By 2030, China’s economy could be 30 percent larger than that of US. China’s share of global GDP on Purchasing-Power-Parity (PPP) basis rose from 3.7 percent in 1990 to 14.3 percent in 2011 and rose to 16.06 percent this year. During the past 30 years, China’s economy has changed from a centrally planned system that was largely closed to international trade to a more market-oriented that has a rapidly growing private sector. A major component supporting China’s rapid economic growth has been exports growth.
Chinese officials contend that China is a ‘Socialist-market economy’. This appears to indicate that the government accepts and allows the use of free market forces in a number of areas to help grow the economy, but where the government still plays a major role in the country’s eco development. Chinese leaders are serious about the economy both at home and across the world. The Chinese government knew that it must maintain a certain economic growth rate on one hand, and make reforms on the other, and it must strike a delicate balance between the two.
Reforms have always been at the top of the government’s agenda and currently China’s focus area is domestic commerce system, China has progressed in four areas in terms of reforming the domestic commerce system. First on the basis of thorough research, it has formulated the plan for the comprehensive domestic commerce reform and mapped out the overall strategy for advancement. Secondly relevant legislation work has started as legislation in this area was insufficient before, especially in comparison with that in foreign trade. Law and three sets of rules are developed — a) Merchandise Circulation Law, Rules on Recycling and Disassembling of End-of-Life Vehicles, b) Rules on Pawnbroking and c) Rules on Fair Trading between Retailers and Suppliers, have been listed on the State Council’s legislation plan for 2014.
Open economic system is considered as the stimulus factor behind Chinese economic growth. Encouraging progress has been made in six areas in terms of modifying this system. Firstly, overhauling the foreign investment administration regime, China is revising the Administration Methods for overseas investment, which will substantially streamline the verification procedures for setting up businesses overseas. Second is the further advancement of Shanghai Pilot Free Trade Zone. With State Council approval, 31 measures have been adopted for greater liberalization in the zone. Third, to create new models of processing trade and deepen reforms on administrative approval procedures for processing trade. Fourth, to accelerate FTA strategies on the basis of FTAs with surrounding countries. Fifth, to move faster with the unification of laws governing domestic and foreign investments. Sixth, to promote other works related to building a new open economy such as advancing negotiations on environmental conservation, investment protection, government procurement and e-commerce under bilateral and multilateral frameworks in a positive and steady way.
In 2000, China initiated a new ‘Go Global’ strategy allowing Chinese firms to invest overseas. On September 2007, China Investment Corporation (CIC) was launched with $200 billion fund. One key factor for this move was to utilize massive accumulation of foreign exchange reserves and secondly to obtain natural resources, such as oil & minerals.
In 2012, the China invested in Canada, Australia and in some European countries. Singapore, Japan, South Korea, and the Philippines have also attracted bigger Chinese investment than the investment made in other countries. In terms of size, oil, gas, and energy deals, China’s three energy giants, CNOOC, Sinopec, and SinoChem were the most noteworthy energy projects.
China has free trade agreements with ASEAN, Pakistan, Chile, Hong Kong, Macau, New Zealand, Singapore, Peru and Costa Rica. China has an economic co-operation frame work agreement with Taiwan. China is currently in the process of negotiating FTAs with the Co-operation Council for the Arab States of the Gulf, which includes Saudi Arabia, Kuwait, the UAE, Qatar and Bahrain, Australia, Iceland, Norway, Switzerland, and the Southern African Customs Union including South Africa, Botswana, Lesotho, Namibia and Swaziland. In May 2012, China, Japan and South Korea agreed to begin negotiations for an FTA. China has also considered negotiating an FTA with India but with little progress to date.
Few people in China are concerned about projection of foreign trade in China, but it is observed by analysts that confidence of exporting enterprises is rising continuously and export situations are improving every single month. It is also observed by some people that, China’s foreign trade no longer enjoys advantage, especially when it comes to price and cost. But it is evident that, during the period following the promulgation of the decision of the 18th CPC Central Committee, the Chinese government has reaffirmed that it treats all types of enterprises equally, and foreign investment policy has remain unchanged, so present environment for foreign enterprises is equally favorable as it was before and China still enjoys a comprehensive competitive edge, in shape of complete infrastructure, well-developed industrial support, a well-educated labor, a trained workforce in all of which they have full confidence.
The competitiveness of China’s private enterprises is also strengthening. Since China’s WTO accession, their export growth rate has been 18.4 percentage points higher than the national average on a yearly basis. They have become the most dynamic market players with the greatest export potential achieved by cultivating a group of internationally competitive industries and businesses. China owns proprietary intellectual property rights to large-scaled complete plant equipment used in communication, power, rail transport, and enjoys conspicuous advantages in terms of price and technology.
Chinese leader, Yang Zuang is considered as the founder of Economic Reforms in China. It is due to his vision that that Chinese Economy has become ‘The Economy of Scale’ which means that transportation or shipping expenditures of a product are more than its cost of production. The economic reforms have transformed the Chinese economy and produced a period of spectacular growth.
China maintains that economies at different development phases should embrace the spirit of solidarity in difficult times, discard zero-sum practices, and join hands to meet common challenges.
China teaches a lesson to the nations i.e. ‘To reshape the economy, it is important to institute an open, cooperative global economic and trade system’. The international community should continue to work towards diversity, openness and mutual benefit. Developed and emerging economies in particular should bring out their respective strengths to drive global economic growth by acting as the ‘double engines’ of the global economy, reinforcing and benefitting each other. This way, we will definitely open up a new prospect of economic globalization.