Peoples Republic of China – A Meteoric Rise

China’s substantial rise over the past half century is one of the most striking
examples of the impact of opening an economy up to global markets.
Over that period the country has undergone a shift from a largely agrarian society
to an industrial powerhouse. During this period there has been an evident
increase in productivity as well as the wages, which has allowed China to become
world’s second largest economy.

Lessons from history ;

Following the founding of the People’s Republic of China in 1949 , the first two
decades were marked with rapid gain in per capita GDP, the growth of output per
person, followed by sharp reversals. The pace and quality (productivity) of
industrialization in the country had intensified after of the First Five-Year Plan,
during which “6000 Soviet advisers helped establish and operate the 156 large-
scale capital intensive Soviet-assisted projects” as stated by the authors of the
NBER paper.
Between 1958-1962 the growth of the country was hampered due to the multiple
restrictions in the market and the ban of material incentives. These reforms were
unwound between 1962-1966 , which led to another productive period until the
Cultural Revolution took place , which again took a toll on the economy.
According to the authors, the Third Plenary Session of the 11th Central
Committee of the Communist Party in December 1978 was the defining moment
in shifting the country from its unsteady early economic trajectory on to a more
sustainable path. The farmers were then allowed to sell their produce in the
domestic market which created a transition from collective farming to the
household responsibility system. The regional economies boosted after the
introduction of Law on Chinese Foreign Equity Joint Ventures which allowed
foreign capital to enter China , however it was not until the mid-80s that the
companies were allowed to set up their wage structures and retain adequate
profits. China’s family planning policy, which became widely known as the one-
child policy, was implemented in the 1980s to alleviate social, economic, and
environmental problems. This not only helped to boost GDP from an annual
average of 6% between 1953-1978 to 9.4% between 1978-2012 but also
increased the pace of urbanization as workers were drawn from the countryside
into higher-paying jobs in cities.
Following the market liberalization , China became a global exporter. This further
aided in reopening of the Shanghai Stock Exchange after 40 years ,ultimately ,
Chinas accession in the World Trade Organization.

What the future holds ;

The good news for the global economy is that the authors of the NBER paper
claim that the Chinese economy can continue to see relatively robust levels of
growth, albeit significantly lower than we have seen over recent decades. While
the average growth rate of real GDP between 1978-2012 has been an impressive
9.4%, that figure could decline to between 7-8% between 2012-2024 in the
authors’ base case. This is significantly higher than most commentators believe is
likely given clear signs of a slowing economy in China’s recent economic data.

Here are their projections:

Looking at the past few decades, China has a remarkable growth record. However
the basic question, what is in store for the future still remains, since large chunks
of gain from urbanization have been exhausted. The recent paper published by
NBER , tries to amalgamate data from 1953-2012 , using the data to model
plausible scenarios for the country up to 2050.
Of course, such long-range projections should be treated with a great deal of
caution but the trajectory of travel is already clear – growth is slowing.
It is difficult to keep the same level of growth with a higher GDP , due to
compounding specifically for economies as large and rapidly building like China’s.
Furthermore , the factors that have given momentum to the expansion are
getting relatively less important. For example, the numbers of people making the
shift from agricultural jobs into higher value add city jobs are likely to decrease
and the process of urbanization will therefore not be able to add as much to
output per worker as it has done in the recent past.
As Chinese industry gets closer to the technological sophistication of its Western
counterparts, the productivity growth in the country slows.
The government has ambitious growth targets, which will have to be met by
expanding its own domestic demand instead of low cost exports to drive the
growth.

Intellectual Property Rights Criticism :

In 1980, the PRC became a member of the World Intellectual Property
Organization . It has patterned its IPR laws on the Berne Convention for the
Protection of Literary and Artistic Works and the Agreement on Trade-Related
Aspects of Intellectual Property Rights. The PRC acceded to the Paris Convention
for the Protection of Industrial Property on 14 November 1984 and became an
official member on 19 March 1985. The PRC also acceded to the Madrid
Agreement for the International Registration of Trademarks in June 1989. In
January 1992, the PRC entered into a Memorandum of Understanding with the
United States government to provide copyright protection for all American
"works" and for other foreign works. . At some points, trade sanctions were
threatened by the two governments over IPRs issues. At the conclusion of
negotiations in 1995, the Sino-US Agreement on Intellectual Property Rights was
signed. In June 1996, the two governments entered into another agreement
protecting American intellectual property in the PRC.
 In deciding an intellectual property infringement case , the Peoples court can
quote directly quote from the PRC decided international treaty.
China stands in the top ranks in the music copyright infringement , throughout
the world. Certain reports suggest that 95% of music sales in China are
unauthorized , most of which are downloads from the internet. There are no real
legitimate online music service, such as iTunes, that sells copyrighted music for
the 457 million Internet users present in the country. The revenue and sale of
new music for the Chinese record industries have been continuously dropping
since 2005. This is due to unauthorized sales which are as cheap as $4. The large
scale illegal file sharing accounted for $410 million of physical copyright
infringement and unauthorized discs in 2005.
In 2006, a memorandum of understanding with a number of media industry
associations to help fight unauthorized distribution and protect online copyright
was signed.State Council of the People's Republic of China, has introduced
streamlined regulations, effective July 1, 2007 that clarifies China's copyright law
regarding the liability of content and service providers involved in the distribution
of unauthorized content. There was a suit filed against China in the WTO by
United states of America for violation of intellectual property rights due to which
the strict regulations for infringement were bought into immediate effect.

Dumping Dead-Ends :
Chemicals and petrochemicals, fibres and yarn, machinery items, pharmaceutical,
rubber and steel items , amongst 99 other Chinese imported products are a part
of the anti dumping duty laws imposed in 2019 , by India.
However, Under the World Trade Organization (WTO) Antidumping Agreement,
dumping is not prohibited unless it causes or threatens to cause material injury to
a domestic industry in the importing country. Dumping is also prohibited when it
causes "material retardation" in the establishment of an industry in the domestic
market.
Steel Domination :
China has significant domination over the steel market. This is made evident
through the 140% increase in imports of finished steel products in the EU in 2015.
Also it acconts for 50% of Steel production. This trend, replicated to differing
degrees worldwide, has led to accusations in the US and elsewhere that China is
selling its steel at a loss, or more accurately in this case, keeping costs artificially
low so that other producers cannot compete, in a practice widely known as
“dumping”.
Europe’s trade body claims that China’s excess production – which is way above
the domestic demand- leads to dumping which is estimated to be the double of
the total EU demand. According to UK Steel, Chinese producers lose US$34 on
every tonne produced. Dumping Concerns still persist due to lack of permanent
enforcement. WTO is not an enforcing body and its regulations are largely a
“guidance” for countries to follow on a consensual basis.
Currency :
A major concern for the congress is the Chinese policy of intervening in the
currency markets in order to maintain the value of its currency, renminbi (RMB),
against the U.S. dollar. The exports o0f the country are made significantly cheaper
and the imports increased in price due to this manipulation with the currency.
The loss of jobs in the manufacturing industry in the states are also blamed upon
the undervalued Chinese currency . As a presidential candidate, Donald Trump
said he would label China a “currency manipulator” on day one. On February 15,
2019, the Trump Administration said that currency issues were included in
negotiations with China relating to trade disputes under U.S. Section 301
measures.

Economic Effects of the RMB’s Value

The effects of China’s currency policy on the U.S. economy are complex. The
Chinese products imported into the U.S.A are priced lower due to the indirect
export subsidies due the undervalued currency. This being an advantage for the
consumers and firms who consume Chinese imports but a disadvantage for the
competitors and domestic producers for those products. Undervalued RMB
theoretically might also raise the price of U.S. exports to China. However, China’s
large purchases of U.S. Treasury securities (which have been a consequence of its
currency policy) have helped the U.S. government fund its budget deficits, which
help keep U.S. interest rates low.
There has been increasing volatility in Yuan- Dollar exchange rate in the past few
years. The Central bank then focused toward making the RMB central parity rate
more market oriented. However, over the next three days, the RMB depreciated
by 4.4% against the dollar and it continued to decline against the dollar
throughout the rest of 2015 and into 2016. From August 2015 to December 2016
the RMB fell by 8.8% against the dollar. From January to December 2017, the
RMB rose by 4.6% against the dollar. However, from January 2018 to December
2018, the RMB depreciated by 7.0%.
It is evident that China fails to have transparent currency related policies , which
upsets various bodies. The Treasury does not consider China as a currency
manipulator but assures that it would continue to be on its monitoring list of
economies.
PRC’s gross national product.

PRC Sustainable Development Plans :

In September 2015, H.E. Xi Jinping, President of China, attended the United
Nations Sustainable Development Summit and joined other leaders in endorsing
the 2030 Agenda for Sustainable Development, providing guidance to national
development of member states and international development cooperation in
the next 15 years.
China being one of the rapidly building economy, decided to keep its key goal
development. Fourth Session of the 12th National People’s Congress, reviewed
and approved the 13th Five-Year Plan, in March 2016, defining the development
concept featuring innovative, coordinated, green, open, and shared development.

9 key areas should be prioritized in the implementation of the 2030 Agenda as

suggested by China are:
•Eradicating poverty and hunger through targeted measures to alleviate and
eliminate poverty, and enhancing agricultural production capacities and food
security.
•Implementing innovation-driven development strategies and generating
momentum for sustainable, healthy and stable economic growth.
•Advancing industrialization to inject impetus to coordinated development
between urban and rural areas and among the three dimensions of sustainable
development.
•Improving social security and social services to ensure equal access to basic
public services.
•Safeguarding equity and social justice to improve people’s well-being and
promoting all-round human development.
•Protecting the environment and building protective barriers for eco-security.
•Addressing climate change actively and integrating climate change response into
national development strategies.
•Promoting efficient utilization of resources and sustainable energy.
•Improving national governance and ensuring economic and social development
in line with the rule of law.

China’s one child policy :

This was implemented in 1980s , enacted to slow down the rapidly rising Chinese
population. In the late 2015s the government announced that the policy would
end in 2016. However the damage was already done until then. This hampered
the economic development off the country. Millions of Chinese parents had to
endure strict enforcement methods of the policy, including forced sterilization
and forced abortions. This also led to low fertility rates and other health issues. In
families that already had one child, the births of additional children—in violation
of the one-child policy—were often undocumented, leading to many problems
later on for those children as they struggled to receive an education or find work.
Even after the one-child policy was rescinded, China’s birth and fertility rates
remained low, leaving the country with a population that was aging too rapidly as
well as a shrinking workforce.

Exports :
China has ranked as the world's biggest exporter of goods since 2009. Official
estimates put Chinese annual exports in the region of $1.904 trillion, and the
country took over from the U.S in 2013 as the largest trading nation in the world.
During the last five years the exports of China have increased at an annualized
rate of 2.5%, from $2.12T in 2012 to $2.41T in 2017. The most recent exports are
led by Broadcasting Equipment which represent 9.6% of the total exports of
China, followed by Computers, which account for 6.08%.

Imports:
Not only is China the world’s largest but it is world’s second largest importer as
well, the imports account for $1.54T in 2017. The country’s agricultural sector has
become increasingly more dependent on imports over the last decade. There has
also been a constant rise in the imports consumed by China. Most of which is
Integrated Circuits (13.5%) followed by Crude Petroleum (9.4%).