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Foreign Trade Environment in China


Foreign Trade Environment in China Liping He School of Economics and Business Administration Beijing Normal University 23 March 2010 – PowerPoint PPT presentation

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Title: Foreign Trade Environment in China

Foreign Trade Environment in China
  • Liping He
  • School of Economics and Business Administration
  • Beijing Normal University
  • 23 March 2010

  • Chinas Foreign Trade A snapshot
  • Geography and Foreign Trade
  • Government Policy and Regulation on Foreign Trade
  • Labor Market
  • Finance and Banking
  • The Exchange Rate Issue
  • Chinas International Relations

Chinas Foreign TradeA Snapshot
  • Chinas foreign trade has been growing rapidly in
    last three decades, with its annual growth rates
    averaged at 15
  • Foreign trade, together with foreign direct
    investment inflow, has served as an important
    growth engine for the Chinese economy
  • China is now among largest trading nations in the
    world, and perhaps the worlds top exporter (the
    role once occupied by Britain, America, Germany,
    or Japan)
  • Yet somehow different with its predecessors,
    China mainly relies on its vast manpower, not
    necessarily on technology, in achieving the
    leading role in foreign trade.
  • Looking ahead, foreign trade will remain as
    essential for Chinese economic growth.

Chinas Trade in Goods, billion, 1991-2008
Chinas Commodity Export, billion, 1991-2008
Geography and Foreign Trade(Internal)
  • Nearly 4/5 Chinas foreign trade (2,562 b) takes
    place in five coastal provinces
  • GuangDong (718 b), Jiangsu (430 b), Shanghai
    (314 b), Zhejiang (242 b), and Shandong (188
  • These coastal provinces are also largest ones
    where foreign direct investment (FDI) flows in.
  • Comparative advantages (1) geographical position
    (2) infrastructure (3) historical connections (4)
    regional governments drive

(No Transcript)
Geography and Foreign Trade(External)
  • Chinas main trading partners EU, US, Japan,
    ASEAN, Hong Kong
  • Geographical diversification has been remarkably
    ostensible in the recent years
  • Export diversification in geography market
    driven and product competitiveness
  • Import diversification in geography resource and
    technology driven

Government Policy and Regulation on Foreign Trade
  • China becomes a member of World Trade
    Organization from 2001, and commits to the
    principle of free and fair trade
  • Currently China is under negotiation with the
    U.S. and EU about the Market Economy Status (MES)
  • China has so far signed 20-odds bilateral FTAs
    with other trading partners (latest one with
    ASEAN from January 2010), and has CEPA with Hong
    Kong (and similar one with Taiwan)
  • China has engaged a number of talks on
    establishing and developing multilateral
    framework on trade and investment promotion
    schemes, including APEC and the Doha round

Government Policy and Regulation on Foreign Trade
  • Ministry of Commerce is the Central Government
    agency responsible for policy making and
    regulation implementing
  • There are four Special Economic Zones (SEZs), and
    recently the Hainan province approved as the
    International Tourism Island these titles give
    the regions some policy privileges.
  • In almost every province and large city, there
    are Economic Development Zone, where local
    authorities have certain discretion over the
    matter of foreign trade and investment.
  • Regional and local governments have strong
    appetite for external development, seeking growth
    in foreign trade and FDI inflow.

Labor Market
  • China today is in general a labor-based
    economy, not exactly a knowledge-based
  • Surplus labor has been diminishing as
    population slows down and non-farming employment
    grows rapidly.
  • But recently emerges a problem of oversupply of
    college graduates.
  • Labor flexibility across regions and occupations
    is relatively high.
  • Low flexibility mainly a problem with employment
    in the public sector and state-owned enterprises
  • New Labor Contract Law is introduced from 2008.
  • Trade unions and social security system are under

Finance and Banking
  • China now has fairly a competitive market
    structure in the finance and banking sector.
  • Five largest national banks, ten-odds regional
    banks, and hundred-odds city banks.
  • Full-scale foreign banks are in operation from
  • Securities (issuing and trading) are also active.
  • Local financing becomes increasingly accessible
    for foreign firms.

The Exchange Rate Issue
  • China has adopted a de facto dollar-pegging
    regime since the mid-1990s, in a backdrop that
    the fight against domestic inflation and endless
    devaluation expectations was running high.
  • A reform on the exchange rate regime took place
    in July 2005, aimed to let the RMB to have more
  • But the reform has not been so successful because
    Chinas financial markets and the corporate
    sector were not well prepared to cope with
    exchange rate variability on their own.
  • The recent global financial crisis had
    effectively made the RMB more closely tied to the
    dollar than before.
  • Whether and how much the RMB has been undervalued
    is an intellectually debating issue.
  • China would see through a gradual reform in the
    exchange rate regime.

Recent Trends in Trade
International Relations
  • China wishfully sees a multi-polar world
    reluctantly sees itself as a superpower or a
  • Foreign policy is dominated by territorial and
    political integrity, which is often the cause of
    frictions with the US on the issue of Taiwan, or
    that with Europe on the issue of Tibet.
  • East Asia has been on the top priority of Chinas
    diplomacy in the recent years.
  • Many in China would like to see to make steady
    progress on the issues such as human rights,
    democracy, and ideology.
  • Leaders of China commit themselves to peace and

International Relations - Asia
  • China sees itself in the center stage of Asia
  • China tries to seeks to maintain friendly and
    cooperative relations with all other Asian
    countries as it is believed to be at the core for
    overall stable international relations
  • Chinas relations with other Asian countries are
    sometimes troubled by historical issues, border
    (territory) issues, and trust issues
  • Notable that with two Koreas, Japan, countries
    neighboring the South China See, and India.
  • Economically, Chinas relations with all other
    Asian countries have developed remarkably over
    time (Triangle relations between the U.S., China
    and Asia).

What China Exports
  • China exported 1,218 billion, equivalent to
    37.5 of the countrys GDP
  • Of the total exports, 617.5 billion was
    processed exports, or 695.4 billion was
    undertaken by foreign firms
  • Great variety in exports
  • Major staples textile and clothing metal
    products machinery and electronics car parts
    furniture and toys

What China Imports
  • China imported 955.9 billion, equivalent to
    29.4 of the countrys GDP
  • Of the total imports, 368.5 billion was that for
    processed exports, or 559.8 billion was
    undertaken by foreign firms
  • Great variety in imports
  • Major imports fuels and other mineral products
    chemicals plastic and rubber products machinery
    and electric equipment advanced industrial

Trade in service(2007)
Export Import Balance
Total trade in service ( million) 122,206 130,111 -7,904
1.Transport 31,323 43,270 -11,946
2.Travel 37,233 29,786 7,446
3.Telecommunication 1,174 1,081 92
4.Construction service 5,377 2,909 2,467
5.Insurance 903 10,664 -9,760
6.Financial service 230 556 -326
7.IT service 4,344 2,208 2,136
8.Patent and Royalty 342 8,192 -7,849
9.Consulting service 11,580 10,856 724
10.Advertizement and Publicity 1,912 1,336 575
11.Filming and audio-video products 316 153 162
12.Other commercial service 26,914 18,238 8,676
13.Gov?t service unrecorded elsewhere 552 856 -304
  • Thank You!