world's republic of china

8/8/2019 World's Republic of China

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Academia de Studii Economice, Bucureti

Worlds Republic of China

friend or foe?

Miroiu Alexandra

Mooi Coramia

Munteanu Mdlina Ioana

Negu Alexandra

FABBV, Year 1

Group 1509

2010


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apparently. That shows up in its to be sure paragraph allowing that no one should desire too

much Chinese ownership: The idea that an opaque government might come to dominate

global capitalism is unappealing. Resources would be allocated by officials, not the market.

Politics, not profit, might drive decisions.

Lets put two objections on the table to that phrasing:

1. Are we so certain that profit, not politics, should drive all decisions?

To refuse to question that, we think, is to cling to a dying Washington Consensus. In

theory, of course, it is legitimate to see profit as the measure of value creation for society

but that would be true in practice only if externalities were all fully priced, antitrust were

thoroughly enforced, and regulation wholly protected the interests of the population. In real-

world market-based economies, profit as the sole yardstick leads to transfers of value from

individuals to corporations. If you want an economy to serve the best interests of flesh and

blood participants not just paper ones the profit motive needs to be accompanied by

priorities placed on common goods like social justice, sustainability, or health.

2. Is it necessarily true that in profit-driven economies, politics is excluded by the

perfect working of the market?

This is another Washington Consensus tenet. But stop and consider for a moment the

subsidies paid to the corn industryin the United States (let alone the demand for corn

ethanol), or the oil depletion allowance, the decision to prosecute or protect Microsoft, or the

structure of the financial services industry. Is it possible to claim these are not driven by

politics?

Were not trying to take the opposite position from The Economistand claim that the

global economy should be dominated by a Beijing Consensus of state-directed capitalism. Our

point is simply that state vs. market is a false dichotomy. The decisions taken by Chinese

companies dont all emanate from Beijing. As The Economistdocuments, they respond to

markets in many ways. And US companies dont strive for perfect competition. Meanwhile,

in Singapore, a different kind of state-dominated capitalism has made different tradeoffs.

Munteanu Mdlina Ioana
http://www.theopedproject.org/index.php?option=com_content&view=article&id=68&Itemid=80http://en.wikipedia.org/wiki/Washington_Consensushttp://en.wikipedia.org/wiki/Washington_Consensushttp://farm.ewg.org/progdetail.php?fips=00000&progcode=cornhttp://farm.ewg.org/progdetail.php?fips=00000&progcode=cornhttp://www.mineralweb.com/owners-guide/leased-and-producing/royalty-taxes/depletion-allowance/http://www.theopedproject.org/index.php?option=com_content&view=article&id=68&Itemid=80http://en.wikipedia.org/wiki/Washington_Consensushttp://farm.ewg.org/progdetail.php?fips=00000&progcode=cornhttp://www.mineralweb.com/owners-guide/leased-and-producing/royalty-taxes/depletion-allowance/


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Why China is different

In the modern era, China's influence in the world economy was minimal until the late

1980s. At that time, economic reforms initiated after 1978 began to generate significant and

steady growth in investment, consumption and standards of living. China now participates

extensively in the world market and private sector companies play a major role in the

economy. Since 1978 hundreds of millions have been lifted out of poverty: According to

China's official statistics, the poverty rate fell from 53% in 1981to 2.5% in 2005. However, in

2006, 10.8% of people still lived on less than $1 a day (purchasing power parity-adjusted). In

the 1949 revolution, China's economic system was officially made into a communist system.

Since the wide-ranging reforms of the 1980s and afterwards, many scholars assert that China

can be defined as one of the leading examples of state capitalism today.

China's foreign trade has grown faster than its GDP for the past 25 years.China's

growth comes both from huge state investment in infrastructure and heavy industry and from

private sector expansion in light industry instead of just exports, whose role in the economy

appears to have been significantly overestimated. The smaller but highly concentrated public

sector, dominated by 159 large SOEs, provided key inputs from utilities, heavy industries, and

energy resources that facilitated private sector growth and drove investment, the foundation of

national growth. In 2008 thousands of private companies closed down and the government

announced plans to expand the public sector to take up the slack caused by the global

financial crisis.In 2010, there were approximately 10 million small businesses in China.

The PRC government's decision to permit China to be used by multinational

corporations as an export platform has made the country a major competitor to other Asian

export-led economies, such as South Korea, Singapore, and Malaysia.China has emphasized

raising personal income and consumption and introducing new management systems to help

increase productivity. The government has also focused on foreign trade as a major vehicle

for economic growth. The restructuring of the economy and resulting efficiency gains have

contributed to a more than tenfold increase in GDP since 1978. Some economists believe that

Chinese economic growth has been in fact understated during much of the 1990s and early

2000s, failing to fully factor in the growth driven by the private sector and that the extent at

which China is dependent on exports is exaggerated.


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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 of minority stakes to Chinalco, a Chinese metals firm. Rios

shareholders opposed the sale but many reckon that the Australian government did, too.


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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.

Miroiu Alexandra

Private-Sector Economy

The expansion of the private-sector economy is natural for China, which is striving to

become a market-oriented economy. Pluralistic economic agents are necessary for the

development of a market economy, and a real market economy cannot be established where

there are only state-owned enterprises. There is a need not only for reform of the joint-stock

system of state-owned enterprises but also for participation of private capital in the

privatization of such enterprises, as well as their retreat from areas where they compete with

the private sector. In addition, the private-sector economy provides a huge number of

employment opportunities, and thus contributes to the stable development of Chinese society

and the domestic economy.

During the era of the planned economy, private property was viewed as the root of all

evil. The growth of private companies provides a favorable environment for state-owned

enterprise reform, including privatization.

The development of private companies has created new jobs for the surplus labor of

state-owned enterprises. The private sector was nonexistent during the planned economy era,

but it has expanded rapidly since the shift to market-opening reforms and especially since

Deng Xiaoping's famous speech during his tour of south China in early 1992. In that year,

only 8.38 million people were employed in the private sector in urban areas; as of 2003 the

figure had risen to 49.22 million .Of this number, 25.45 million people are employed at

privately-owned enterprises with eight or more employees, while 23.77 million work at

companies run by individuals - those with fewer than eight workers. (In China, privately-

owned enterprises and individually-owned enterprises are together called private companies,

or the private- sector economy.) Meanwhile, in rural areas, the number of workers in the

private sector more than doubled from 18.62 million in 1992 to 40.14 million in 2003 (Of

these, 17.54 million people worked at privately-owned enterprises and 22.6 million worked at

individually-run businesses). By contrast, the number of employees at state-owned enterprises

stood at 68.76 million in 2003, down considerably from its peak of 112.61 million in 1995.

Thus, the growth of private companies has been absorbing workers affected by restructuringat state-owned enterprises and the surplus workforce of rural areas. In fact, in 2003 alone the


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private sector created 7.83 million new jobs: 6.54 million in urban areas and 1.29 million in

rural areas. When we also consider the fact that many state-owned enterprises and township

and village enterprises are bringing in private capital, the private sector's contributions are

probably much greater than these figures suggest.

Also, the rapidly growing private sector is directly participating in the reform of state-

owned enterprises in the four following ways: First, some private companies purchase a

portion of the stock of state-owned companies as they shift to a joint-stock company. They

may even hold enough shares to be able to assume a leadership role in the company's

operations. Second, some private companies purchase a state-owned enterprise outright. In

this case, the state-owned enterprise continues to exist as a private company. Third, a private

enterprise may absorb a state-owned enterprise through merger. Fourth, the state-owned

enterprises that have been operating in the red for a long time and for which rehabilitation

may be liquidated through legal means so that private businesses can purchase their assets and

use them more efficiently.

Meanwhile, the rise of private enterprise has led to intensified competition; the

monopolistic position of state-owned enterprises is under threat and their profitability is

declining, while the demonstration effect of up-and-coming private businesses despite the

adverse business environment they face stands in sharp contrast to the stagnation at state-

owned enterprises. This is making the public more aware of the need for reform and is a key

factor in keeping conservative forces at bay.

Contacting Chinese Companies

Medium-sized and small companies are more and more trying to benefit from export

to China. However they are hindered by high investment costs and administrative hurdles in

China. Based on the above, the following points are introduced on how a contact can be

obtained and which marketing opportunities are available to companies desiring to enter the

Chinese market.

Automotive Companies

Chinas automotive sector is growing at an astonishing rate. Auto makers from all over

the world want to sell in the worlds fastest growing auto market. However, the real winner in

this industry will be China which is fast building an automotive industry of its own with the

help of foreign investors.
http://www.chinaorbit.com/china-economy/chinese-company-china-company.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-automotive.htmlhttp://www.chinaorbit.com/china-economy/chinese-company-china-company.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-automotive.html


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Brilliance Auto

Through its subsidiaries, joint ventures and associated companies Brilliance Auto has

become one of the leading automotive manufacturers in China. Brilliance Autos operations

are divided into two sections, the manufacture of minibuses and automotive components and

the manufacture of sedans.

Geely Automobiles

Geely Automobile was the first independent vehicle manufacturer in the Peoples

Republic of China. Its parent company is the Geely Holding Group. Geely started out in 1986

manufacturing refrigerators and then moved on to manufacturing decoration materials in

1989. Following this Geely moved onto producing motorcycle parts in 1992 and then

motorcycles in 1994. By 1996 the company had produced over 200,000 motorcycles and

scooters. Geelys automobile productions began in 1999 and in 2003 it began to export cars.

Geely Automobile was the first independent vehicle manufacturer in the Peoples

Republic of China. Its parent company is the Geely Holding Group. Geely started out in 1986

manufacturing refrigerators and then moved on to manufacturing decoration materials in

1989. Following this Geely moved onto producing motorcycle parts in 1992 and then

motorcycles in 1994. By 1996 the company had produced over 200,000 motorcycles and

scooters. Geelys automobile productions began in 1999 and in 2003 it began to export cars.

Geely was the first Chinese automobile manufacturer to be present at the Frankfurt

Motor Show, where it displayed its range of vehicles in 2005. This was Geelys first incursion

into a foreign developed market. It is expected that Geely will begin selling cars in Europe

during 2007. Geely was also the first Chinese car company to display its vehicles at the

Detroit Auto Show in the USA. Geely hoped to begin selling its products in the USA in 2008,

in line with the start of the Beijing 2008 Olympics, but its arrival in the US has been delayed

until 2009. This is due to several vehicles failing to pass US crash and emissions tests.

However, Geely has expanded its operations into some foreign markets selling both cars and

motorcycles in Venezuela and Pakistan.

Aviation Companies

The largest airline in China is Air China operating a fleet of over 200 Boeing and

Airbus craft to more than 250 domestic and international destinations. No other airline offers

so many flights to the Chinese capital Beijing, or onward flights to regional points in China.
http://www.chinaorbit.com/china-economy/chinese-companies-china/china-automotive/brilliance-auto.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-automotive/china-geely.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/aviation.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-automotive/brilliance-auto.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-automotive/china-geely.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/aviation.html


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Negu Alexandra

Banking Companies

Banking has become an extremely competitive business in China since the countries

entry into the World Trade Organisation (WTO) and the development of a rapidly de-

centralising market driven economy. This section will provide you with detailed company

profiles for the largest banks in China. Including information on the history of the banks and

future projects and goals.

Energy Companies

With Chinas unquenchable thirst for energy the sector has grown dramatically in

recent years. Justin Yifu Lin the chief of the China Centre for Economic Research at Beijing

University claims that China uses 15% of the worlds energy. Sinopec is Chinas largest

producer and supplier of oil and petrochemical products and Chinas second largest producer

of crude oil. PetroChina supplies the country with natural gas and oil and according to the

Forbes ranking is the largest publicly owned company in China.

Insurance Companies

The insurance industry in China has grown enormously in recent years. Between 1999

and 2000 premium insurance revenues grew by 14.5% to 159.59 billion RMB. According to

the Forbes rankings of the top forty largest companies in China the top ten contains two

insurance firms, China Life Insurance and Ping An Insurance..
http://www.chinaorbit.com/china-economy/chinese-companies-china/banking.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/energy.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-insurance.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/banking.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/energy.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-insurance.html


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Materials Companies

In recent years Chinas economy has grown steadily and at a fast rate rate, and so has

demand for materials to produce everything from automobiles to household appliances.

Chinas unquenchable thirst for construction has also led to high demand for materials. For

Chinas numerous ambitious construction projects it is estimated the country is currently

using half the worlds concrete and a third of its steel supply.

Telecommunication Companies

The telecommunications industry in China has grown exponentially in recent years.

China Mobile is now the largest mobile phone provider in the world with a customer base of

more than 269 million people. The company also has a registered capital of 58.2 RMB and

investment capital of approximately 400 billion RMB. By clicking here you will be able to

view company profiles for the largest telecommunications providers in China.

"The nation's private enterprises are leading the country out of the slowdown, without

government subsidies," said Wei Jie, director of the National Center for Economic Research

of Tsinghua University. He added that "60 percent of these 500 companies have reached or

even exceeded their 2008 earnings, and 30 percent are getting close to that level". However,

Wei pointed out that most private companies in China are in a relatively inferior position

compared to State-owned enterprises. They have heavier tax burdens, face fiercer

competitions and hardly enter upstream industries dominated by State-owned giants.

ConclusionTo sum up, China, currently ranked as the second biggest economy of the world(after

Japan), is stepping up its international mergers and acquisitions activity to take advantage of

the fall in asset values caused by the global financial crisis. Even if investing large amounts

of capital may seem like the main criteria for a good development, China will surely have to

adapt its companies such as hiring local managers, investing in local research.

By investing in the global economy, Chinas interests will become aligned with the

rest of the worlds, leading to an international co-operation. Disconsidering China as a
http://www.chinaorbit.com/china-economy/chinese-companies-china/china-materials-companies.htmlhttp://www.chinaorbit.com/china-economy/chinese-companies-china/china-materials-companies.html


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potential friend to the worlds economy would seem like a disservice to generations yet to

come.

Mo oi Coramia


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world's republic of china

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