business report

Report on Development of China’s Market EconomyCONTENTForeword1.Basic Content and Conclusions of the Report on Development of China’s Market Economy 20102. A General Analysis of four Key Questions Concerning Market Economy3.Resolution of the “Non-Market Economy” Issue: A Win-Win OptionForewordFollowing China’s accession to the WTO, the number of antidumping i nvestigations initiated involving Chinese products, instead of decreasi ng, has risen rapidly. One of the key grounds relied upon by the initi ating countries is the China’s being characterized as a “Non-Market Ec onomy (NME)”. In fact, thanks to over two decades of reform and openin g-up, a market economy system has already taken shape in China. In ord er to contribute to knowledge of foreign friends with regard to China’s market economy, we drafted the Report on Development of China’s Market Economy.1. The Cost and Pricing of Input FactorsThe US Department of Commerce is interested in the degree of control exercised by a government over the allocation of resources and whether the price paid for inputs are market-based. The EU is interested in w hether the price of input factors is determined by the market and the a uthenticity of the costs of firms. In short, they all take an interest in whether the factors of production such as raw materials and labor a re market-based. This is quite understandable as the price of inputs i s related to the cost of products and has a direct impact on their pric e, which is relevant to antidumping investigations. Therefore, all imp orting countries would look carefully at the authenticity of the costs and the rules under which the products are prices with regard to produc ts from an exporting country. Th is may be termed “marketization of pro duction factors”.2. Trade EnvironmentEU, the US and others are interested in such issues as whether trans actions are free or suppressed in both international and domestic trade, whether market infrastructures and market legislation and judicial sys tem are well-functioning, whether market intermediaries are independent and what role they play, whether enterprises are independent in pricin g their products under a country’s trade policies, how the government a dministers exports and exporters and whether enterprises are free in th eir commercial activities. All these relate to trade environment and c onditions and we name this criterion “fair trade environment”.We welcome comments from readers from both home and abroad, particul arly those from abroad on the developments in China’s market economy. We will adhere to an objective and scientific approach in seeking the t ruth, having full exchanges and reaching consensus so as to do our part for a comprehensive resolution of Ch ina’s “non-market economy status”, accelerating the process of improving China’s market economy and advan cing non-discriminatory global trade.1.Basic content and conclusions of the Report of 2005 on Development of Market Economy in China1.1. Basic Content of the ReportThe introduction to the report gave a summary of the developments conce rning China’s market economy during 2008 and 2009 analyzed the efforts of C hina and the results in resolving the non-market economy issue, expounded on the researc hers’ basic views on this issue and briefly presented the main cont ent and views in the Report of 2010entitled “Latest Developments in Market Economy 2008-2009, has ten cha pters. Following the structure of the Report of 2009, the first nine chapters g ave an empirical analysis on the latest developments in nine aspects of China’s market economy in 2008 and 2009 namely the reform of government administ ration, operation of enterprises under market conditions, market-based labor flo w and wages levels, market-based capital transactions, market-based land transa ctions, market-based trade, scale of intermediary organizations and their market-based operations, market-based currency and financial institutions and improvem ent in China’s market economy legal framewor k.1.2. Basic Conclusions and Main Features of the ReportThe Report of 2010 on Development of Market Economy in China made a comprehensive analysis of the development of market economy in Chi na in 2008 and 2009by applying the five tests of “rules-based govern ment behavior”, “liberalization of economic entities”, “marketiza tion of production factors”, “fair trade environment” and “ration alization of financial parameters”. The basic conclusion is that Ch ina’s market economy was developing in both breadth a nd depth during 2008 and 2009A s the Report looks at the development of China’s market economy by Western standards and tries to respond to the questions of foreign governments particularly those of the leading developed countries concerning China’s MES in a more directly and focused manner, the Report takes special care to integr ate its research aspects with its practical purposes. Compared with the Report of 2009, a new section was added to examine, assess and illustrate the actual situation in China in light of each and every MES criterion of the European and American sides. It responded to some of the major theoretical and practic al controversies concerning the development of China’s market economy and a ddressed with balanced comments some of the doubts and criticisms of Wester n scholars in particular.2. A General Analysis of Twelve Key Questions Concerning Market E conomy2.1. Convertibility of RMB under the capital account increased significantly.-- Efforts were made to steadily move forward the process of convertibility o f the RMB under the capital account. Starting from the year 2002, regulation over the source of overseas investment and the requirement for bond deposit for repatriation of overseas investment profits were relaxed further. Restriction s over purchase of foreign exchange for advance servicing of domestic foreign exchange loans and external debt and over the conversion of external debt into loans were lifted. Procedures for examining foreign exchange loans issued b y foreign invested banks in China were simplified, examination of the sale of foreign exchange as capital fund under the capital account and procedures rega rding registration, account and servicing of principal and interest for foreign ex change loans in China are now directly handled by qualified designated foreign exchange banks and a Circular On Issues Concerning Improving Regulation o f Foreign Exchange in Foreign Direct Investment. -- Number of regulated it ems under the IMF classification decreased gradually. Among the 43 capital t ransaction items under the IMF classification, 20 or 46.5% were completely co nvertible or basically convertible (subject to registration or approval) by the end of 2003.2.2. The extent of freedom of employees in their collective bar gaining with employers over wagesDuring 2008 and 2009 reform for market-based labor and wages systems made major progress. The incidence of collective wages bargaining increased dramatically.2.2.1. China ranks roughly in the middle in the world’s line-up in terms of government regulation of wages.-- According to Canadian Frazer Institute in its Economic Freedom of the World Report 2004, the score of China under “regulation of the labor marke t” ranks the 62nd place among 95 countries surveyed, at a par with Lithuania, Brazil and Belgium.2.2.2. Supply and demand of labor is basically market-based.-- The workers enjoy a relatively sufficient freedom in choosing their job s. The Law of the PRC on Labor provides for the right of the worker to equ al employment and ch oosing jobs and such right is reflected in the law’s impl ementation. At present, university graduates and newly added labor force in u rban areas basically are employed on market terms. All discriminatory restricti ons on employment of rural labor force in urban areas have been basically eli minated and the free flow of labor from rural to urban areas is accelerating.-- Enterprises of different types recruit independently. Recruitment by no n-SOEs has been market-based from the very beginning. By the end of 2002, employment by non-SOEs accounted for as high as 68% of the total urban e mployment. With the reform of the SOEs and the increasing popularity of lab or contracts, SOEs have come to enjoy greater independence in terms of recrui tment. They hire and fire employees in light of the market and their own per formance.3. Resolution of the “Non-Market Economy” Issue: A Win-Win OptionTo resolve China’s “non-market economy” issue would, on the one hand, require the Chinese side to provide information to prove otherwise and, on the other hand, take a whole new approach on the part of EU, the US and other countries, i.e. to examine their trade ties with China from a mutual benefit p oint of view. Moreover, discussions at the technical level must be combined with decision-making at the political level. Absent facts and theories at the te chnical level, it would be difficult for the decision to be taken at the political level. Without the vision and courage at the political level, the work at the technical level would be shelved. Therefore, it is utterly critical that a consen sus be reached at the political level.On the political plane, a reversal of the traditional perceptions and mindset is of primary importance. The traditional or old thinking holds that if China is kept on the list of NMEs, its competitiveness in exporting would be under cut. The market would remain the way it was carved up, which is good for t he trade interest of the existing players. Such a line of thinking actually betra ys a lack of vision. Nor does it hold water. The new thinking would argue that bilateral or multilateral economic exchanges and trade must be viewed in t he bigger context with considerations given to both one’s own interest and that of others so as to achieve mutual benefit and win-win results. Top priority s hall be given to development and differences shall be resolved by expanded ec onomic cooperation and trade. Bilateral economic and trade coordination mech anisms must be allowed to play their role to facilitate communication and cons ultations and avoid escalation of tensions.International trade benefits all. This has been borne out by theories and practices of the Western countries over the past hundreds of years. It is parti al and shallow to equal trade deficit with interest lost. It is a consensus in th e theory of international trade that a country pursues balance of international p ayments, not just surplus. In another word, one must look comprehensively at the relationship between trade accounts and capital accounts, not just the surpl us or deficit in the trade accounts alone. For example, the US has deficit in its trade with China. But much of China’s foreign reserve is spent buying the US Government bonds, which in itself is a contribution to the balance of inte rnational payments of the US. Even if we look at the trade only, the export of large quantities of Chinese products to the US causes no injury to the latte r’s economic interest. The products of China provided at an affordable price but with a good quality have contributed significantly to meeting the needs of the Americans in their lives. And many of the products from China are prod uced by enterprises invested by the US or other countries or purchased or orde red by American merchants in China after careful selection. What Chinese wo rkers get is very low processing fee while the firms in the US makes profits, including the logistics companies, wholesalers and retailers which profit from t he transport and sales of Chinese commodities. Therefore, the China-US trade is mutually beneficial. It is normal that some US firms that compete with C hinese exports have come to feel some pressure. Such an imbalanced structura l distribution of commercial interests exists in all countries in the world. The visionary statesmen would make their judgment from a strategic point of view. China is aware that trade is done by the firms and the choice of millions of consumers. The increase or decrease in trade volume is governed by economi c and market laws. There are bound to be profits and losses in the competiti on. China incurs a long-term deficit in its trade with ROK and South-East As ian countries. Has China ever expressed complaint or raised any excessive req uests with these countries? The answer is negative. The developing trends sho w an even clearer picture of complementary trade ties between China and othe r countries. China’s import volume in 2003 ranked the third in the world. It is expected that the annual import of China by the year 2010 will top one tri lli on USD The frequent resort to trade barriers to roll back China’s export m ay, in the short run, serve the interest of some enterprises in Europe and the US. However, it may cause greater long-term losses for China’s trade partners in terms of reduced exports to China. It is fair to say that to give support t o China’s economic development today, put trade with China in perspective an d play by fair rules are actually supporting their exports to China tomorrow.Bibliography ：1. Anderson E and Anderson M (2000, September) Are Your Decisions Today Creati ng Your Future Competitors? Avoiding the Outsourcing Trap Available: (Accessed: 2 003, February 13)2. Barnes S and Hunt B (2001) E-Commerce & V-Business Oxford: Butterworth-Hein emann3. Bazac D (2002, May 14) Why Dot-Coms Fail - a Webmasters Perspective Available : (Accessed: 2003, February 11)4. Bhaargava A, Burke J, Doshi T, Keswani R and Normann T (2001, March 2) IT As signment 3: Sophisticated Tastes, Inc Available: (Accessed: 2003, March 3)5. Biscontri R (2001, April) Cutting through the business of culture (Australian CPA) Available : (Accessed: 2003, February 13)6. Blond R (2001, April) Will the global slowdown slow you down? Available: (Acce ssed: 2003, February 13)7. Cannon T (2000, August, 12) From the Top (Guardian Unlimited) Available : (Acc essed: 2003, February 13)8. Clarke (2001, January 12) Towards a Taxonomy of B2B e-Commerce Schemes Av ailable: (Accessed: 2003, April 29)9. Clarke R (2001, October 1) Trust in the Context of e-Business Available : (Accesse d: 2003, April 28)10. Clarke R (2002, May 5) e-Consent: A Critical Element of Trust in e-Business Ava ilable : (Accessed: 2003, April 28)11. Deans P and Starchan J (2002) Electronic B2B Commerce: Reasons Adoption Wa s Slower than Forecast (IAIM) Available : (Accessed: 2003, March 3)12. Horvath J (2000, December, 01) New Economy Bubble in No Trouble? Available : (Accessed: 2003, February 11)13. Introna L (2001) Recognizing the limitations of Virtual Organization: In S Barn a nd B Hunt E-Commerce & V-Business 268 ?77. Oxford: Butterworth -Heinemann 14. Jantavongso S, Li K Y R and Tootell B (2003) Culture and e-business in Thailand ? Chapter in S Kamel, Managing Globally with Information Technology. Hershey: IR M Press15. Lawrence E, Newton S, Corbitt B, Lawrence, Dann S and Thanasankit T, (2003) I nternet Commerce: Digital Models for Business, 3rd ed , Milton : John Wiley &Sons。