China in the global economy: A fast growing export country

Résumé du document

The economy of China is particularly interesting to look at, because China was still over two decades ago a very poor country, whose planned economy didn't allow any improvement for its citizens' standards of living. But after a series of reforms oriented towards the market and initiated by Deng Xiaoping in 1978, China has become one of the greatest examples of economic successes after World War II.
Its economic growth has reached an average 10% per year since then, and the considerable growth of Chinese export in the global market is the most spectacular illustration of China's economic success these recent years. China is a major demographic power, with 1.3 billion inhabitants, and the third largest economy in the world in terms of GDP (US$2.6 billion in 2006) . Even if the country is now facing the global economic slowdown due to the aftermath of the financial crisis, its GDP grew 9% in 2008 from the previous year .

Since the middle of the 1980s, China has liberalized its policies related to trade and foreign investments. Its economy is now almost as open as most of WTO's countries. The country entered this organization on December 11th 2001, after a long negotiation process, which marked the outcome of its opening strategy on the world market. Thanks to both increase in the Foreign Direct Investment (FDI) and the growing China's participation in international trade, the country has known an outstanding economic development. So much so that China no longer belongs to the group of low-income developing countries in the world and, since the end of the 1970s, some 400 million people have been lifted out of poverty, according to the IMF.

We will study here the economic reforms that China performed to make this possible, then we will examine China's export activities in the world trade and the reason why it has become a major export country, and finally we will look at the stakes this country is facing in this crisis context.

Extraits

[...] But, before the 1990s, the FDI were oriented towards China's exportation industries. The final step of the integration process was for China to enter the World Trade Organization, which eventually happened in December 2001. To do so, China lowered its tariffs on industrial goods by 17% in 1997[3], and agreed with the United States to achieve a further decrease in its tariff barriers, to widen its agricultural importation quotas and to suppress its restrictions on the importation of industrial goods. [...]

[...] Indeed, these recent months, about 7,000 small and medium-sized plants have already shutdown in Shenzhen and Guangdong. And, according to the mayor of Shenzen people have lost their job in the city by November 2008. As a crisis measure, to try to tackle the problem of the export slowdown, the government has decided to support exports by restoring some export subsidies that had been previously given up to rebalance the economy. Like the United States, China is responding to the crisis with a huge spending process as well. [...]

[...] A brief summary of the economic reforms that China implemented to integrate in the global economy and the world trade. As we've seen in the introduction, China's economic growth has been outstanding for more than two decades now; thanks to the efforts its governments have made to gradually open the country to the world market and to participate in the world trade. China has indeed processed to three very important steps in implementing its economic reforms. The country has decided to shift from a centrally- planned to a market-oriented economy; from an agricultural to a manufacturing and services economy; and from a foreign trade close to open economy. [...]

[...] The US is also China's first trade partner, and the trade between the two countries has increased from $ 14.3 billion in 1998 to $ 65.2 billion in 2007[11]. This same year, China exported mainly electrical machinery and equipment, power generation equipment, and apparel. So China is now a major trade country in the world. Thanks to its opening policies, China's trade with the world has dramatically increased from $ 266.2 billion in 2001, the year when it entered the WTO, to $1,218 billion in 2007[12]. Such exchanges have enabled the country to reach this very important economic growth that China has known for thirty years now. [...]

[...] Besides, “while shipments to the world's largest economies fell significantly down 17 percent to the European Union percent to the United States and 9 percent to Japan - shipments to China's neighbors plunged even more[16]”. Exports to the countries belonging to the Association of Southeast Asian Nations were down 22 percent. To sum up the current situation, as it was said in the Economist recently, China cannot rely on exports any longer, because “becoming the world's biggest exporter will be of little comfort if global trade is spiraling downwards[17]”. China will probably have to boost domestic demand in order to support its economy and to help improving global trade unbalance. [...]