Three Trade Regimes in China in the Post-1949 Period - Assignment Example

The trade regime comprised of central planning that was generally a Residual category concerning domestic capacity. Post-reform and pre-WTO: This was also called dual trade regime. There was the devaluation of currency from $1 which was equivalent to 1.4 Yuan to 1 dollar is equivalent to 8.7 Yuan, this was around 1994. Exporters were allowed to keep a percentage of foreign exchange In 1996 there was current account convertibility. The dual track was advantageous in the following ways, in that the new sector benefited whereas the old sector is not hurt.

The free market was also introduced and did not interfere with the existing old sector. Post-World Trade Organization. During this period there was tariff reduction and also removal of non-tariff barriers that included quotas, licensing, and quantitative restrictions. Major services included telecommunication with the advent of internet provision; there were also financial services and professional services like consultancy and accounting. 2. How did the dual-track foreign exchange market work? How did the dual-track in Foreign trade work?

This period was majorly between 1986 and 1993. It involved: a) Currency devaluation from one dollar which was equivalent to 1.4 Yuan to one dollar equivalent to 8.7 Yuan in 1994. The devaluation of the currency was encouraged to promote the number of exports. . China's foreign reserve by 2006 was over one trillion dollars which were more than a year’s import. d) In this period there was duty-free and many processing zones were created, there were witnessed tax holidays for some specific industries to steer their growth. e) Little interference was witnessed and also a free duty on goods purchased to make export goods.

Other countries that did the same were Island in the Indian Ocean and Mauritius. f) The period experiences an increase in the no. of trade in terms of international firms. In general, the exporters were insulated against the forever world trade general. 3. Why a dual-track instead of a single-track? Use the examples in foreign exchange and foreign trade to explain the advantages and disadvantages of a dual-track Dual track referred to the coexistence of two coordination mechanisms (plan and market) and not to the coexistence of two ownership systems the dual-track system allowed state firms to transact and cooperate with nonstate firms, allowing valuable flexibility.

But the growing importance of collective, private, and foreign-invested firms should be considered. It implied a two-tier pricing system for most goods. The greatest advantages of the dual, as opposed to single track, were that there was the introduction of free trade. In this system, there were tax holidays that further encouraged more foreign investments. Concerning this, the dual was better than one single track system that was not as economically viable because single track meant the entire economy was planned.

The planned economy in a way reduced investments and discouraged free trade.