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Trade patterns in China and Hong Kong - Research Paper Example
Pages 4 (1004 words)
Trade Patterns in China and Hong Kong 05-17-2012 Trade Patterns in China and Hong Kong Countries all around the globe traded with each other since the pre-historic period. Why do they do so? All the countries have varying capital, human, and natural resources and also they have diverse ways of combining these resources…
(National Council on Economic Education) But some countries like Hong Kong plays an intermediation role for the trade of land lock countries such as China. Hong Kong acts as an entrepot for China. Hong Kong supplies semi-manufacturing goods as well as raw materials to Mainland China by importing from rest of the world. In exchange, it re-exports the manufactured goods from China to rest of the countries of the world. (Schoen, 2010) The two basic theories of trade flows are the absolute advantage and comparative advantage. Absolute advantage believes that a country should only produce those things which it can by using least possible resources. The absolute advantage China has in comparison to Hong Kong is China’s low-paid workers who are very beneficial in production of labor-intensive goods. Hong Kong comparatively have high cost of living due to which people of Hong Kong are hardworking. However, sometimes the effects of comparative advantage theory outweigh Absolute advantage as countries focus on goods with least opportunity goods as mentioned above. In this situation, a country with a comparative advantage can export same goods to a country in which the later country have an absolute advantage. ...
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