International Trade And Development Research Assignment

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International Trade and Development
China’s Current Economic condition and Foreign Trade
Since China adopted economic reforms and opened up its borders to foreign trade over 40 years ago, it has benefited significantly from globalization and cooperating with other economies (Rzeszotarska 131). Economic reforms have played an instrumental role in transforming the Chinese economy from stagnation to economic powerhouse. Local and cross border trade has diversified, with China promoting other fast-paced segments, thus making it one of the biggest trading nations across the globe. In 2017, the country's GDP rose by 6.9%. Moreover, its exports increased by 11.1% and imports grew by 36.9%, leading to a trade surplus of more than $20.3 billion (china-trade-research.hktdc.com). Figure 1 below shows China's main economic indicators. Foreign trade has rapidly expanded because of the connections, which the country makes with nations worldwide. This has been instrumental in enhancing modernization and promoting economic prosperity.
World Trade Organization (WTO) published data indicating that China has integrated its economy with foreign markets, thus enabling it to enhance foreign trade growth and thus promote growth. China managed to trade a total of $4,104.5 billion, with other countries as of 2017, with total imports and exports increasing by 15.9%and 7.9% respectively (china-trade-research.hktdc.com). This contributed to a trade surplus of more than $422.5 billion, as shown in Figure 2 below. Furthermore, expansion of the economy has enabled China to rank among the greatest nations in terms of purchasing power parity and economic size, trade of merchandise, value-added manufacturing, and amount of foreign exchange reserves (Morrison 1). This makes the nation be among the fastest expanding region worldwide, with an average expansion rate of the (GDP) being 9.5% as of 2017.
Trade relations between China and the United States
A significant increase in economic growth in China has enabled it to trade with other economies and establish commercial ties with America. Data published by the U.S. showed that trade between the two nations expanded from $5 billion in 1980 to more than $680 billion in 2017 (Morrison 1). Currently, China is the biggest trading partner with the U.S., the largest source of import area, and the 3rd-largest export region. Studies have also shown that most companies in the U.S. have major operations in the Chinese market. U.S. companies are also able to utilize the large market in China as well as the cheap labor for manufacturing activities that are export-oriented (Rzeszotarska 131). Such activities have also enabled American companies to become globally competitive, thus providing American markets with different types of low-cost products. Studies have also shown that China bought bulk American treasury securities totaling to $1.2 trillion in 2017. This was instrumental in enabling the American officials to finance its budget deficits and consequently enable the interest rates to remain relatively low.
Nevertheless, China’s transformation as a powerful economic entity has been an issue of concern among policy makers in America. It has been argued that unfair and wrong trade policies are implemented in China, including subsidizing domestic companies and undervaluing its currency. This has enabled low-cost Chinese goods to flood the American market, a factor that threatens the U.S. standards of living, jobs, and wages (Stverkova 41). China believes that an expanding economy is essential in enhancing socioeconomic stability. However, the country is exposed to certain economic challenges that may negatively affect growth in the future. They include socioeconomic policies that are destructive and which have made the country to rely on exports and fixed investment to enhance economic growth. In addition, there is little focus on policies promoting consumer demand, an ineffective banking system, and intensive support for public-owned enterprises, which widen income gaps. However, these problems have been identified by the Chinese government, which has pledged to develop policies that boost innovation, consumer surplus, social safety, and consumer spending.
Economic Policies to achieve Growth
China is currently utilizing important economic policies aimed at enhancing and maintaining growth and prosperity. Since economic reforms were introduced in China, the country is among the leading manufacturing destinations worldwide. Policies have been implemented to enhance the construction and industrial sectors have catapulted the economy, and they represent the biggest share in the GDP in China. Numerous stimulus programs like the $585 billion unveiled by the government in 2008 facilitated China to perform better during and after the recent global financial crisis (focus-economics.com). The economic policies also enabled the Chinese economy to emerge from the crisis with a GDP growth of over 9%, low rate of inflation, and powerful fiscal position. However, although the stimulus programs stimulated investment, they led to macroeconomic imbalances, which lowered household consumption. Nevertheless, President Xi Jinping’s administration introduced economic policies aimed at enhancing an economic model that is more balanced and stabilizing growth. China’s economic data is shown in Figure 3 below.
Since 2012, the Chinese government has introduced new economic fundamentals that would allow reduced growth rates but promote a sustainable growth model. The economic policies decided to focus on enhancing consumer demand instead of relying on the past model that concentrated on enhancing investment demand. In 2014, its foreign exchange reserves increased to over $4.0 trillion, which was over 10.1% of the GDP, thus solidifying the nation’s current account (focus-economi...