FPT UNIVERSITY

INTERNATIONAL INTEGRATION TRADING OF THE COUNTRY WITH THE WORLD

IB1711_FALL22_ECO201

GROUP ASSIGNMENT REPORT

Course Details

Subject Code : ECO201

Subject Title : INTERNATIONAL ECONOMICS THEORY AND POLICY

Lecturer’s Name : MRS. TO THI THUY DUONG

Members of Group 5:

1. Nguyen Ho Anh Phuong SS160381

2. Nguyen Tran Hoang Nguyen SS170455

3. Tram Gia Phat SS170545

4. Dao Tuan Kiet SS170531

5. Nguyen Huy Thang SS170378

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 TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................................ 4

1. China’s position in the world ................................................................................ 4

2. Potential and strong industries of China.............................................................. 4

a. Manufacturing ................................................................................................ 4

b. Services ............................................................................................................ 4

c. Agriculture ...................................................................................................... 5

d. Telecommunications ....................................................................................... 5

e. Pharmaceuticals .............................................................................................. 5

f. Hydroelectricity............................................................................................... 6

II. CHINA’S ANALYSIS OF ECONOMIC MODELS AND THEORIES ....................... 6

1. Ricardian model .................................................................................................... 6

2. Specific factor model ............................................................................................. 7

3. Heckscher – Ohlin model ...................................................................................... 9

4. Standard trade model ......................................................................................... 10

a. Import tariffs ................................................................................................. 11

b. Export subsidies ............................................................................................ 12

III. HISOTRY OF TRADE POLICIES OF CHINA ........................................................ 13

1. Import substitution and trade liberalization ears .............................................. 13

a. Evolution of China trade development strategy .......................................... 13

b. Import substitution and marginal export promotion (1980-1983) .............. 14

c. Export promotion neutralizing import substitution (1984-1990) ................ 15

d. Export promotion and marginal trade liberalization (1991-1993) .............. 15

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 e. Radical trade liberalization (1994-2001) ...................................................... 16

f. Fulfilling commitments to access to WTO and continued trade liberalization

(2002-2005) .................................................................................................... 16

g. Trade policy adjustment and growth pattern transformation (2006-

2008)
................................................................................................................... 17

h. Addressing and recovering from the global financial crisis (2008-now) ..... 18

2. Minimum-wage laws and working conditions ................................................... 19

3. Environment-protection policy and the environmental Kuznets curve ............ 21

IV. NATIONAL INCOME ................................................................................................ 22

1. GDP (Gross Domestic Product) ......................................................................... 22

2. GNP (Gross National Product) ........................................................................... 23

3. Inflation rate ....................................................................................................... 24

4. Interest rate ......................................................................................................... 24

5. Exchange rate ...................................................................................................... 25

V. INSIGHT ANALYSIS................................................................................................... 26

VI. RECOMMENDATIONS ............................................................................................. 27

VII. CONCLUSION .......................................................................................................... 27

VIII. REFERENCES ......................................................................................................... 29

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I. INTRODUCTION

1. China’ position in the world

China is considered a major market and factory of the world, The world's second
largest economy, the prospect of surpassing the US in the next decade as its
economic growth slows, the impact is already pervasive According to statistics
researched from the International Monetary Fund, in 2021, China accounts for
18.1% of global GDP, behind the US with 23.9% but higher than the 27 members
of the European Union with 17.8% . They account for nearly a third of global
manufacturing output, according to United Nations data from 2020. Today, most
textiles in Northern Italy - the European fashion hub - are produced in central China,
and China is playing an increasingly essential role in the global supply chain. China
is increasingly acting as an irreplaceable supplier of many essential industrial and
consumer goods. Nikkei Asian Review's survey of 3,800 popular products in
international trade shows that there are 320 products in which China constitute of
more than 50% of the market share. For example, China currently accounts for two-
thirds of the market share in the export of minicomputers, more than 50% of the
market share of liquid crystal displays, air conditioners, sanitary ware, etc. China is
also a member of formal and informal multilateral international organizations,
including: WTO, APEC, BRICS, SCO and G-20, etc.

2. Potential and strong industries of China

a. Manufacturing
As the second world's largest economy only stands below the United States and the
largest economy in Asia, China produces and sells more goods than any other
country. Chinese products (from footwear, mobile phones, solar panels, electronics,
and cars to ships) contribute nearly a quarter of global industrial production value
and 40% of the GDP. of China.

b. Services

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China's economy is no longer solely based on building railways or manufacturing
household appliances. China's leaders have long steered the economic boat to other
lucrative industries. Financial services in general, especially the stock market,
health care, small business, education, entertainment, culture, science and research,
contributed over 50% for the first time China GDP in 2015.

c. Agriculture

As the largest agricultural producer in the world, China has 300 million farmers
with crops mainly rice, potatoes, millet, cereals, tea, and tobacco. One-fifth of the
world's corn and one-quarter of the world's potato production comes from China.
Every year, China produces nearly 30 million tons of eggs, accounting for half of
the world's egg production. Notably, only 10% of China's land area is devoted to
agriculture, and this area is increasingly shrinking due to industrialization,
urbanization and desert formation.

d. Telecommunications
With about 1.3 billion mobile phone users and 700 million Internet users, China is
a complete leader in the telecommunications industry. China Mobile is the world's
largest telecommunications company with a market capitalization of nearly $280
billion. Four of the ten largest Internet companies in the world belong to China.
Chinese applications, Internet companies, smartphones and tablets are still in their
"nascent" period. The growth potential of this industry according to merchants is
very high.

e. Pharmaceuticals
China's pharmaceutical industry "dominating" all of Asia and currently ranks
second in the world after the US. Since 2009, drug sales in China have grown at an
annual rate of over 25%. Due to an aging population and an improved quality of
life, Chinese policymakers have prioritized promoting the development of the
medical care industry. In just a few years, China has doubled its health budget to
achieve the goal that by 2020 all of China's population will enjoy good quality
medical care at affordable costs and easy access

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 f. Hydroelectricity
Over the past several decades, China has focused on investing in hydroelectricity
to generate electricity using water power. Of the 25 largest hydroelectric power
plants in the world, 11 are Chinese. In 2006, Tam Diep dam, the world's largest
hydroelectric dam with a length of 2km and a height of 185m, was put into use.
Since the 1990s, China has had six large reservoirs on the Mekong, but it plans to
build at least 11 more. Because China has almost no rivers to build dams, the
country is currently investing in building hydroelectric plants abroad.

II. CHINA’S ANALYSIS OF ECONOMIC MODELS AND THEORIES

1. Ricardian model

The Ricardian model employs the principles of opportunity cost and comparative
advantage. Goods made in the United States cost 5% more than their Chinese
equivalents. Furthermore, China remains 10-20% cheaper than major European
countries. According to the Boston Consulting Group, it will be 2-3% cheaper to
manufacture goods in the United States than in China by 2018. China has a
comparative advantage in manufacturing manufactured goods compared to the
United States and European nations.

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 It costs around 96 cents to make identical goods in China for every dollar spent on
manufacturing in the United States. The extra four cents is a steal for businesses
concerned with enhanced quality, intellectual property protection, and supply chain
simplification. In 2019, China contributed 28.7 percent of global manufacturing
production. This puts China more than ten percentage points ahead of the United
States, which had the world's largest manufacturing sector until China surpassed it
in 2010. With approximately $4 trillion in total value added by the Chinese
manufacturing sector in 2019, manufacturing comprised about 30 percent of the
total economic output. The manufacturing industry in America is no longer as
influential as it once was: it accounted for little over 11 percent of GDP in 2019. In
16 of the 22 manufacturing categories tracked by the United Nations, China ranks
first in the proportion of global production while ranking second in six others. The
data is from 2019, the most recent year for which data is available. China maintains
its dominance in light industries such as garments and textiles, general industries
such as primary metals and electrical equipment, and higher-end activities such as
computers and transportation equipment. China has at least a 20% worldwide
market share in almost every industry, with 40%+ proportions in electrical
equipment, basic metals, and computers. China constitutes more than half of the
textiles, clothing, and leather market.

2. Specific factor model

Lower Wages

Even at the lowest labor rate, manufacturing in China is cheaper by only $1.72, a
savings of 2.2% over manufacturing in the U.S.

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Manufacturing labor costs per hour for China, Vietnam, Mexico from 2016 to
2020 (in U.S. dollars)

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 The law of supply and demand states that because the supply of employees exceeds
the demand for low-wage labor, salaries remain low. Furthermore, until the late
twentieth century, the majority of Chinese were rural, lower-middle-class, or
impoverished, with internal migration flipping the country's rural-urban
distribution. These newcomers to industrial towns are frequently eager to work
many shifts for minimal pay. China does not adhere to (at least not rigorously) child
labor or minimum wage rules, which are more generally observed in the West.
China's massive labor pool allows for bulk production, seasonal industrial
requirements, and even unexpected increases in demand schedules. Because the
supply of workers exceeds the demand for low-wage workers, wages remain low.
When China opens up for trade, the market cost of their export goods, which are
manufactured goods, rises, but the equilibrium wage only rises by a small amount,
implying that by concentrating in producing manufactured products, they can earn
more profit with a limited increase in production costs.

Ecosystem of Business

Factory output does not happen in a vacuum; rather, it is supported by networks of

suppliers, system integrators, distributors, governmental organizations, and
customers who are all engaged in the manufacturing process through competition
and collaboration. In the previous 30 years, China's corporate ecology has changed
dramatically.

3. Heckscher – Ohlin model

The Heckscher-Ohlin technique to describing global trade is frequently used to

describe China's trading patterns. Plenty of Work China excels in exporting labor-
intensive goods. Heckscher-broader Ohlin's viewpoint is also ideally fit with
China's position in completing labor-intensive jobs in his complicated multinational
supply chain. Without a question, China enjoys a global comparative advantage in
labor-intensive goods. China's trade must also consider local comparative
advantages. In products, China has a competitive advantage in some regions, but
not in others. China can be expected to have a comparative advantage in heavy

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 commodities in nearby markets and lighter commodities in more distant markets.

This theory motivates a simple empirical prediction. Within the product China's
export unit price should increase with distance. Dividing China's export markets
into two groups, near (Korea, Taiwan, Hong Kong, Japan) and far away, we find
that the average unit price of exports over the near group is about 15% higher. The
corollary to this is that China's competitors in the export market will be under the
most pressure if China starts with a high market share.

4. Standard trade model

After the 3 factors mentioned above, I can summarize as China has comparative
advantage in producing manufactured goods due to labor abundant plus their
labor’s wage is cheap because of high demand for domestic job, they also have land
abundant, moreover, China dominates the export of manufactured goods, even
though the more production is made and the cheaper the competition, the lower the
term of trade, but since it is the top 1, its isovalue line will cut the indifference curve
far because they have large money to buy imports to help increase welfare. China's

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integration into the world economy is one of the main drivers of economic growth.
International trade helps increase the productivity of some domestic industries and
accelerate technological progress.

Increased trade in machinery parts and components (both imports and exports) and
convergence in the commodity mix of imports and exports make intra-industry
trade in East Asia more important than ever.

a. Import tariffs
China divides its tariff rates into six categories: general, most-favorable-nation
(MFN), agreement, special, tariff rate allotment, and preliminary.
For commodities that the government has classified as essential to the growth of a
crucial industry, China may impose tariff rates that are much lower than the MFN
rate that is publicly available.
For instance, the Chinese Customs Administration periodically declares special
tariff rates for goods from the chemical, steel, and automobile industries.
As we have already mentioned, China lacks advanced technology, so as long as
they can maintain their tariffs at an optimal rate, these tariff policies assist them
boost their innovation and learning curve for important industries employing FDI.

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The graph below depicts the evolution of China's tax rate between 2010 and 2020.

We can see that after China made the decision to liberalize its trade, which will be
discussed later, it uses high tariffs to improve its terms of trade and support the
development of young industries. However, because they lack advanced
technologies, they are unable to increase their efficiency when these industries
reach their full potential, so lowering import tariff rates in important industries is a
brilliant move.

b. Export subsidies
The subsidies came in the form of no-interest or low-interest loans, artificially
reduced prices for raw materials, components, energy, and land, as well as
assistance with R&D and technology purchases. Since China joined the World
Trade Organization in 2001, subsidies have supported more than 20% of the
country's industrial capacity growth per year. Huge Chinese subsidies have eroded
the industrial basis of other nations and resulted in vast global capacity, increased
exports, and reduced global pricing.

Examples: China accounted for 13% of worldwide imports and 16% of global
output in 2000, making it a net importer of steel. It had surpassed all other steel-
producing, consuming, and exporting nations by 2007. Even though its extremely

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 fragmented sector lacks scale efficiencies or a technological edge, China currently
produces half of the world's steel.

China's massively funded fleet currently makes up 42% of all fishing activity
worldwide, surpassing the combined output of the next ten largest nations.
As a result of their export policies, they are able to dominate the global export
market, which generates significant revenue that is used to support the nation's core
industries so they can compete with imports and develop their high-tech sectors. In
a second round of allocations for 2022, China has given non-state refiners import
quotas for 52.66 million tons of crude oil, an increase of 49% over the same period
last year, according to data. China only establishes the import quota for oil barrels.
With the addition of the additional allowances, China's overall non-state import
quotas for this year are up to 161.69 million tons, compared to 157.83 million tons
at this point in 2021.

III. HISTORY OF TRADE POLICIES OF CHINA

1. Import substitution and trade liberalization eras

a. Evolution of China’s trade development strategy

This report's main goal is to examine the development of China's foreign policy and
trade policy from the standpoint of trade and development. A "pragmatic" trade
strategy, according to China's experience, necessitates striking a careful balance
between liberalization and the employment of industrial policy to promote
particular economic sectors. This argument is made by examining some of the
important changes in China's trade policy and regime.
The goal of a trade development plan is to increase commerce and output in certain
industries by altering the relative cost of exportable and importable commodities.
The historical membership of China to the WTO in 2001 might be used to split the
development of China's trade strategy into two significant stages. China's trade
development strategy evolved through four stages between 1980 and 2001 during
the "pre-accession to the WTO" phase: "import substitution and marginal export

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promotion" (1980–1983), "export promotion neutralizing import substitution"
(1984–1990), "export promotion and marginal trade liberalization" (1991–1993),
and "radical trade liberalization" (1994-2001).
They expose the trade and industrial strategies used by the central government to
restructure economic institutions and implement an open-door policy. Regarding
the "post-accession to the WTO" phase, China has changed its trade development
strategy from one that prioritized import substitution or export promotion to one
that is more supportive of sustainable development, internally and externally
coordinated, and import and export trade balanced, all within the context of a larger
economic development strategy. China's trade policies have gone through three
stages since 2001: "fulfilling commitments to access the WTO and continued trade
liberalization" (2001-2005), "trade policy alteration and growth pattern
transformation" (2006-2008), and "addressing and recovering from the global
financial crisis" (2009-present) (2008-now).

b. Import substitution and marginal export promotion (1980-1983)

Since 1949, China has industrialized in a manner similar to that of the former Soviet
Union, and up until the early 1990s, import substitution was a crucial component
of Chinese trade strategy. In order to supply capital equipment and intermediate
goods for other sectors, China implemented an import substitution strategy through
"forward-linkage," emphasizing the development of heavy industries. Downstream
industries were chosen because they were those in which China had the least
comparative advantage. Other East Asian nations followed "backward-linkage"
industrialization, starting with labor-intensive sectors by manufacturing and
exporting nondurable consumer products before progressively stimulating demand
from the capital and technology-intensive sectors.
This method was in contrast to China's. Prior to the economic reform, China had
adopted a strategy that resulted in high costs associated with economic inefficiency,
a scarcity of crucial industrial intermediate products, a lack of foreign currency and
consumer goods, and a low average real pay. Exports in labor-intensive industries
like textiles, clothes, and footwear significantly increased after manufacturers could
identify and anticipate the "correct" relative pricing in the market.

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 c. Export promotion neutralizing import substitution (1984-1990)
Through the trade reform programs put in place in 1984 and 1988, export promotion
measures, which primarily include export tax rebate, export subsidy, foreign
exchange retention quota, and multiple exchange rate systems, were formally
established in the mid-1980s and gradually generalized nationwide. 4 However,
there are still several import trade restrictions, including quotas and licensing
requirements. The hyperinflation that took place in 1985 and 1988 also caused the
real exchange rate to be overvalued by an average of 32%, and from 1986 to 1990,
the difference between the official exchange rate and the FEACs rate widened
significantly. As a result, the trade development strategy during this time may be
described as "export promotion offsetting import substitution" or "protected export
promotion," wherein it was encouraged for the exportable and importable sectors
to grow at the expense of non-trade sectors. However, the economy's general trade
direction at the time was still skewed toward import replacement.

d. Export promotion and marginal trade liberalization (1991-1993)

In 1991, substantial changes in trade policy occurred as a result of the Chinese
economy's growing efficiency and competitiveness. To lower tariff rates, import
obligatory plans, import quotas, and import permits, a far more audacious trade
liberalization initiative was started. Additionally, it was decided to do away with
import adjustment duties, export subsidies, and import substitution programs.
Trade liberalization improved the price system and made production and trade
patterns appear more "natural" from an economic perspective. The distortion of
the economy steadily decreased. When compared to the international level, the
amount of trade protection was still high. The coverage ratio of non-tariff
obstacles was 51%, while the average imposed tariff rate was 43%. The foreign
currency control system's limitations and distortions continued to be detrimental
to export industries. On average, the real exchange rate of the RMB was
overvalued by 44%. To reduce export dumping and low-price competition in the
global market, export license requirements and export tax systems were also
combined in enforcement.

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 e. Radical trade liberalization (1994-2001)
The formation of "the Socialism Market System with Chinese Characteristics" was
declared by the China Communist Party (CCP) in 19927. It gave the resolve to
pursue market-oriented economic reforms a more credible, reliable, and foreseeable
quality. Since then, the central government has implemented a number of
significant reforms in a variety of areas, including banking, finance, the budget,
taxes, trade, state-owned companies, administrative organizations, etc. Given these
facts, China needed to initiate a more drastic trade liberalization process
immediately. The Chinese delegation started formal and significant trade
negotiations with the major GATT contracting parties. As a result, China had to
take seriously concerns about market access raised by trading partners. To fulfill
internal objectives and external demands, a variety of trade reform initiatives were
implemented. Not only were trade barriers on average cut greatly, but the protective
structure was also changed so that it tended to be "trade neutral." As a result,
producers may determine their input and output at global prices and replace
expensive labor with capital and intermediate commodities. The foreign exchange
system saw more major changes. In 1997, China totally liberalized its current
account, enabling it to finally satisfy the IMF's requirement of removing foreign
exchange controls. RMB really lost about 50% of its value at the official rate, which
significantly decreased RMB overvaluation and improved currency
competitiveness for Chinese exporters.

f. Fulfilling commitments to access to WTO and continued trade

liberalization (2002-2005)
China became a formal member of the WTO in December 2001. From 2002 to
2005, China fully implemented WTO commitments and effectively promoted well-
designed, market-oriented, and rule-based economic and trade liberalization, which
resulted in dramatic increase in the transparency of trade laws and regulations as
well as the management of trade policies.
China also took steps to implement numerous specific market access commitments
pursuant to schedules set forth in the WTO accession agreement, including
reducing tariff rates, eliminating non-tariff barriers, and expanding services market

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access for foreign providers.13 Specifically, China bound all tariff lines and the
average applied MFN rate dropped from 15.6% in 2001 to 9.7% in 2005, with the
manufactured goods tariffs declining from 14.3% to 8.9%, and agricultural
products decreasing from 23.2% to 14.6% during the same period. Some sectors
such as automotive and auto parts, textiles and clothing, and IT products were
particularly experiencing large tariff reductions. In terms of non-tariff barriers,
most of the import licenses, import quotas, and specific tender requirements were
removed before January 2005. Import licensing procedures were simplified, and a
new import licensing system came into force mainly for environmental, health, and
safety purposes. Tariff quotas remained only for certain agricultural products and
fertilizer trade. Restrictions on textiles and electromechanical products were also
canceled. Furthermore, all trade-related investment measures, including foreign
exchange balancing requirements, local content requirements, and export
performance requirements in previous FDI laws and regulations were completely
removed according to the WTO TRIMs agreement. Finally, China made extensive
service liberalization commitments beyond the average of developing countries,
covering more than 100 sectors over 160 sectors in the GATS list, particularly in
the areas of great commercial significance such as banking, securities, insurance,
telecommunications, retail, and distribution services. National treatment was
implemented in all service sectors except for subsidies and restrictions on the
movement of natural persons for some domestic service providers. All service
management agencies were regulated independently from service providers, except
express delivery and rail transportation.

g. Trade policy adjustment and growth pattern transformation (2006-

2008)
Due to domestic criticism of China's weakness in the WTO negotiations and a lack
of agreement within the Chinese government on the priorities of economic market-
oriented reform, particularly how to handle state-owned enterprises, China's
momentum towards trade liberalization reform started to slow down in 2006. The
average tariff rate did not appreciably decrease any more during that time.
However, more tariff quotas were eliminated, leaving just a relatively small number

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of items, including grain, sugar, wool, cotton, and fertilizer, subject to a tariff quota
limitation in 2008. After China joined the WTO, trade obstacles in its export
markets were removed, which led to a sharp increase in exports and a corresponding
rise in the trade surplus. The proportion of current account surplus to GDP peaked
historically at 11% in 2007.
Given these conditions, China had to encourage a change in the way that commerce
grows in order to combat home inflation and the pressure that a large trade surplus
brought from abroad. Strengthening export limits on industrial items and some
agricultural products, especially those that use a lot of natural resources, consume
a lot of energy, cause a lot of pollution, and have a low technical content, was one
of the key changes to trade policy. The primary steps include raising export taxes,
reducing VAT export refunds, raising export limits and licensing requirements, and
expanding the list of goods that are barred from being processed. 16 The
improvement of export industries, the reduction of trade friction, the assurance of
domestic supply, and the attainment of sustainable development were all made
possible by these measures.

h. Addressing and recovering from the global financial crisis (2008-now)

The process of trade liberalization was not reversed by the global economic
recession. Actually, during the financial crisis, China still maintained its pace of
trade liberalization, such as announcing a new action plan of IPR protection in
2008, offering national treatment in the area of government procurement for foreign
companies, and deepening service openness in the tourism and financial
information sectors. China’s trade policy adjustments successfully helped her to go
through the global crisis and improve its trade performance, especially at the outset
of the crisis. With the gradual recovery of the world economy and external demand,
China’s foreign trade turned to positive growth in November 2010 and achieved
rapid growth since 2011. Up to recent years, as in 2019, China was expected to
move toward a structurally lower trade surplus or even a trade deficit, as stronger
domestic demand and services sector growth boosted imports. But the COVID-19
debacle seems to have altered that trajectory. The dual circulation strategy pledges
to unleash domestic sources of demand but to curtail foreign suppliers from

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 realizing their comparative advantages to satisfy it. From now on, China’s trade
reform outlook looks like a closed-circuit liberalization that hoards the domestic
dividends of competition, should they finally arrive, for home-team firms and
selected foreign friends willing to play by authoritarian-friendly rules.

In 2021, China continued to premise the trade policy on trade liberalization and
support for the multilateral trade system. In the past several years, China prioritized
free trade agreement negotiations and the construction of in-state free trade zones
as the key step to facilitate trade and investment home and abroad. Additionally,
China requested for membership in the Comprehensive and Progressive Agreement
for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership
Agreement (DEPA), demonstrating a strong desire to advance trade liberalization
in a bigger geopolitical area and online environment. Example of expanding trade
liberalization 2021: China aims to widen the open-up policy by way of building in-
state pilot free trade zones. By far, there have been 21 pilot free trade zones in
China, among which Hainan Pilot Free Trade Port is in the leading position. In June
2021, the Hainan Free Trade Port Law came into force which provides legal
authority and autonomy to the government to further liberate and facilitate trade
and investment on the island. Particularly, trade of most goods could enter the
market on the island freely at zero tariff rate, and trade of service will be accorded
national treatment and managed under the frame of the negative list which is a
breakthrough in China’s management of trade of service nationwide.

2. Minimum-wage laws and working conditions

Several separate papers and resolutions have codified the following laws:

1995 Chinese Constitution China's People's Republic Labor Law

2008 People's Republic of China Labor Contract Law

The People's Republic of China's Law on the Mediation and Arbitration of Labor
Disputes

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China's People's Republic Labor Union Law

China's People's Republic Law on Workplace Safety

Social Security Law Regulations issued by the State Council's various ministries
and committees as well as the Ministry of Human Resources and Social Security
(the "MOHRSS")

Working conditions

According to Chinese law, employers are required to maintain a clean and safe
workplace for their employees, which means they must adhere to all applicable
rules and laws on hygienic conditions and workplace safety. The Work Safety
Legislation was published on June 29, 2002, and it was revised in 2009, 2014, and
2021 (based on the People's Republic of China's law on work safety). The
workweek was abbreviated to 996 informally, which stood for a six-day, 9 a.m. to
9 p.m. schedule. These hours not only went over the permitted maximums, but the
employees were also seldom paid for the overtime hours. China's labor regulations
permit employers to extend the working day by one hour provided all parties agree
to it.

Minimum wage

Salaries must be paid to workers at least once every month. Additionally, that pay
must be greater than the minimum wage established by one of the 22 province
governments. Every few years, these salaries are revised to reflect changes in the
cost of living, degree of development, and regional circumstances. A developed
city will have a higher minimum wage than a rural location. According to the China
Briefing, among the 31 provinces, Shanghai now has the highest monthly minimum
salary (RMB 2,590, or US$400), while Beijing has the highest hourly minimum
wage (RMB 25, or US$3.9). Shanghai, Guangdong, Beijing, Tianjin, Jiangsu, and
Zhejiang are the six areas that have monthly incomes over RMB 2,000 (US$308).
Employers are required to give social benefits in addition to Employee pensions/
Medical expenses/ Housing funds/ Unemployment Maternity benefits/ Work-

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 related accidents or injuries

3. Environment-protection policy and the environmental Kuznets curve

The Environmental Kuznets Curve was the primary discovery of research on the
link between economic growth and pollution in the early 1990s (EKC). According
to concentrations of carbon dioxide (CO2), sulfur dioxide (SO2), nitrogen oxides
(NOx), and water pollutants, as illustrated in Figure 1, there is an inverted U-shaped
relationship between wealth and pollution. Figure credit goes to S. Bartolini & L.
Bonatti (2003).

Economists Gene Grossman and Alan Krueger created the term EKC to describe
the relationship between economic development and environmental degradation,
taking its name from Simon Kuznets, the creator of the Kuznets Curve Theory,
which showed that the relationship between economic development and income
inequality is an inverted U-shape. Grossman and Krueger remarked that the
inverted U-shape may be brought on by countries ceasing to manufacture those
commodities that are pollution-intensive and starting to buy from other countries
that have less stringent environmental protection legislation in their study
"Economic Growth and the Environment." They explains that the core of the
Environmental Kuznets Curve (EKC) is that the environmental quality degrades in
the early phases of the economic cycle.

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 Therefore, as a country's economy develops through time, economic expansion will
eventually be beneficial rather than a danger. According to Ota's research on Asia,
"Both Asian trends in income inequality and ecological degradation (CO2
emissions) appear, on the whole, to follow Kuznets' hypothesized curve up to the
lower level of high income as income rises, whereas a divergent tendency could be
noticed among producing substantial, resulting in a second inverted U-curve with
frequent anomalies in the portion as incomes rise."

IV. NATIONAL INCOME (GDP & GNP)

1. GDP
As we can see here over the period from 2010 to 2020, the GDP of China along
with the per capita chart didn’t witness any significant growth but rather a slow and
steady increase due to in recent years, China has adopted an export-oriented
economic policy and has become a major trader in the global market, trade also
help China increase productivity through capital, technologies import and
knowledge gain from “ Learning by doing” process.
Even more, the annual % change rate or the GDP growth rate even showed a drop
in the figure and only recovered near to the starting point in 2020. This happened
because of over investment, high savings and modest consumer spending, high
debt, and low industrial productivity along with the fact that China is currently
trying to restructure its economics. As they already dominate exporting
manufactured goods over the world their GDP can only grow by a steady small rate
that’s why they increase productivity through capital, technologies import and
knowledge gain from “ Learning by doing” process in order to reduce the cost of
importing and build up new comparative advantage.

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2. GNP

The figure and growth of GNP of China are quite the same and related to GDP,
because as mentioned above when open more for trade and produce, invest more as

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 a result GNP of China will also grow as we see from the chart. The only one
noticeable point is that in 2020 the COVID-19 pandemic went out in China and
their government established the Zero Covid policies which shut down almost every
trade from China to the world so the GNP figure in 2020 was extremely low.

3. Inflation rate

When China opened up for more trade in 2010, the demand for money was higher
as the price rose inside the nation, which caused the government to print more
money which resulted in the inflation in the year 2010 and 2011. But then since
2012 the rate dropped and remained around the rate of 2%. Only in 2019 the figure
increased to 3% but then also continued to drop back to 1% in 2021 due to COVID-
19.

4. Interest rate

As mentioned, China needs to import goods to gain the benefits in technologies,

knowledge and capital so the government of China decided to increase the interest
rate to draw more investment and foreign currency.

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 Another reason is this action also comes from the fact that in 2010, some infant
industries of China weren’t strong enough to compete with other foreign brands, so
they accepted to imports these good in order to gain by the “learning by doing”
affect which in the end help to nominated the import industries and save cost.

5. Exchange rate

The same explanation also can be applied to the exchange rate of China. And
because they are the largest manufacturing country in the world, keeping the
exchange rate low will seem attractive to nations around the globe which from then
draw these countries to purchase more and more of China goods which result in
huge amounts of benefit for China.

Since 1994, the Chinese yuan has been fixed to the dollar at an exchange rate of
8.28 to 1. This strategy maintains the yuan's low value in comparison to other
currencies. When compared to those of other countries, Chinese exports are less
expensive and hence more appealing, which attracts more investment and helps
China advance its technological expertise for its own advantage. Additionally,
China secures its economic growth by encouraging consumers throughout the

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 world to purchase its products.

Year 2020 2019 2018 2017 2016 2015

% Change -6.18% 1.23% 5.72% -6.32% 7.18% 4.52%

V. INSIGHT ANALYSIS
After reviewing all the ideas and their actions, it is clear that China has achieved
half of its goal of becoming a fully developed nation because it has already
controlled the global export market, with a more than 50% share. This is the fruit
of the early liberalization efforts, which were sufficient to complete the primary
task of investing the large amount of capital the nation had in the industry and real
estate with an export focus. China utilized its comparative advantages, which we
previously discussed, to its fullest profit potential, but it is clear that its export-
improving strategies are now at their most effective.
China must thus possess a sophisticated technology infrastructure and a varied
industrial and service sector to compete with other industrialized nations in their
selected vital industries. China, however, appeared to fall short in this regard, given
that it made significant infrastructure investments by providing loans to regional
governments and state-dominated upstream industries like steel. The central

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 government decided to invest more money in important state businesses
simultaneously to make them world leaders. The financial system was not
functioning correctly in the new climate, as seen by the sharp increase in lending to
local governments and state-owned businesses, which led to the overall level of
debt in the economy climbing alarmingly quickly. Unfortunately, despite all
attempts, nothing has changed.

VI. RECOMMENDATIONS

Beijing is seeking both trade expansion with compliant regional partners and a
planned decrease in reliance on foreign suppliers in the technology and critical
sectors in order to protect against risks from international economic tensions. The
14th Five-Year Plan (FYP) for China, which will be at the center of the new dual
circulation strategy, advocates for less reliance on foreign technology and
commerce and more attention to local consumption. It includes both "external
circulation" and "internal circulation" (accessing global demand, foreign cash, and
foreign technology) (stocking domestic demand and domestically developed
technology). The program's justification by President places a strong emphasis on
changing development momentum in favor of local demand, domesticated supply
chains, and indigenous innovation. The strategy's import-substitution components
do not bode well for reform, even if it is uncertain how the overall effect would
affect China's trade balance. Measures preserving indigenous manufacturer market
shares and limiting foreign players are expected to be implemented as a result of
import substitution in key technologies and crucial supply chains.

VII. CONCLUSION

China is the greatest trader in the world, and trade liberalization was crucial to the
growth of its economy after 1978. Despite a history of reform, China continues to
maintain a trade surplus that is molded by both old and new types of protectionism,
which harms both domestic and international commerce as well as consumer
welfare. China has to remove trade and investment obstacles that are ineffective for
its consumers and tense with trading partners in order to maintain its economic

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potential. Incentives for innovative business models, initiatives to reduce supply-
chain risks, and further steps to improve trade liberalization and facilitation are all
included in the recommendations. Additional measures also include fiscal and
financial support for foreign trade enterprises.

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