Regional Protectionism in China

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Audrey Lai

Economics- Internal Assessment

Crystyl Mo, (December 7, 2001), Climbing the Walls, Asiaweek, p38

Regional Protectionism in China

        This article talks about the regional protectionism in China.  In this commentary, I will investigate the cause of such protectionism, the problems provoked and some possible solutions.

        Protectionism is the act of imposing trade barriers to protect the income of domestic producers.  The ‘inspection fees’ and ‘anti-forgery stickers’ are examples of regional protectionism in China.  Though the central government reduces protectionist measures like national tariffs, in order to maximize local interest, provinces often charge money with outlandish schemes, hoping to scrape as much money as possible.

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        Several problems might occur due to the regional protectionism.

First, China would not be able to maximize its productivity.  China is a large country with various resources located in different areas.  Take the liquor industry from the article for example.  The opportunity cost for producing beer might be lower in Beijing than in other provinces, hence Beijing has comparative advantage in producing beer.  Yet, regional protective schemes prevented capital of the industry to centralize at one location, like Yanjing Beer Group had to buy local breweries.  This made specialization impossible, and could not enjoy increasing return to scale.  As ...

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