International Business between China and USA - Essay Example

?International Business between China and USA Table of Contents Introduction 3 ment of Problem 4 International Business between China and the USA 4 Merchandise Business between China and the USA 5 Import Business between China and USA 7 Service Business between China and the USA 8 Major International Business Issues between the USA and China 10 Currency Issue between China and the USA 10 Intellectual Property Right Issue between China and the USA 11 Conclusion 12 Works Cited 13 Bibliography 14 Introduction In recent years the businesses between two major economies in the world i.e. the United States of America (USA) and China have extensively increased. In the year 1979, the Chinese economy had restructured which has assisted the country to become one of the greatest rising economies in the world. The economic development of China as well as trade liberalization comprising inclusive business obligations in the year 2001 on joining the World Trade Organization (WTO) agreement had resulted in sharp expansion of the US - China business relationships (Morrison, “China-U.S. Trade Issues”). Traditionally, China was regarded as a closed economy and it was not contributed to the international business. However, in present days, China is considered as one of the biggest business nations internationally. China’s incorporation in the international economy and progressive capture of the market ideologies had been initiated by the US political and financial commitment. The economic development of China has helped to widen and extend the business associations between the US and China at every level for the welfare of both countries (United States Trade Representative, “U.S.-China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement”). Statement of Problem The paper will describe the trends of business relationships between the two nations i.e. China and the US with respect to export business, import business as well as services business. Further, the paper will also will consider the other aspects that have impacted the trade relations between the USA and China. International Business between China and the USA Since the mutual trade agreement between two nations in the year 1979, the international business increased significantly. In the year 1979, the total business between the US and China was approximately US$ 2 billion and it increased to US$ 457 billion by 2010. Presently, China is regarded as the second biggest US business associates and it is the third biggest export market for the USA. The imports had developed much quicker in comparison to export business. The import deficit between these two countries had increased from US$ 10 billion in 1990 to US$ 273 billion in 2010 (Morrison, “China-U.S. Trade Issues”). The following figure will describe the international business between the US and China from 2000 to 2010: Source: (Morrison, “China-U.S. Trade Issues”). Merchandise Business between China and the USA The merchandise business between China and the USA had improved considerably with 32.1% increase in 2010, compared to 2009. With the rapid improvement in merchandise exports, China has gradually replaced Japan as one of the merchandise export markets for the US. In the year 2010, the US export business with China represented almost 7.2% of total exports, a 5.1 percentage increase than 2000 (Morrison, “China-U.S. Trade Issues”). The following chart will describe the top export business partners of US in 2010: Source: (Morrison, “China-U.S. Trade Issues”). During recent years, China has remained as one of the fastest rising export markets for the USA. The major categories of export business between China and the USA in the year 2011 were crops, computer and electronic products, chemical products, shipping tools, raw materials and ore. The following table will describe the top most exported products between the US and China in 2010 and 2011: Source: (Turner, “US-China Trade Continues To Surge in 2011”). Several business analysts have argued that in future China can become one of the most significant markets for export for the USA. The major objectives of China to update the business infrastructure and industries and develop the lifestyle of people can create considerable demand for international products as well as services (Morrison, “China-U.S. Trade Issues”). Import Business between China and USA In the year 2010, China was the biggest importing destination for the USA. The amount of import in 2010 was raised by 23.1% compared to 2009. The total import in 2010 was worth US$ 365 billion representing almost 19.1% of total imports of the US. The position of China as an importing nation to the US had increased considerably, i.e. from eighth position in 1990 to first position by 2010 (Morrison, “China-U.S. Trade Issues”). The following table will show the US imports from China during 2005 to 2010: Source: (Morrison, “China-U.S. Trade Issues”). Traditionally, during the period of 1980s and 1990s almost all imports between the US and China were inexpensive products and labor intensive goods, for instance, games, electronic goods, footwear, cloths and apparel products. However, in recent years, the components of imports have changed to technically advanced materials, for example computer equipments, communication tools, audio and video tools among others. According to the report of “US Census Bureau” in the year 2009, the total import of “advanced technology products” (ATP) from China to the US was almost US$ 89.7 billion which was almost 30.3% of total imports (Morrison, “China-U.S. Trade Issues”). Service Business between China and the USA Service business is one of the major aspects for the US - China international business relationship. The significant growth of China’s middle income group people contributed to the service business of the USA, because they are regarded as one of the most enthusiastic buyers of US exports with respect to services such as travel, educational or online services. Since 2001, the service exports between the US and China have increased considerably. The “majority-owned foreign affiliates” (MFOAs) represent the major development in service exports to China. In the year 2003, the total service export between the USA and China was almost US$ 6 billion whereas services export through MFOA was almost US$ 3.8 billion (VanGrasstek, “The Benefits of U.S.-China Trade in Services”). The following graph will show the trend in service export business between the US and China from 1994 – 2004: Source: (VanGrasstek, “The Benefits of U.S.-China Trade in Services”). Major International Business Issues between the USA and China Though the businesses between the two countries i.e. China and the US have expanded radically, there are several issues regarding trade that result in anxiety and pressure within the business relationships. One of the most significant issues for China and the USA was the disagreement of China to accept the market oriented currency rate. Currency Issue between China and the USA Unlike other developed economies, China did not keep a market driven balanced currency exchange rate. From 1994 to 2005, “China had pegged its currency” (RMB or Yuan) rate to the US$ at almost “8.28 Yuan to the Dollar” (Morrison, “China-U.S. Trade Issues”). In mid 2005, China raised the RMB to Dollar rate by 2.1% and shifted to a “managed float” on the basis of key international currencies comprising US$. According to “Bank of China”, during 2005 – 2009 the exchange rate between Dollar and Yuan shifted from 8.27 to 6.83, i.e. had almost 2.1% appreciation. Several US officials as well as business diplomats related with import based business had accused that regardless of slight transformation in currency policies, the Chinese government sustained to influence the currency to maintain a low rate against Dollar. Furthermore, it was also accused that the Chinese currency strategy was the crucial aspect for trade shortage between China and the USA (Morrison, “China-U.S. Trade Issues”). Intellectual Property Right Issue between China and the USA The other international business issue between China and the US was intellectual property right (IPR). The US had pushed China to develop the IPR safety and security management from 1980. In the year 1991, the US had also pressurized China to enforce almost US$ 1.5 billion business sanctions in case it is unable to enforce IPR safety and security measures. In the year 1995, both the nations had arrived at mutual business contract where China had promised to take instant measures to stop IPR isolation by cracking down on major manufacturers and dealers of pirated products. Under the condition of relationship with WTO, China had also agreed to develop IPR regulations in agreement with WTO’s business oriented aspects of IPR, comprising a pledge to set up an efficient IPR enforcement rule (Morrison, “China-U.S. Trade Issues”). Conclusion The business relationship between China and the US has become much vital to the development of economies in both nations. China’s economy is increasing rapidly where international business with the US plays a significant part. The export business of China represents a significant part of China’s gross domestic product (GDP) and both the countries have obtained numerous advantages from this business relationship. Due to open trade between China and the US, the American people can enjoy ranges of consumer goods with cheap costs which impacts on the US economic development while maintaining the inflation rate. On the other hand, Chinese middle class people can also enjoy the benefits of the US service exports and other products such as educational products. Due to growing business between China and the US, together these two nations represent almost half of international financial developments in recent years (United States Trade Representative, “U.S.-China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement”). Works Cited Morrison, Wayne M. “China-U.S. Trade Issues”. February 28, 2012. Congressional Research Service, 2011. Morrison, Wayne M. “China-U.S. Trade Issues”. February 28, 2012. Congressional Research Service. Turner, William. “US-China Trade Continues To Surge in 2011”. February 28, 2012. US-China Business Council, 2012. United States Trade Representative. “U.S.-China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement”. February 28, 2012. Top-to-Bottom Review, 2006. VanGrasstek, Craig. “The Benefits of U.S.-China Trade in Services”. February 28, 2012. United States Council Foundation, 2006. Bibliography Chen, Shuxun. & Wolf, Charles. “China, The United States, and the Global Economy”. February 28, 2012. RAND, 2001. Dumbaugh, Kerry. “China-U.S. Relations: Current Issues and Implications for U.S. Policy”. February 28, 2012. Congressional Research Service, 2009. Read More