Upload
alexandra-hsiajsnaks
View
219
Download
0
Embed Size (px)
Citation preview
8/8/2019 Why China is Different
1/3
8/8/2019 Why China is Different
2/3
International trade makes up a sizeable portion of China's overall economy. The course of
China's foreign trade has experienced considerable transformations since the early 1950s. In
1950 more than 70 percent of the total trade was with non-Communist countries, but by 1954, a
year after the end of the Korean War, the situation was completely reversed, and trade with
Communist countries stood at about 75 percent. In 1965 China's trade with other socialist
countries made up only about a third of the total.
Since economic reforms began in the late 1970s, China sought to decentralize its foreign trade
system to integrate itself into the international trading system. On November 1991, China joined
the Asia-Pacific Economic Cooperation(APEC) group, which promotes free trade and
cooperation the in economic, trade, investment, and technology spheres.
China's investment climate has changed dramatically with more than two decades of reform. In
the early 1980s, China restricted foreign investments to export-oriented operations and required
foreign investors to form joint-venture partnerships with Chinese firms.
Foreign investment remains a strong element in China's rapid expansion in world trade and has
been an important factor in the growth of urban jobs. In 1998, foreign-invested enterprises
produced about 40% of China's exports, and foreign exchange reserves totalled about $145
billion. Foreign-invested enterprises today produce about half of China's exports (the majority of
China's foreign investment come from Hong Kong, Macau and Taiwan), and China continues to
attract large investment inflows.
Chinas high savings will spur deals. Companies often have surplus cash and banks surplus
deposits. Today those savings are recycled into rich countries via sovereign-wealth funds and the
central bank, which act as portfolio investors, buying mainly bonds. But China may and probably
should diversify. That shift will be accelerated by Chinas political aims: to acquire inputs, such
as raw materials, labour and land; to build up technical and commercial expertise; and to gain
access to foreign markets.
Public announcements of such deals are something of a charade. Wooden Chinese executives
insist they are acting on purely commercial grounds. Western bosses hail a new era of co-
operation. Yet these transactions are tricky partly because of cultural differences and partly
because of the role of the Chinese state. There have been fiascos. In 2005 CNOOC, a Chinese oil
firm, withdrew a bid for Unocal, a Californian producer, after American politicians kicked up a
stink. In 2009 Rio Tinto, an Anglo-Australian mining firm, withdrew from a deal to sell a series
8/8/2019 Why China is Different
3/3
of minority stakes to Chinalco, a Chinese metals firm. Rios shareholders opposed the sale but
many reckon that the Australian government did, too.
Outward foreign direct investment is a new feature of Chinese globalization, where local Chinese
firms seek to make investments in both developing and developed countries.