since 2001. GDP further increased from average 8% in the late 90s to more than 10% since 2002, 1% of which was projected by scholars to be a result of WTO entry (Chow, 2001). Export growth rate reached 30%, twice of the 15% at the previous stage. Imports also grew at a 20% rate (Figure 2A). In 2006, China surpassed Japan as the host with the largest foreign exchange reserve, which reached $1.8 trillion in 2008. Meanwhile, inflation was held steady at 1.5%.
Economic growth again affected people's daily life. The ownership of consumer durable goods continued to increase. One in every two urban households has computers; each household has one and a half cell phones; and one in 20 households now have a car while some are buying their second. Both urban and rural income increased 150% between 2001 and 2006, and per capita savings doubled within the same period of time. The number of students enrolled at a higher education institution in 2006 was 2.5 times of that in 2001
6. Facilities for Foreign Investors
FDI continues to increase and is undoubtedly the biggest winner of China's accession to WTO. More stimulating polices were implemented. For example, to retain profitable MNEs and to encourage re-investment of FDI profits, foreign investors can be refunded their total amount of enterprise income tax paid on the reinvested portion (Tuan, C. And L.F.Y. Ng, 2004). The Chinese Commerce Minister promised that "China will modify the administration and strengthen protection of intellectual property rights to create a better investment environment" (Xinhua, 2007). In fact, 450 of the world's largest 500 multinational corporations already have invested in China. Decision-making in attracting FDI was also somewhat transferred to local government. In 2004, the Chinese government adjusted its policies to permit provincial governments to approve "encouraged" or "permitted" projects worth under $100 million - $70 million higher than the previous limit (Ming, Z., 2004).
7. Nationalism and Patriotism
Overall, accession into the WTO provided China with the most promising opportunity to continue its legendary economic growth and to continue its reform process. Meanwhile, a new trend in Chinese consumer behavior also appeared. As mentioned in the previous section, many Chinese started revisiting traditional Chinese philosophy in the 90s. Fueled by President Hu's encouragement of historical Confucian thinking and traditional values, many Chinese demonstrated rising patriotism and nationalism never seen since the end of the Cultural Revolution. In terms of consumer behavior, many ditched the notion that Western brands are the best and started buying domestic products. The government also strongly encouraged the development of world famous Chinese brand names, such as Haier and Lenovo. Quality of Chinese products increased while their prices remained low, hence attracting more consumers. "Buying Chinese" became the latest trend, especially for the young generation. Another unexpected turn of the newly visited patriotism was the flaming anti-Western boycotts that occurred in recent years. As mentioned earlier, Chinese nostalgic hostility against the West and Japan re-emerged at the turn of century. When China and other developed countries had political conflicts, Chinese consumers took it out on commercial businesses. For example, not long after the "Toshiba Incident" in 2000, another wave of boycotts of Japanese products broke out in 2005 via the Internet and cellular phones. New websites were even set up to show how much one would contribute to Japan's anti-Chinese activities for each RMB spent on Japanese products. General avoidance of Japanese cars significantly contributed to the American auto industry's fast growth in Chinese market. The most recent demonstration of Chinese nationalism is the boycott of French products in response to the Torch Relay chaos in Paris and alleged French connection to Tibet Liberalization Movement. Protests were organized online and on May 1st, 2008 thousands rallied in front of French supermarket Carrefour, whose sales were reported to drop since then (Zhong, W., 2008). Although such narrow nationalism and boycotts harm both foreign investors and the Chinese economy, it is unlikely that Chinese consumers will cool down their sensitivities and adopt more rational thinking. Indeed, CNN anchor Jack Cafferty's demeaning comments that "They (Chinese) are basically the same bunch of goons and thugs they've been for the last 50 years" (CNN.2008) aroused a great deal of anger in China, provoking charges of racism and prompting the Chinese Ministry of Foreign Affairs to issue three demands for an apology from CNN . With an increase in consumer spending, indicated by a 12.2% year-over-year rate of consumer goods retail sales in 2006, businesses are eager to participate in the massive Chinese market. Faced with competitions among themselves and against Chinese enterprises, foreign investors need to handle Chinese consumers' feelings with more care and increase their sensitivities to Chinese cultural and traditional norms (Lin, Y. And N. Stoianoff, 2004).
8. Textile Sector
With the development and economic growth there is scope for investment in every field of China. Taking textile and garment industry, it is notable that since the 1980's there has been large scale production relocation from Hong Kong to mainland China, especially to its neighboring province of Guangdong (Lau and Chan). In addition to national and local policy preference, Hong Kong entrepreneurs are attracted to Guangodng due to its convenient transportation, its similar dialect (Cantonese). Following Hong Kong entrepreneurs, business people from Taiwan, Japan, South Korea and the United States have also invested and relocated their garment production to Guangdong
China's accession to the World Trade Organization (WTO) has contributed to the expansion of export-oriented garment production in Guangdong during the 2000s. With the phrasing out of the quota-system, the restrictions once placed upon garment exports have loosened. Statistical data shows that the value of China's export of textiles and apparels was over 180 billion U.S. Dollars in 2008, almost four times greater than it was in 1995.
Despite its rapid growth, the garment industry in China has entered a high-competition and low-profit stage (TIC, 2006). Compared with other industries, its entrance expenditures are low. In addition to large scale factories financed by foreign capital, there are a large number of medium and small scale garment factories and family shops in Guangdong. The upgrading of industry has been slow. The main type production is original-equipment-manufacture (OEM) they do not produce their own brand of garments, but process for overseas clients who provide design, original material, and samples. The buyer-driven garment supply chain gives big buyers such as Wal-Mart, and brand-name manufactures such as Gap, Nike, and Levin more control than producers over the profit margin (Hurley and Miller, 2005). These large organizations usually place orders with multiple contractors, who then use multiple sub-contractors to promote competition. This "run-to-the-bottom" reduces the profit for producers and makes garment factories highly sensitive to labor costs
9. The Shortage of Labor
In the pas three decades, garment production in China has depended on the supply of migrant labor from rural areas. With the increasing urbanization, the supply of local rural labor is declining. Migrants from other provinces now constitute the majority of the garment labor force.
Although rural-to-urban migration is growing overall, the supply of migrant labor, especially young female migrants and skilled workers, has not kept up with demand in the past few years (Yang, 2005). In the months immediately after China's spring festival there is usually an increased need for recruitment, however, many garment factories have difficulty hiring enough workers during this time.
At one level, the shortage of migrant labor in the garment industry is due to the industrial competition over laborers (LSS, 2004). The expansion of China's economy produces abundant job opportunities for young migrants. The garment industry, because of…[continue]
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