China s industrial and foreign trade policies what are they and how successful have they been (стр. 2 из 3)

It is important to recognize that technocratic governance exists in China mainly as an ideal. The practical reality of Chinese policymaking is fragmented and politically constrained, with most policies emerging as compromises between semi-autonomous central government ministries, or as the result of tortuous negotiations between the center and local governments, over which Beijing has at best imperfect control.

Measuring success

Having defined as best we can the nature of the Chinese economic development model, we can now make a brief survey of how successful the model has been. In terms of economic growth the question is easy to answer. Between 1980 and 2005 China’s GDP grew by an annual average rate of 9.6 percent. No other country (including Japan, South Korea and Taiwan) has ever sustained that rate of GDP growth for such a long period of time. It is not within the scope of this paper to disentangle the various contributions of policy, demographics, and other factors to growth; it is sufficient to suggest that in the context of such spectacular growth, it is inconceivable that policy played a negative role, and it is probable that it played a strongly positive one.

Impact on technology and development of competitive domestic firms

But as we have noted, it is not the goal of Chinese policy to create economic growth pure and simple. Other policy goals include the creation of domestic technology capacity, and the development of internationally competitive Chinese firms. On both of these counts China’s success is ambiguous.

To understand this it is necessary to go back to China’s trade figures. Between 1980 and 2005 China leapt from being a negligible trader to the world’s third biggest trading nation, behind only the US and Germany. This was accomplished in large measure by policies designed to attract export-oriented foreign direct investment. These policies were enormously successful; as noted above foreign enterprises accounted for well over half of China’s exports in 2005, and the foreign share has been rising. Moreover, as shown by Figure 2, the foreign contribution to China’s trade surplus, quite modest in the 1990s, became dominant in recent years. The most likely explanation is that foreign enterprises were heavy importers of capital equipment in the 1990s, as they were installing their factories. While these imports continue, they are now outweighed by the production value of exports from the installed base.

Two additional points need to be made. First, the role of processing trade. More than half of China’s trade is processing – i.e., final assembly of imported materials and components. Processing’s share of total trade has not declined appreciably in recent years, nor has the local value-added component of processing increased significantly (see Figure 3). Chinese trade growth, and by extension overall economic performance, are quite reliant on this relatively low value-added processing trade

Figure 3

China’s processing trade

Source: Ministry of Commerce

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When one turns to goods classified as high-tech, the picture is even more stark. In 2005, 88 percent of China’s high-tech exports were generated by foreign firms – and 67 percent by wholly owned foreign firms, in which there is no formal mechanism for technology transfer to a local partner. FIEs are now significant net exporters of technology goods, while domestic firms continue to be net importers (see Figure 4). On a more qualitative basis, there is little evidence that Chinese firms are producing significant innovation in core technologies, manufacturing process, or design – either in high tech goods or in any other sector. The primary Chinese comparative advantage continues to be production at low cost and on a large scale. Chinese companies that have demonstrated international competitiveness, for instance steel producer Baosteel, telecoms equipment maker Huawei, and auto components maker Wanxiang, have done so not on the basis of new technology or innovative manufacturing process, but mainly by their ability to manufacture to an acceptable standard at very low cost. There are a large number of such companies, mainly small and medium sized manufacturers.

Figure 4

China high-tech merchandise trade, 2002 and 2005

Source: Ministry of Commerce

Figure 5

Trade balance composition, 1990-2005

From an economic point of view there is nothing terribly wrong with this. Because of its unique cost and scale advantages, China will be able to generate enormous increases in employment and incomes simply by commoditizing an ever wider range of technologies invented elsewhere. As Figure 5 demonstrates, this widening of China’s industrial base – represented by China’s trade balance in five major goods categories – is proceeding rapidly. In 2005 China was a large net exporter of machinery (to the tune of US$60 billion) and industrial intermediates (US$45 billion), both categories in which as recently as three years earlier it was a net importer. In the long run, these large concentrations of manufacturing capacity, and the development of a richer and more demanding domestic consumer market, are bound to prompt domestic technological innovation.

Yet from the point of view of Chinese planners who define success in terms of maximizing “comprehensive national power” and would like to create local versions of Toyota and Sony, the picture is distressing. When Chinese planners talk of “internationally competitive” they do not simply mean companies that can compete effectively in international markets, which as we have noted many Chinese firms are already able to do. Rather, they mean companies that have globally recognized brand names; intellectual property rights from which they can reap price premiums, royalties and license fees; and control of distribution channels in foreign markets. In other words, Chinese planners explicitly reject the Taiwanese model of small, nimble manufacturing firms that operate mainly on a contract basis with the owners of brands and distribution channels in developed-country markets. Instead they favor the creation of Japanese-style multinational firms.

Common themes of government pronouncements now is the undesirability of China remaining “locked into low-value assembly production,” and the desirability of developing indigenous intellectual property so that Chinese firms can collect rather than pay royalties and license fees. This concern has spawned a number of strategies, including incentive packages for technology industries, the promotion of domestic technology standards, and government procurement rules mandating purchase of domestic hardware and software. The most prominent example of the first was State Council Document 18, published in 2000, which provided a wide range of tax and other benefits for domestic producers of semiconductors and software. These were attacked by US semiconductor makers as an illegal subsidy and were rescinded in April 2005.

The problem with these sorts of policy measures is that by constantly trying to create explicit or implicit discrimination between foreign-owned and domestic enterprises, the government converts what ought to be industrial policy into a trade issue. The two things most required for domestic innovation to flourish and for Chinese multinationals to grow are a) an improvement in the rewards system for innovation (including improved intellectual property protection and more flexible capital markets) and b) and consolidation of industry so that the most efficient players can focus on research and development and well thought-out international expansion, rather than fighting vicious price wars at home in order to maintain market share.

A final consideration is to what extent China’s growth has enabled it to gain power in the international trading system. To the extent that it is now the world’s third largest trading nation, China obviously wields influence over the trade policies of many of its partners. Yet as a new entrant into the WTO it does not as yet gained a significant role in setting the rules of international trade; and insofar as it is perceived as a heel-dragger in meeting its WTO obligations, its impact on further adjustments in the WTO regime is likely to be limited, except in a negative sense (i.e. blocking WTO rules on matters that Beijing sees as helpful protectionist tools, such as government procurement policies). This relatively low level of influence does not yet seem to be an issue of great concern in Beijing, where policy makers are far more engrossed in domestic reform issues than they are in securing a favorable operating environment for Chinese firms abroad. China’s interest in taking a more active role in WTO rule-setting will presumably grow in tandem with the presence of Chinese multinationals in international markets. It is likely, however, that such international concerns will continue to take a back seat to domestic considerations for many years to come.

Hard-won achievements of China's foreign economic and trade cooperation in 1998.

The aggregate trade value basically reached the same level of the previous year with continued growth of our export. According to the Custom's statistics, national import and export value totaled 323.93 billion US dollars, down 0.4%. In a breakdown, export stood at 183.76 billion US dollars, up 0.5%; import amounted to 140.17 billion, down 1.5%. Trade surplus in the whole year accumulated to 43.59 billion US dollars, increasing by 7.9%. The commodity structure of our imports and exports further improved as the export value of mechanical and electronic products increased by 12.2% to 66.54 billion US dollars, taking up a larger percentage of 36.2% in total export.

The newly-signed contractual foreign investment realized recovery growth and the actually paid-in capital maintained to grow. Last year, the number of newly approved foreign-invested enterprises nationwide was 19846, down 5.7% from the previous year; the newly-signed contractual foreign investment witnessed a growth of 2.21% and a total of 52.132 billion US dollars, realizing growth rebound after decline by large margin for two years in a row in 1996 and 1997. And the actually utilized foreign capital grew up by 0.67% to 45.582 billion US dollars. Features of utilizing foreign investment in 1998 could be summed up as follows: foreign investment in China sourcing from Europe, America and some free ports made headway continuously; the industrial structure of foreign investment further improved; the average amount of utilized foreign capital for a project increased to some extent; and the mid-western part of China increased the attraction of foreign investment by an obviously larger scale when compared to the eastern region. By the end of 1998, China has accumulatively approved over 320,000 foreign-invested enterprises with 572.5 billion US dollars of contractual foreign capital and 267.45 billion of paid-in foreign capital.

Foreign project-contracting and labor services cooperation have made relatively large progress. The newly-signed contractual volume of foreign project-contracting, labor service cooperation and designing consultation involves 11.77 billion US dollars, moving up 3.7%. The accomplished turnover reached 10.13 billion US dollars, up 20.9%. At the end of the year, over 350,000 Chinese were providing labor services abroad.

Foreign assistance further progressed with the reform of its modalities advancing steadily. China signed agreements on financial assistance with a number of countries last year. Substantive progress has been made in foreign assistance and reform on its modalities.

Overseas investment witnessed initial development. By the end of 1998, enterprises investing abroad who had been approved by or registered at MOFTEC totalled 5,666 with an overall contractual Chinese capital of 6.33 billion US dollars.

Reform on the administration system of foreign trade and economic cooperation made active progress. We further opened up the right to import and export. For the 1,000 State-owned Enterprises with which the State emphatically contacted, we enforced the system of registration for record on the foreign trade right and extended the coverage of this system to more than 6,800 large-scale industrial enterprises nationwide as of January this year. We promulgated the Interim Regulations on Endowing the Right to Import and Export to Private Manufacturing Enterprises and Scientific Research Institutes which had been approved by the State Council. The Regulations came into official enforcement as of January 1, 1999 and 20 private manufacturing enterprises have obtained the right to trade as the first group pursuant to the approval. We also relaxed the approving criteria for provincial and municipal trading companies to establish subsidiaries in Pudong New District of Shanghai. And we have scored new achievements in restructuring export commodities management system.

Multilateral and bilateral economic and trade relations kept developing. China strengthened its negotiations with US and other WTO members, actively participated in the activities of Asia-Pacific Economic Cooperation and played an important role in it. China frequently exchanged high-profile visits with the United States, European Union, Russia and Japan, which have laid solid foundation for bilateral economic and trade ties and pushed forward bilateral collaboration in these aspects. Due to the adverse impact of Asian Financial Crisis, our export to Asia plummeted last year. Meanwhile, our export to other regions increased to varied extent. To be more specific, our export to US was 37.98 billion US dollars, up 16.1%; export value to Europe was 28.15 billion US dollars, up 18.1%; to Africa, 4.06 billion US dollars, up 26.5%; and to Latin America, 5.32 billion with 15.5% of increment. The economic and trade relations between mainland and Hong Kong became even closer. Our economic and trade ties with Macao also developed smoothly which has created favorable conditions for the successful reunification of Macao this year. And the economic and trade relations between the mainland and Taiwan continued developing.

All the achievements were made under the circumstances of deepening impact of Asian Financial Crisis, severe economic recessions, drastic devaluation and general declines of imports and exports in many neighboring countries, and against the backdrop of serious flooding within China and non-devaluation of Chinese Renminbi. The achievements are therefore by no means easy. Such achievements of China's foreign trade and economy sector under those difficult circumstances should be attributed to: first, the great importance the Central Party Committee and the State Council have attached to the cause of foreign trade and economic cooperation and their timely, correct policies; second, the strong supports and active cooperation from all localities and departments; third, the precious spirit of hard struggle as demonstrated by people of all sectors involved in foreign trade and economic cooperation.

Of course, while posing difficulties for the development of China's foreign trade and economic affairs, the Asian financial Crisis has hardened the adaptability of our foreign trade enterprises and heightened the urgency of strengthening the two fundamental transformations and risk prevention.

The situation and major tasks for the development of foreign trade and economic cooperation of China this year.

The situation faced by China's foreign trade and economic sector this year could be even harder and more complicated. The situation remains harsh. The impact of Asian financial crisis is deepening, and the world is entering a period of adjustment with weakening growth momentum. International demands are sliding drastically. Trade protectionism is gaining ground, resulting in heightened trade frictions. Besides, the scientific and technological advantages of developed nations and the price comparative advantages of certain Southeastern Asian nations due to devaluation of their currencies could become even more prominent factors. With the slowdown of the aggregate growth of global transnational direct investments, the inflows of international capital into the developing nations this year may continue to decline; The crisis-stricken countries are formulating one after another more favorable policies to lure foreign investment and this could have a negative impact on China's absorption of foreign investment.