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Chinese Position in International Economics

Upper Middle Income 1.364 billion
Upper Middle Income 1.364 billion.
Data / Year 2011 2012 2013
GDP (current US$). 7,492,432,097,810 8,461,623,162,714 9,490,602,600,148
Population, total 1,344,130,000.0 1,350,695,000.0 1,357,380,000.0
GDP per capita (current US$) 5,574.2 6,264.6 6,991.9
FDI inflows 280,072,219,149.9 241,213,868,161.4 290,928,431,467.0
FDI outflows (% of GDP) 1.3 1.4 1.7
Balance of Payments 136,097,000,000 215,392,000,000 182,807,000,000
Imports 459.4 487.7 530.4
Exports 761.8 822.1 886.7
Exchange Rates and system (LCU per USD) 6.5 6.3 6.2
Ratios-industry – intra-industry, etc (value added % of GDP) 46.1 45.0 43.7
Tariff, all products (%) 7.8 Not available Not available
Trade Rounds, if any Not available Not available Not available
Region Trade Agreements (Merchandise exports to and import from developing economies within region (% of total merchandise exports) 7.4 (export)
9.8 (import)
8.3 (export)
9.6 (import)
9.2 (export)
9.1 (import)
Other Trade Agreements (Merchandise exports to and imports from developing economies outside region (% of total merchandise exports) 16.4 (export)
15.5 (import)
16.2 (export)
16.0 (import)
16.1 (export)
15.5 (import)
Trade to GDP ratio 48.8 45.7 43.9
Comparative Advantage/Absolute Advantages Not available Not available Not available
Poverty headcount ratio at $1.25 a day (PPP) (% of the population) 6.26 Not available Not available
Unemployment rate (% of people in the labor force) 4.1 4.1 4.05

Background

China is the country that attracted enormous attention of professionals and the general public no so long ago. It has been experiencing great economic growth, starting with the 1950s, which lasted for 60 years. This time turned out to be enough to boost GDP by almost 4%, urbanize, liberalize the market, and become a major global exporter (Hirst, 2014). As a result, the country started to influence the world’s economy and the life of other countries.

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China’s products can be found in various locations, and they are in extreme demand with the population. Except for that, many foreign organizations are willing to cooperate with the country because of cheap labor and enormous technological opportunities. Such tendencies made China an attractive business partner and improved its performance enormously. However, its economic growth slowed down recently. Professionals claim that the country is in the worst condition right now.

They underline that such poor growth rates were not observed for several decades already, which proves that China is likely to lose its ground. Still, it is not really so. China’s representatives and some other economic experts believe that currently, reduced growth does not prevent the country from facing positive changes such as becoming closer to the technological sophistication of the West. China is considered to expand its domestic demand and continue to cooperate with foreign countries. It tends to become more independent in the economic sphere and is ready to implement new reforms to create a more balanced economy and become an international leader.

Trade Agreements, International Economic Expansion, and Formation over Time

The trade industry plays a vital role in the life of China. It allows us to grow, expand its businesses, cooperate with many other countries, and receive a stable position in the global market (Gerber, 2013). Trade agreements are extremely important in this perspective for the life of the country. China mainly focuses on Free Trade Agreements (FTAs) that are seen as the most beneficial ones. Their main advantage is that they streamline domestic reforms and improve cooperation with other economies. China has 13 FTAs already (with ASEAN, Pakistan, Chile, New Zealand, Singapore, Peru, Hong Kong, Macau, Costa Rica, Iceland, Switzerland, Korea, and Australia) (China’s Free Trade Agreements, 2016, par. 1).

There is also one unilateral Preferential Trade Agreement. It is the Asia-Pacific trade agreement that was signed according to the WTO’s requirements and allows to reduce tariffs for some products. The country also has several FTAs under consideration and negotiation, which proves that it is not going to stop entering new markets and is willing to expand further.

Even though China is known for its development and international economic expansion, the surveys show that its economic growth slowed down greatly during the previous years. For half a decade, starting with 2009, the country over-invested and failed to receive the desired pay off, which had a negative influence (Kaiman, 2015). China expanded by 7.4% two years ago but reached only 6.9 in 2015, which is its poorest result since the end of 20th century (Magnier, 2016).

Such data proves that the country pays much attention to globalization and international expansion, but not all its initiatives turn out to be worthy. Quick development and leading positions changed to unimpressive results. Still, China is working on the issue and is likely to overcome it soon. It has already exceeded the projection of the International Monetary Fund, which is a positive factor.

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Economic Data

The fact that China is a well-developed country can be proved by the evaluation of its economic data. For example, countries’ GDP that shows the value of products and services increases by approximately $1 trillion each year. It is a great economic performance for the whole country. Being divided by midyear population, it equaled $5,574.2 in 2012 and increase by about $700 each year. China’s population is controlled by the government with the help of various policies. Still, more than 6 billion individuals start to live in this area each year, which increases competitiveness.

Foreign countries invest in China and its industries due to the wide variety of technologies, chip equipment, and labor. However, these investments are not stable. In 2012, they decreased by almost $40 billion and then increased by $50 billion in 2013. The outflows of these investments also faced significant change in 2013. It escalated by 0.3 and equaled 1.7% while in the previous year the difference was only 0.1%. Such tendencies show that the business sphere improved and became more extended. Countries started to globalize actively, opening new departments and manufacturing more.

All economic transactions maintained by the private and public sectors between China and the countries it cooperates with are viewed as a reduced balance of payments. It is a positive change because they should equal zero theoretically. Both import and export indicators increased, which emphasizes the fact that China is tightly cooperating with other countries to become a leader in the globalized market. The rise of the currency in value is slowly reducing.

This proves that China’s exchange rate regime works appropriately and is beneficial to the country. As the data shows, ratios-industry – intra-industry indicator decreases slowly with the course of time. Many Chinese people consider that their products are now healthy and environmentally friendly but not all of them are able to afford those brought from foreign countries as they are more expensive. Tariff rates for all products corresponding to each partner country in China were 7.8% in 2011, which seems to be an average measure.

Unfortunately, the information related to other periods of time is not available, which means that the tendencies cannot be discussed. The information on China’s trade rounds is missing, which means that there might be no trade-related negotiation series or they may be not disclosed to the general public.

Considering merchandise exports and imports, it can be stated that China ships more goods and services out of the country and brings in less, which allows it to leave more money in the country. Taking into account developing economies outside the region, it should be said that the changes are not stale, but both import and export rates decreased recently as well as trade to GDP ratio.

There is no current information on China’s comparative and absolute advantages, unfortunately. 6.26% of the population were living at $1.25 a day, which was lesser than in 2010 but no more recent data is available. Still, this information seems to be enough to prove that the quality of life in the country increases.

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It is also advantageous to pay attention to the unemployment rate when discussing country’s economy. It gives an opportunity to consider and evaluate the health of the economy and decide if the country utilizes its manpower resources efficiently. Knowing how many people are looking for a job but cannot find one and remain unemployed, allows to discuss the balance of supply and demand as well as to define wasted potential production.

The data shows that the situation in China does not change much, and unemployment rates remain on the same level for several years already. It proves that the government controls this issue, and the number of working places meets the requirements of the constantly increasing population to some degree. Still, it also signifies that the interventions are not efficient enough to decrease unemployment rates with the course of time.

Status of the Country

Many professionals who work in the sphere of economy believe that China is one of the leading countries in the world. It rose rather fast and influenced international economy greatly as its trade flows increased five times since the beginning of the 1990s (Harris, Robertson, & Xu, 2010).

First of all, it cannot be denied that China increased the global labor force greatly. A great competition among the population exists in this country, which makes its people do their best to become efficient workers. As a result, world’s potential output becomes greater. Of course, country’s growth rate is not that enormous and unachievable, but it still impacts international economy more than other countries. China not only has a huge and cheap workforce but also is extremely open to trade. Thus, it drives global growth and influences other economies significantly.

The world’s financial system is also affected by China and is even believed to be shaped by it. Not so long ago it was even claimed that its currency will not be pegged to the dollar anymore. Such alterations are expected to cause great currency flexibility, provide more opportunities to steer China’s economy and affect the international one by ending Bretton Woods system of fixed exchange rates with the US. Consequently, American bond yields may increase, causing scale revaluation, squeezing domestic demand, and hurting US economy.

In this perspective, the global monetary policy can be seen as the one made in China. It controls the prices of products, labor, assets, and capital. China’s impact on the international economy can explain such issues as the alterations in oil price (it is affected by Chinese demand), food price (cheap China goods allow central banks to reach their inflation goals). Thus, China’s effect on the world’s economy is likely to determine “developed countries’ inflation and interest rates, wages, profits, oil and even house prices” (How China runs the world economy, 2015).

Trade, Monetary, and Fiscal Policies

China is focused on trade and is open to it that is why it is not a surprise that since the beginning of the 21st century. Such participation affected its trade policy and entailed pre-WTO accession. The country utilizes multilateral trade policy trade policy and pays attention to both international and domestic trade. Even though China meets the WTO’s requirements of transparency and efficiency, its policy structures are often discussed as pluralistic, intransparent, and reactive.

It is open to external influence, but government tends to shape the negotiation and implementation. China’s trade policy is not static that is why it is not clear if capitalist tendencies will remain leading ones or free-market can be restored. For now, the country is focused on FTAs mainly and maintains domestic growth (Hilpert, 2014).

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China tends to ensure its macroeconomic and financial stability. Its monetary policy is meant to help with this. It keeps the value of the currency stable and provides more opportunities to improve economic growth according to the People’s Bank of China that is also known as the Chinese central bank. The bank positioned its policy such that it can alter and adjust any parameters it considers to be necessary.

The implementation of the “prudent” monetary policy a year ago also had the same characteristics to benefit the country. As a result, China’s currency is said to become independent from the dollar. It is expected that the country will loosen its monetary policy. Such step will give a chance to prevent speculation and other financial risks. Moreover, it is likely to ensure growth stimulation within the domestic economy. It is also possible that China’s monetary policy will have a global influence and affect world’s banking system (Michaels, 2015).

China has a prudent fiscal policy that allows it to lower the deficits and meet the budget targets. It is guided by the government and desire to create a space for future spending on contingent liabilities. The policy is meant to deal with medium-term and short-term focuses. It is claimed to become proactive after the crisis, but professionals consider that it should be even more active to maintain fiscal expansion and achieve the goals of 2016 (Yang, 2016).

Future of the Country

China was experiencing extreme rises for several decades but today the situation changed adversely. The beginning of 2016 is claimed to remain dramatic for the country. Professionals believe that the value of the stock market will not increase for now. Still, the International Monetary Fund and Beijing expect that the situation will change in a positive way this year, and the economy will grow by 6.3-7%. Such belief can be supported as the focus changes to consumers and services instead of investment and manufacture.

Except for that, even lowered growth of China in 2015 was the same as the total size of Saudi Arabia’s economy, which proves that no extreme problems are faced by the country (Lacqua, 2016). Thus, it is expected that the markets will calm down, and China will remain the locomotive of the global economy.

Conclusion

Taking everything mentioned into consideration, it can be said that China experienced various economic changes. It rose extremely quickly and became one of the most influential countries in the world. China cooperates with other countries. It pays much attention to import and export, which affects the creation of trade agreements. It focuses on the international economic expansion, which allows to get a rather stable position formed over time. Unfortunately, such activity slowed down recently and economic growth reduced. Still, China does not consider it to be a great problem. It alters market approaches and focuses on customers and services, expecting to remain stable.

The country experiences changes that also influence the situation in other countries and in the world, which proves that it is still powerful. Thus, it can be claimed that the currently observed events do not make China give up, and it expects to face an optimistic future.

References

China’s Free Trade Agreements. (2016). Web.

Gerber, J. (2013). International Economics. New York, NY: Pearson.

Harris, R., Robertson, P., & Xu, J. (2010). The international effects of China’s growth, trade and education booms. Web.

Hilpert, H. (2014). China’s trade policy: Dominance without the will to lead. Berlin, Germany: Stiftung Wissenschaft und Politik.

Hirst, T. (2014). A brief history of China’s economic growth. Web.

How China runs the world economy. (2015). Web.

Kaiman, J. (2015). China’s economic expansion fails to hit government’s growth target. Web.

Lacqua, F. (2016). Where Is the Chinese Economy Heading? Web.

Magnier, M. (2016). China’s economic growth in 2015 is slowest in 25 years. Web.

Michaels, R. (2015). Chinese monetary policy. Web.

Project Map – China. (n.d.). Web.

Yang, Y (2016). China needs a more active fiscal policy. Web.

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