Since China implement the policy of reform and opening up in the late 1970s, Chinese has achieved explosive economic growth more than 10 percent per year frequently. In 2009 China became the second-largest economy in the world, just behind the United States. But at the same time, China suffered from the global financial crisis in 2009. Although China’s economic develop have is facing the challenge of the economic globalization, but China seems to more tend to develop the regional economic integration.
The regional economic integration blocs which China joined
The regional economic integration bloc means according to a geographic area that established by two or more countries agree to reduce barriers to trade and investment. In present day, China has built 10 free trade area within 29 countries all over the world, included the Association of Southeast Asian Nations,the Asia Pacific Economic Cooperation, Chile, Pakistan, New zealand, Singapore.
APEC: Asia Pacific Economic Cooperation, the first meeting of this group in 5-7th.11.1989.Australia, American, Canada, Japan, Korea, Newzealand, and the 6 countries of ASEAN in the Australia and announced APEC was set up. The APEC named in 1993. China joined in the 1991. “We are united in drive to build a dynamic and harmonious Asia-Pacific community by championing free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation, enhancing human security, and environment. Our initiatives turn policy goals into concrete results and agreements into tangible benefits.”( Griffin, R ) It is the final purpose of APEC.
CAFTA: China-ASEAN Free Trade Agreement, this agreement is the first agreement that China make with other countries, and the largest free trade agreement area which involved 1.85 billion populations, and 14 million squares. This trade area activated on 1st Jan 2010.It’s purpose is to promote economic development of these countries.
Other free trade agreements: There are some more agreements that China signed is China-Pakistan FTA, China-Chile FTA, China-New zealand FTA, China-Singapore FTA, China-Peru FTA, China-Costa Rica FTA. These free trade agreements was signed separately in November 2006,18th November 2004,7th April 2008,23rd October 2008, 28th April 2009, November 2008 respectively.
Join into the regional economic integration benefit China to build a well international environment. The close economic co-operate not only can improve a regional area’s countries’ economic developing and social progress, but also can build a good political atmosphere. Join intoAccess of the regional economic integration help China to remove or relief the dispute and conflict between the countries, additionpromoting the trust with others. Since implement the policy of reform and opening up, China insist to focus on developing economic, actively put up the peaceful international environment. With the deep of reform and further opening up, China need to use the international resources to better exploit the advantages. China pursues an independent foreign policy, and actively participates in regional economic cooperation, promote the development friendly relationship with neighboring countries, creating a favorable international environment, can greatly improve China’s international competitiveness and international status.
For example,China chose Chile to sign a bilateral free trade agreement,which the first and foremost reason is the political mutual trust between the two countries. Chile is the first South American country to establish diplomatic relations with China, the first to support China to restore the legitimate seat of the United Nations. The first to signed a bilateral agreement for China’s accession to the WTO countries who come from Latin America, is the first to admit China full market economy status of the country, and now is the first to carry out a bilateral FTA negotiations with China. In this sense, Chile is indeed different Latin American countries, which always expresses a very friendly political sincerity, such a long history of friendly relations.
A good of regional integration is to strengthen member countries relationship with other nations. This is one of the motives for China to create the CAFTA, whose members includes Malaysia, Philip, and Cambodia. Been traced back to China and other East Asian countries have maintained a good relationship until the Cold War, the international levels against the pattern, resulting in the diplomatic relations of China and East Asian countries began winding. The most famous issue is the south sea problem, which began in 1970s, peripheral some countries started to use military means, use of force grasp the nation’s nansha reef, and continuously put forward in the south China sea sovereign rights. China and Southeast Asian countries to build a more harmonious relations. It is more or less concern about China and ASEAN political security as an important part of the free trade agreement, starting free trade area with ASEAN countries to establish a strategic partnership, to create a favorable regional political environment for China to improve China’s international political status, making China have a greater say in world trade and economic, political and security affairs, so as to expand China’s political influence.
China and the ASEAN Free Trade Area has the dual purpose the political and economic. First, the construction and startup of the bilateral Free Trade Area of deep mutual political considerations. For China, it can win over ASEAN to highlight its importance in the East Asian region, in reducing the concerns of the Chinese threat, not only can improve the political and diplomatic relations with the ASEAN countries, homeopathic led East Asian affairs, and to each other to compete with Japan, the United States or the European Union forces. More helpful especially for the strategic layout of the East Asian region, peaceful rise demands of big countries through a well-intentioned, allows Chinese forces south to Southeast Asia, and extending to the Indian Ocean, as well as the East Pacific and the South China Sea and is conducive to the development of maritime transport or marine forces development.
Another example is the APEC, APEC’s Previous meetings of the main on the economy, and avoid talking about political. Actually, between the APEC’s member countries there are a lots of political issues. Such as the China and Taiwan’s belonging problems, China and Unit Status barriers, the diaoyu island issue of China and Japan. Joining into APEC, and focus on the economic and avoiding the political, can lead to the peaceful and balance international environment as China wish.
Impact on the economic growth
There are a lot of benefits for China to join into the regional economic integration. It can conducive China to expand exports and attract foreign investment, to help speed up the domestic industrial structure adjustment and optimization. It is beneficial to continue to deepen the reform of China’s economic system, conducive China’s participation in the formulation of new rules of international trade, to safeguard the legitimate rights and interests of our country, to enhance China’s international status, conducive to China’s participation in the process of the globalization of the world economy. But at the same time, it is still some drawback after China join into the regional economic integrations.
Such as regional integration simultaneously leads to trade creation, whereby new trade is generated among the countries inside the bloc, and trade diversion, in which member countries reduce trade with countries outside the bloc. Regional integration entails specific disadvantage. It can reduce global free trade, particularly when member countries form a customs union that results in substantial trade barriers to countries outside the bloc. When economic blocs involve many countries of various sizes, regional integration can concentrate power into large firms and large nations inside the bloc. Regional integration results in economic restructuring, which may harm particular industries and firms. When a country joins an economic bloc, it must relinquish some of its autonomy and national power to the bloc’s central authority.
On the trade side, China actively participated in the construction of the free trade zones, would bring many tangible benefits to businesses and consumers. Specifically: First, will bring the growth of trade, the vast majority of goods which come from the free trade zones’ tariffs must be canceled, the product of a country can be more free, more convenient to enter the market of another country, for example, China – ASEAN Free Trade Area the implementation of the trade in goods agreement, bilateral trade increased by 23.4%. After the implementation of China – Chile FTA, bilateral trade in 2007 alone, an increase of 82%; Second, it would contribute to market diversification, to get rid of dependence on traditional markets; Third will reduce consumer spending and increase consumer choice, for example, China – ASEAN free trade area implementation of the early Harvest Program after the Chinese apple, pear, chestnut, jujube, potatoes, onions on the table of the people of Thailand, Chinese consumers buy from the supermarket Thailand durian, mangosteen, jackfruit, rambutan some tropical fruit in Southeast Asia, these benefits are ordinary people really can feel.
FDI is one of the important part of economic growth. The FDI is the foreign direct investment. The regional economic integration play a significant role in the FDI, there are more than 80% FDI come from APEC’s members. ASEAN has made direct investment to China from the 1980s. According to the Chinese Ministry of Commerce statistics, as of the end of September 2004, the amount that the ASEAN countries to invest in China’s item is 23684, accounting for 4.76% of the total of China to attract foreign investment projects, contracted foreign investment of 69.897 billion U.S. dollars, accounting for 6.65% of the total foreign investment in China the actual utilization of the amount of $ 34.838 billion, accounting for 6.33% of the total of China’s actual use of foreign capital. March 2006, ASEAN cumulative direct investment in China has nearly $ 40 billion from the nature of ASEAN investment in China is still vertically integrated FDI mainly.
With the deepening of the construction of a free trade zone, investment liberalization, facilitation expand and the continuous improvement of the investment environment, based on the level of specific comparative advantages FDI between China and ASEAN countries will also expand. According to the estimates of the ASEAN Secretariat, the establishment of the China-ASEAN Free Trade Area will enable ASEAN investment in China increased by 48%, reaching the level of $ 5 billion a year. Another sample is China and Costa Rica free trade agreement, both to attract foreign direct investment among the best in the country in the world. China’s huge domestic market, Costa Rica FTA network, as well as the friendly relations between the two countries continue to improve will provide great opportunities for mutual investment. The impact of the FTA on trade in goods and trade in services, and will promote the growth of mutual investments between the two countries. Therefore, the construction of the China-Colombia FTA will actively promote the growth of mutual investments between the two countries, and to enhance the attractiveness of the two countries’ respective districts other parts of FDI into. Moreover, the establishment of the China- Costa Rica FTA let bilateral enterprises through investment to strengthen business dealings to create a favorable environment.
On the finance part, a longer period of time, China and ASEAN financial markets open with asymmetry, the degree of opening up of the financial services market in most of the countries of ASEAN is far behind China, objectively hinder the formation of China’s financial institutions to enter the ASEAN. “The signing of the service trade of China – ASEAN Free Trade Area Agreement and other documents, prompting ASEAN in the financial industry to make a commitment to open markets, and allow each other to set up wholly-owned or joint ventures, to relax the establishment of the company’s shares in the proportion of restrictions, which greatly reduces the Chinese financial industry to develop the ASEAN market conditions. China-ASEAN Free Trade Area, along with the increase of bilateral trade between China and ASEAN, investment activities, the ASEAN countries, including banking, securities, insurance, funds, futures and other financial institutions (especially Singapore, Malaysia and other ASEAN financial institutions in more developed countries) will be to set up offices in China, and expand its business in China.
During the pasted 30 years, Chinese regional economic integration has reach a quit a high point, but in the future, China has to face lots of challenges that she never met. There are a number of problems for this country’s regional economic integration, first of all is how to adjustment the imbalance of the imbalance of outward-inward trade? how to overcome the impact of the fluctuation global environment to Chinese local market? What is the solution of the different legal systems between the agreement countries? How to regulate the low staff cost, low offices and factories, the government offer to the foreign investments to attract their invest, but these invests didn’t have much effect on the local market? How to adjust the variety cultures of the agreement countries? In many situations, Chinese products was surprised, from the toys to auto, the low price and good quality’s Chinese products is everywhere, there are no denying the fact that this is good for the customers, especially which live in the developing countries. But for the same reason, China become the first attract target during the developed countries’ trade protect actions. Especially, Unit Status always complain Chinese trading policy lead American’s economic drop.
On the other hands, China also have many questions on the nation inside. In the last decade, Chinese GDP enhance sharply, but just still the one seventh of American, and even lower than Turkey and Calumbia. China’s outward trade mainly focus on the seaside, so no doubt that most wealthy keeping in the south China, such as Shanghai, Guangzhou, Shenzhen. The western still living in poor. On somewhat extant the regional economic integration expand the gap of rich and poor in China.
On the other side, China join into the regional economic integration also a big challenge for the member countries. For example, as an important trade partner of China, New zealand also facing a lot of challenging from China. The most serious challenge is that as more Chinese workers to reach New Zealand, will bring fierce competition to New Zealand workers, resulting in the increase of the unemployment rate in New Zealand.
Despite the fact that on the way of developing the regional economic integration, China still have to face a lot of challenge, but in the long run developing the regional economic integration can help China improve the position on the international no matter on the policy side or economic part.
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Jersey: Pearson Prentice Hall, Ch. 8. Cavusgi, S., Knight, G. and Riesenberger, J. (2008) International Business. New Jersey: Pearson Prentice Hall, Ch. 8. Griffin, R. and Pustay, M. (2010) International Business. London: Pearson, Ch. 2. Rugman, A. and Collinson, S. (2009) International Business (5th edn.) London: Pearson Education, Chapter 17, 20. Thompson, G. (1998) Economic Dynamism in the Asia-Pacific. London: Routledge, Ch. 1, 4, 7, 11. Johnson, D and Turner, C. (2003), International Business, London: Routledge, Ch.2.