Team Report - CHINA

Strenghts, weaknessess, analysis and participation in the WTO

Ayala María, Caparros Kathleen, Ledrans Raphael, Lentz Maxime, Pacheco Fernando

Global Markets – Semester 1 - 2010

Executive Summary


Introduction

Currently the globalization plays an important role for the development of the emerging country. There are some countries which contribute more than others on the global growth of economy such as the BRIC nations and especially China which is the emerging country which bring forward the most in the global growth. It is why we focus on the strengths and weaknesses of china from a politico-economic, social and environmental perspective and also on its geopolitical role in the aim to focus on the future of China and how it can become the first-order global power in the world.


Stage 1: Strengths and weaknesses of China from a political, economic, social and environmental perspective

Each country being unique, it has strengths and weaknesses which are peculiar to it. They are defined with regard to the rest of the world. We can distinguish six axes of study (politic, economic, socio-cultural, technologic, ecology, and legal). In this part we will study the politico-economic, social, and environmental factors.

Politico-economic:

Politically, China combines a socialist political regime with the aim of a market economy. In practice, China is a unitary state, where the Chinese Communist Party holds all political power. So with the liberty of trade china can give to the companies the same advantages as western countries but at the same time it is a totalitarianist and communist state in which the labour unions are controlled by the government party so they are not really powerful. In china there is no strike, no conflict because of the lack of freedom of speech, as a result there is no interruption of production so less unforeseen costs.

As we know, China is one of the countries where corruption is the most present, by consequence the country has a bad reputation. Economic evidence suggests that high levels of corruption significantly reduce the Foreign Direct Investment (FDI), level of international trade, and economic growth rate. By siphoning off profits, corrupt politicians and bureaucrats reduce the returns to business investment and, hence, reduce the incentive of both domestic on foreign businesses to invest in that country.

Moreover, China has been blamed for imposing price dumping strategies to enhance export and to outperform its competitors. Dumping is defined “as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or below its costs of production”(OECD, 2009). It is an unfair competition process which soiled its reputation.

Like big powerful countries, China has means of pressure. Effectively, the payment of commercial invoices are generally made in foreign currencies (in dollar for most of them), as China’s trade balance is positive; it receives more dollars than it pays, and, in the case of United States, China acquires American Treasury Bonds with US dollars. So, China holds a weapon of diplomatic pressure on its commercial partner because the liberalization of so many Treasury Bonds would make the American currency fall.

Relating to military force, the Chinese army is very large and equipped. China has nuclear arm, submarines, and is a permanent member of the United Nations Security Council.  In 2008, a French diary wrote “The power of the Chinese army worries Washington”(Le Figaro, 2008).

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Concerning economical aspect, the authorities have encouraged Foreign Direct Investment towards high technology industries (Business Monitor International, 2006b). In 1978 China started a reform and open policy and has given opportunities for foreign companies looking to do business in China. In addition to that China is more and more involved in the world economy, actually at the beginning of the 1980´s, China became a member of the International Monetary Fund and of the World Bank. Later during the same decade, China also joined the Asian Development bank and the General Agreement on Trade and Tariffs (GATT). This registration in ...

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