Chinas Economic Policies - Coursework Example

East Asia Introduction East Asia is a continent with the most successful regional economiesin the world. The region that consists of China, Hong Kong, Japan, South Korea, Taiwan, and Singapore has integrated numerous local policies that provide favorable legal and political environment for industrial growth and development of commerce. In this regard, the nation’s general acceptance of foreign trade and investment, high government savings and investment in technology have fostered economic growth in the region. Also, the countries also enjoy an abundance of natural resources making production input to be easily available and low cost. These nations have high populations that are highly skilled and specialized to provide adaptable labor (that is free and very flexible) at relatively low cost (Wong and Wei, 2007). These countries have adopted education systems that have rapid learning potential for the governments have integrated technology and scientific inventions/ innovations in providing skills to be applied inefficient production. The school system in East Asian nations emphasizes on equal educational opportunities for both girls and boys that surpass the global policy by a great extent. Moreover, high populations (estimated to be more than 2075 billion people) and high working age (15-59) also provide the required labor force for production. The region also has a high level of structural differentiation, economic system autonomy and efficient functional differentiation whereby the East Asian nations operate (Wong and Wei, 2007). China’s Economic Policies According to global investors, China provides the most profitable investment opportunity compared to other East Asian countries. China not only has high population, extensively broad geographical coverage and highly industrious, but it also has implemented numerous government policies towards attracting foreign investment. The Chinese government has created 5-year strategic plans that depict the creation of new industries that will be financed through government subsidies and grants (Wong and Wei, 2007). The industries are aimed at improving sectors such as infrastructure, information technology, biotechnology, automotive and energy. The local Chinese governments have provided necessary support to facilitate sector development in their region. The local governments provide subsidies to finance the acquisition of foreign technologies as well as finance innovation and inventions within China. Currently, the Chinese five-year national development plans postulate that the economy of China will grow sporadically and hit double Gross domestic product, as well as transition its sectors from agriculture into manufacturing and service industry. Additionally, the plan also seeks in environmental sustainability and management as well as improvement of social- political balance. The Chinese leaders have also pushed for sub-division of the five-year plan into sustainable short term plans aimed at promoting equitable regional development in particular between urban and rural areas as well as across all geographical regions. These short projects promote fair balance between social aspects, human relations, trade, relations, natural resources and conservation of the environment by reducing pollution (Wong and Wei, 2007). For China to achieve the long-term goals, China has implemented the following policies. First, China has strengthened its macroeconomic stabilization policies aimed at providing favorable investment opportunities by local and international investors. Secondly, China maintains the high rate of domestic savings to increase capital formation resulting to the adequacy of physical capital for investment instead of depending on foreign borrowing. Thirdly, China intends to tap on the availability of cheaper labor that is found in rural areas seeking employment in non-agricultural sectors. In this regard, China has made numerous structural changes by shifting from the agricultural sector into labor- intensive manufacturing and service sectors. The transition was increasing the quantity of cheaper products for Chinese consumption and export (Wong and Wei, 2007). Fourthly, China has invested in research and development. In this regard, China has strengthened its science and education program through the integration of technology in technical colleges and universities. Fifth, the human capital development program will ensure equal education opportunities for elementary education (in primary learning institutions) through the reduction of the cost of school fees in less developed areas. Sixth, the Chinese government, is improving its participatory role in market development through modernization of rural agricultural industries, reforming the regional administrative system and the provision of public goods (Wong and Wei, 2007). Adequate planning and integration of the plans and efficiency of implementation, China has dominated the East Asian economy. Chinese exports to other states have experienced a 15 percent increase, thereby ranking Chine the largest exporter of merchandise goods to Eastern Asia and the fourth largest exporter of the same products globally. China has taken advantage of its large size, similarity of culture, the abundance of resources, liberalization of trade and low-technology capital intensive production technique to displace its competitors within the East Asian region. China’s economic growth has resulted in the an importation of high priced products from technologically advanced East Asian neighbors, the quantity of these imports has reduced significantly compared to its exports. Additionally, china’s access to the World Trade Organization has given it the competitive advantage over other East Asian nations as well as other developed countries in terms of increasing manufacturing and industrial production (Wong and Wei, 2007). In spite of the above strengths and potential opportunities, China continues to face numerous challenges and external threats that may limit economic growth and development over time. First, the integration of macroeconomic stability policies may widen China’s income disparities at regional levels. Additionally, China’s population policy has resulted in decreasing population growth rate. The reduction will reduce the growth in labor supply and increase the dependency ratio in future time due to increase in the aging population. Ultimately, increased dependence increases consumption and reduces the national propensity to save. Moreover, reduced saving reduces the availability of physical capital, thereby reducing investment and economic growth (Wong and Wei, 2007). China will have achieved its primary objectives of the economic reforms in 2020. Additional changes are likely to have the lesser economic impact and are therefore unnecessary (Wong and Wei, 2007). The rapid increase in population has also resulted in environmental degradation as well as over exploitation of social amenities. Unfortunately, the government has failed to implement appropriate environmental protection policies. Moreover, China is ranked top importer of natural resources like fish, meat, energy, timber and minerals, thereby creating global concern about world food security especially since it imports these products in large scale. The sustainability of China’s economy may also decline due to rapidly decreasing resources because of over-exploitation. Lastly, there exists political tension China between different regions as well as along its borders where most of its natural resources are located. Opportunities In The Wine Industry The Chinese wine industry is a sector that has a huge opportunity for most international investors shy away from entering the industry due to inadequate consumption of wine among Chinese citizens (which is 0.4 liters per person per year, compared to 50 liters per person per year in France, and 25 liters per person in the US). Moreover, investors are also afraid of the cultural preference for Chinese wine among its citizens. However, due to high population, China provides the perfect market for international wine firms to invest in the country. It is estimated that wine sales over the past ten years has increased to over $6 billion per year and is expected to rise by more than 12 % per annum. Due to a presence of small but relatively large wine companies presence in China, and increasing population growth, wine consumption has a huge potential to grow. Currently, China’s annual wine consumption in 2014 stood at 2.17 billion bottles and, therefore, ranked fifth largest wine-consuming nation in the world. Additionally, while the red wine consumption decreased in France by 18 percent since 2008, in China it has increased by 136 percent. The increase in wine consumption has resulted in the importation of foreign wines as well as greater investment in modern ways of wine fermentation along Grape Producing Regions of Yantai, Beijing, Zhangjiakou (Hebei) Taiyuan (Shanxi), Yibin (Sichuan), Ningxia, and Tonghua (Jilin). Due to numerous government policies favoring the investment and establishment of foreign-based companies, abundance of production resources, high consumption of wine, availability of capital (from savings and subsidies by national and local government), and improved technological wine production methods, foreign wine companies stand to benefit from the returns obtained (Wong and Wei, 2007). Diamond Estates Wines analysis In this regard, the Diamond Estates Wines and Spirits limited that produces the 20 bee brand would be better suited for this type of investment. The company has not only proven its efficiency by acquiring the 20 bee brand from Niagara Vintners, but also invested heavily in the Canadian Wine Industry. The product may be very successful through franchising within throughout the main cities since it is an international brand (AgMedia, 2008). With over seven years experience, investments and commitment to wine production, the company is more likely to benefit from investing in the Chinese industry and later on progress to Asian and global production. Conclusion East Asia is a continent with the most successful regional economies in the world. The region has integrated numerous local policies that provide favorable legal and political environment for industrial growth and development of commerce. China provides the most profitable investment opportunity compared to other East Asian countries. China not only has high population, extensively broad geographical coverage and highly industrious, but it also has implemented numerous government policies towards attracting foreign investment. Foreign wine companies (such as Diamond Estates Wines and Spirits) stand to benefit from the returns obtained from investing in China. Works Cited AgMedia Inc “20 Bees Wine Maker Has a New Owner.” BETTER FARMING, 14 July 2008. Web. 17 May 2015. Wong, John, and Wei Liu. "Preface to Chinas Surging Economy: Adjusting for More Balanced Development." Contemporary China 11 (2007). Read More