Chinas International Trading Capability - Case Study Example

International Business Question 2(a China Introduction International trade in China has been characterized with a significant and rapid expansion coupled with extensive economic growth in the country. The expansion has made China expand its marketing scope and view the world as a potential market. The growth of China’s economy is attributable to establishment of viable economic reforms and the introduction of the open door policy that expands the country’s market. The reforms come about after China joins the World Trading organization (WTO). China’s International Trading Capability The rationale of determining China’s international trading capabilities take three factors into account. The factors are the evaluation of the impact that international trade has on the country’s GDP, the reforms pertaining to international trade and the trade relations between China and other countries. The three aspects reflect the efforts that China has advanced to ensure success and profitable returns on the capital invested in international trade. Trends and new developments in international trade are also evident in this case. China avails a number of goods to the international market in form of exports and this includes: Export Estimated Net Worth in 2014 Proportion in terms of total exports Electronics $571.045 billion 24.4% Machines, Engines and Pumps $400.91 billion 17.1% Furniture and Lighting equipment $93.39 billion 4.0% Crotchet or Knit clothing $92.002 billion 3.9% Clothing (Not knit nor crotchet) $81.453 billion 3.5% Medical and Technical equipment $74.2 billion 3.2% Plastics $66.816 billion 2.9% Vehicles $64.243 billion 2.7% Gems and other precious metals $63.212 billion 2.7% Steel or Iron Products $60.685 billion 2.6% The Impact of International Trade on China’s Gross Domestic Product (GDP) The robustness of China’s economy has intensified international trade in the country. In 2014, the major exports in the country were worth 2.343 trillion US dollars which is a 48.5 percent increase from the amount in 2010. This is an indication that China is doing well in the international market. Information from International Monetary Fund database indicates that the total GDP in China was 17.632 trillion US dollars in 2014 alone. Exports constituted at least 13.3 percent of the country’s total economic output. Therefore, international trade is a major per taker in China’s economy. The $2.343 trillion export revenue would roughly translate to 1728 US dollars for every citizen in the country because the prevailing population is about 1.36 billion people (Workman, 2015, p. 1) From the GDP statistics, it is evident that China is achieving a viable level of success in its international trading ventures. The returns on the capital invested are profitable and can cater for the country’s extensive population. The success is reflected in the substantive expansion of the country’s economy which subsequently lays a platform for further advancements in global trading activities. Reforms and Improvements in Relation to International Trade As mentioned earlier, most of these reforms came about following China’s decision to join WTO. The country had to adjust some of its trading systems and approaches in order to conform to the global trading or business environment. It is vital for the country to fit into the international business world and the adjustments serve as a boost to the countries capability to cope with the trends in international trade for example competition and the ever changing monetary policies and currency values. Relevant reforms ensured that China commands a substantial portion of the international market. China fulfilled the commitments it made after joining WTO by extensively opening the services market. The country has allowed Foreign Service providers and international traders to access various fields in the trade layout that is prevalent in the state. International traders have been given the consent to engage in different business-related fields such as the construction sector, information technology, extension of financial services and tourism. This reform had a major impact on China’s trading activities. For instance, 13905 foreign enterprises dealing in the provision of specific services had been established in the country. The investments from the enterprises amounted to at least $48.7 billion (China Embassy, 2011, p. 1). The developments have in the long run improved China’s international business relations and encourage foreign business entities to invest into the country’s economy which is a vital basis of the country’s international trade ventures. Liberization of foreign trade in China was a major step in improving the country’s position in the international trade map. China revised the Trade Law that required foreign traders to seek approval from the Chinese government before engaging in any trading activities in the state. In the current system, the traders have to report to the relevant authorities and not to the government. This development has reduced the cumbersome procedures involved in the acquisition of trade permit and opened up China to more trading opportunities. The continuous expansion of China’s import-export market makes it a key player in foreign trade because the state has an enabling environment for foreign traders and a sustainable economy (Wang & Yu, 2012, p. 1797). China’s continuous lowering of trade tariffs has been a major enticement to foreign traders and states that are willing to engage in trading activities with the state. This has improved China’s viability as far as international trade is concerned. Th process of lowering the tariffs started in 2005 whereby they were lowered by from 15.3 percent in 2001 to 9.9 percent. The lowering of tariffs has been done in conjunction with the removal of trade barriers for example long licensing procedures and quotas. The overall tariff level in china had been reduced to 9.8 percent in 2010 from 15.2 percent. Tariffs and trade barriers are the major factors that scare away foreign traders because of the financial burden that come with the two. Reduction or removal of trade barriers has ensured that china has remained among the World’s top per takers in international trade (China Embassy, 2011, p. 1). The Chinese government has made efforts to maintain both the domestic and the international market at an optimum level. This is done by improving the law-enforcement system and supervisory procedures to ensure that the trading activities are conducted in a fair manner and illegal trading ventures are avoided at all costs. China also played a major role in curbing the international financial crisis. The country worked in conjunction with the WTO in opposing acts of trade protectionism that is a hindrance to global trading activities. Such decisions taken by the government confirm that the country is committed to international trade and is able to work by the rules of the WTO. China’s commitment to its trading partners is a vital component of its ever expanding international trading relationships. China continues to sign international trade treaties with various countries (Guo, 2013, p. 995). China had fulfilled all its obligations to WTO by the year 2010. This ensured that the state acquired a spot in the global trade market because it had proven worthy for the course. Most of the members of the WTO recognized that China’s efforts were considerate of their interests and commended the state. The Chinese government ensured that the principles of the WTO were integrated into the country’s laws and regulations relate to trade. By joining WTO, China is exposed to global trading concepts for example, the importance of fair competition and the interplay of business law and intellectual property rights. Such knowledge has laid down a platform for further economic developments and provided the Chinese business sector with the technical skills on how to handle international trade thus improving the countries capability to exercise international trade successfully (Clark, 2013, p. 226). China’s International Trading Relations China has established trading links with other foreign countries from where the state exports its products and imports the need products. The Chinese government has established commercial relations with USA, Japan and Germany among other countries. The commercial activities between USA and China have intensified. The total monetary value of the trade between the two countries increased from 2 billion US dollars in 1979 to 592 US dollars in 2014 (Morrison, 2015, p. 1). The U.S Treasury securities constitute the largest foreign income earner for China. As of December 2014, the securities were worth 1.24 trillion US Dollars (Clark, 2013, p. 227). Such viable economic partnerships have ensured that China maintains its international trade operations. The graph below shows China’s trade relations with other countries: Question 2 (b): China’s Green Business Opportunity China’s green business opportunity lies in the Energy sector. Although the country is striving to increase energy efficiency as well as environmental sustainability, more should be done because the country has the necessary resources and economic capability. Many viable opportunities are present in the country’s commercial sector with specific regard to the energy industry which drives most parts of the industrial economy. The rapid economic growth in China has led to the improvement of the living standards of most of its citizens. To maintain the economic sustainability, the country must explore the available energy sources fully .Acquisition of alternative energy sources is also an idea that can be effectively explored. All these should be done while considering the impacts of exploring the available opportunities on the environment ensuring that the greenhouse effect is minimized. For the Chinese policy makers to succeed in the quest to establish additional opportunities to improve the country’s energy efficiency, they should make use of the available and technically feasible commercial opportunities (Yang, 2015, p. 3). The establishment of alternative sources of energy that are more efficient and environmental friendly is a major green business opportunity in China. For instance, the manufacture of electric vehicles would reduce the state’s fuel consumption by at least 30 percent enabling the government to save on the funds used to import oil (Joerss, Woetzel & Haimeng, 2009, p. 1). From this venture, China is able to achieve its energy efficiency objectives. The demand for coal should also be leveled to save on the available sources of energy and achieve the goal of reducing emissions that consequently cause the greenhouse effect. It should be noted that for China to achieve its goals in relation to the opportunities in the energy industry, a substantial amount of capital must be invested. Technological improvements and expertise are also vital for this venture. The developments are complementary, for instance the manufacture of electric vehicles requires adequate supply of electric power. The environmental sustainability that results from the exploration of the new energy opportunities provides a platform for other economic ventures to be pursued. Agriculture is a good example of such ventures which is a viable deviation from the highly industrial nature of China and a chance of maintaining both food and energy security (Barlow, 2009, p. 1) China is the world’s largest solar panels producer. Most of the manufacturing industries lack the capacity to manufacture solar-grade poly-silicon which is affordable. The opportunity in this case is the production of affordable solar panels as an alternative source of energy in China. For the state to achieve this, the best way to approach the situation is to enter into partnerships with international corporations that deal in the same line of business. Solar energy is readily available and easy to harness. The inexhaustible nature of solar energy guarantees the continuity off industrial activities. In addition, solar energy does not have negative effects on the environment because it is available in nature (Joerss, Woetzel & Haimeng, 2009, p. 1). The exploration of energy efficient explorations is important to China in a number of ways. For instance, the process of establishing new energy sources elicits the application of advanced technology. Therefore, the opportunity comes with development in technology which can be applied in other sectors of the country’s industrial and business sectors. Therefore, energy is a key component of any form of industrial activity or economic venture (TSE, 2010, p. 5). Conclusion From the critical analysis of China’s trading system, international trade is integral in the determination of the country’s GDP. The trading reforms that are preceded by China’ decision to join the WTO. By initiating the reforms, China has established itself in the world of global trading as a key player in the import and export based transactions. International trade has enabled the people of China to raise the living standards since the inflated GDP is sufficient enough to cater for the countries large population. 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