Essay: International Trade the Economy

Pages: 7 (2353 words)  ·  Bibliography Sources: 7  ·  Level: College Senior  ·  Topic: Economics  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] This indicates that the relationship is based on China production and Australian conaumption of the Chinese goods (Economy Watch, 2010). This is a direct indication that once the Australian market is saturated and it can no longer take in the Chinese goods in the required and profitable quantity, then China will sift to another country.

China has kept an open border where nearly all those who are willing to engage China in trade are not subjected to many barriers as those importing to China do not require import licenses. It has gained mileage and has become the world third largest trading nation. Opening up of the borders has encouraged the Western nations and other investors who have been attracted by the removal of many taxes into the country (The Canadian Trade Commissioner Service, 2014). The other attracting factor is the affordability of labor which is in abundant making it cheaper to produce from China and become competitive in the global market. China's cheap and educated labor has attracted countries to shift and form base in China to take advantage of the available workforce and produce cheaply making goods to be affordable and be sold in volumes globally. These two factors are temporary since with the open borders and less taxation there will come the eventual explosion in the importation into China of goods to compete with the locally manufactured goods and once these two are in equilibrium, the local economy will have no grounds to support itself hence the internal industries will either collapse or a reintroduction of taxes on some importations and countries that depend on China like Australia will have to find alternative partners at the end of the boom. The cheap labor will also be momentary since once more investors come in and there are many industries, there will be higher demand for labor hence higher prices, eventually the thriving China economy will get tougher times hence unable to hold itself hen the investors like the Australian investors going into China due to the bilateral agreements will have to look for alternative markets.

State owned enterprises (SOE's) have taken the bigger part of the economy and are considered the largest as compared to the non-state owned enterprises. In terms of their size, they comprise 5% of the total enterprises in China. The level of profitability between the SOE's varies and non-state owned ones varies, for some individuals, non-state owned enterprises are more efficient and profitable while in real sense, the state owned ones have more advantage as most policies favor them hence the high level of profitability. The state enjoys monopoly over the others and enjoys the availability of resources taking advantage of all their sizes and networks and strategic positioning to outdo the non-SOE's. A more elaborate analysis would be achieved by paying attention to specific industries but the general trend and the outcome is constant with little or no deviations from different sectors of the economy (Gao Xu, 2010). This is a factor that kills the economic base yet economies world over thrive on healthy competition. This is a clear indication that the insecurity that the China government treats external investors is a clear sign that the economy is not sustainable in the long runs hence unreliable and Australia should think of other ways to spread its influence rather than trusting an economy so unstable and a government so insecure such that it imposes even the percentage of state ownership.

There are several counties that have had successful coalitions in the past but the China economy, bearing the rapid growth that was based on unstable premises like the cheap available labor. Apparently due to the pay for the labor, there has been mass exportation of the labor to other countries including the African countries and soon there will be labor shortage. Australia would be better off rethinking its stand in terms of the economic ties and relations plus exchanges with China since even the current economic trends as indicated by The Guardian (2014) are worrying already with an indication that the growth rate has dipped to 7.7% which is the lowest in 14 years and it is projected that the unemployment will persist. It is time for Australia to take steps now.

References

China Internet Information Center, (2014). China's Political System. Retrieved April 23, 2014 from http://www.china.org.cn/english/Political/26151.htm

Crips T., (2014). Shift of focus for China profit hunt. Retrieved April 20, 2014 from http://www.theaustralian.com.au/business/opinion/shift-of-focus-for-China-profit-hunt/story-e6frg9if-1226876133234#

Economy Watch, (2010). Economic Structure of China: Chinese Economic Profile. Retrieved April 20, 2014 from http://www.economywatch.com/world_economy/China/structure-of-economy.html

Gao Xu, (2010). State Owned enterprises in China: How profitable are they? Retrieved April 20, 2014 from http://blogs.worldbank.org/eastasiapacific/state-owned-enterprises-in-China-how-profitable-are-they

The Canadian Trade Commissioner Service, (2014). Import Regulation in China. Retrieved April 23, 2014 from http://www.tradecommissioner.gc.ca/eng/document.jsp?did=125684

The Guardian, (2014). Chinese growth rate slows to 14-year low of 7.7% - as it happened. Retrieved April 20, 2014 from http://www.theguardian.com/business/2014/jan/20/chinese-growth-rate-slows-to-77-business-live

Washington Post, (2014). Chinese authorities step up censorship controls on internal media. Retrieved April 20, 2014 from http://www.theguardian.com/media/greenslade/2014/jan/13/censorship-China [END OF PREVIEW]

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