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The pharmaceutical market’s growth
is another example of the economic progress China has made. Even after
accounting for all the economic benefits recognized by the world, the Chinese
still come out as the country with the most gains. However, there are more
motives behind China’s market reforms than just purely economic. On the
political front, China is fast becoming an integral part of international
organizations. The government is making a conscious effort to reenter GATT
(General Agreement on Tariffs and Trade), realizing the importance of creating a
favorable trading status among foreign nations. Slowing this progress, the 124
nations strong trade bloc has requested that numerous conditions must be met by
China before the nation can become a member of GATT once again. Several of these
provisions are the elimination of import prohibitions, restrictive licensing
requirements and other controls or restrictions; lifting of all restrictions on
access to foreign exchange and full convertibility of the Chinese currency (fmprc.gov).
Other important key themes behind China’s Open Door policies are economic and
technological cooperation with the West (fmprc.gov) and that China’s government
no longer supports Third World revolution. Instead, China realizes that
cooperation with developing countries would be far more practical.
Although
Chinese foreign policies is aimed at opening the nation’s economy to the world,
it neglects the agricultural market almost entirely, with the exception of
technical contracts. These contracts are designed to improve the transfer of
technologies to improve crop yields. Technical Contracts are made between
farmers and village economic cooperatives and a wide variety of offices and
technical personnel from different administrative levels (fmprc.gov). The
funding for the technology used by the agricultural industry can be traced to
extension stations of political parties, finance bureaus, or local insurance
company. Since the groups funding technical contracts are nothing more than
investors, a portion of the profits from increased production due to the
technological advancements are returned to these groups. However, the technology
providers also bear the risk of investors, if output and economic returns can’t
reach prescribed figures, the extension administrations have to make up the
losses(fmprc.gov). Like all good things, China’s formidable economic growth had
its downsides.
There are a few detriments like
inflation, an under-aided agricultural market, government inefficiency, and
geographically uneven development. High inflation, caused by a demand for more
exchange medium on the Chinese market is causing Chinese currency to depreciate
relative to other national currencies. Currency conversions and management
remains a sticking point for many businesses wishing to invest in China. There
has been some movement in Asia toward a more uniform level of currency exchange,
but not so much that it has affected the difficulties in trading with China.
And, a lack of emphasis on the agricultural market is causing that sector of the
Chinese economy to fall behind, and soon the supply of agricultural products
will fall below the demand for these goods, resulting in a shortage. Another
problem is also the inefficiency of large, state-owned production facilities can
be explained by excess bureaucratic red tape and corruption. Finally, there has
been an uneven distribution of development between the land-licked, western
section of China and the industrialized east-coast, consequently causing
ineffective land use.
A lot of China’s economic problems seem to be internal,
and connected with supporting the massive population while divesting the
government of money-losing businesses. Indicative of the overall industrial
health of China is the amount of tax the country collected through their
industrial and commercial tax in August, 1997. The total collected was $6.5
billion-a 12.9 percent increase over the same period in 1996. Included in the
overall tax is a business tax, which grew by 49.5 percent in August, 1997 alone.
There are hundreds of American businesses wanting to take advantage of the
growth of China’s business sector. Several US- based, multinational companies
already have entered the Chinese market, and now the smaller entrepreneurs would
like to be included, too. One of the keys to this movement is that China now
claims an emerging middle class, most of which wants American goods (Cross 25).
US-China trade has increased by fully 90 percent since 1990, reaching $64
billion in 1996.
Before Hong Kong reverted to
Chinese ownership and rule, US businesses used Hong Kong agents to negotiate
with the Chinese government. Now, however, Hong Kong is the international
administrative arm of the Chinese government (Barnathan 30). Such negotiations
are less certain and requires either the services of an international trade
consultant, or at the very least, more than a passing glance at US
government-generated tips on doing business in China (Cross 25). Jiang announced
that the unorthodox brand of market-driven socialism that has propelled China
this far needs a radical overhaul. In one of the most sweeping sets of policy
changes since the late Deng Xiaoping unleashed the forces of modernization in
1978, Jiang announced that the state sector is in for a wrenching downsizing
(Clifford et al.). Of course, his plan to restructure carries with it the risk
of opposition among the worker’s, particularly those that will be left to fend
for themselves.
Historically, each governmental liberalization of the past has
resulted in a wave of capitalistic activity. Market driven socialism and totally
free markets are two very different entities, and the Chinese government is
faced with decisions of how much control they will levy on a freer market
system. Indeed, Jiang’s plan is so sweeping that it could unleash perhaps the
largest wave of corporate restructuring, mergers, and acquisitions the world has
ever seen (Clifford et al.). Certainly, China is poised to become the world’s
next economic super power. Their success in attaining that status will depend
largely on how they collectively deal with their existing and future economic
issues, however. China recognizes the necessity of radical changes in some of
their current practices, most notably the ownership and operation of state
enterprises.
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