December 17, 2004

Chinese Economy-Open Door Policy

Due to natural resource and the developing gap among areas, the average of income people in southeast part of China are higher than rest of the other provinces. The 1980s “Open Door” policy gives 10 cities a series of economic privileges to develop, along with the east coast line. The initial purpose of these policies is make southeast areas prosperous first, and then the other cities can learn the differences and make efforts on developing on their own. The policy is successful used during the last two decades. However, it also brought negativities. With the increasing job opportunities and living condition in these open places, thousands of people from nationwide are crowd into these cities for job hunting. The most remarkable phenomenon in Chinese cities under economic reform is the growth of the temporary population in large and medium-sized cities. There are two types of temporary population. The first type is temporary residents. Unlike permanent resident, whose households are registered in the city, temporary residents are mainly people who obtain permission to stay in a city for a fixed period of time. They are mainly contract workers working in factories or on construction sites. The other type is the transient or floating population. The transient population is normally not reported in city statistics but temporary residents are reported. The presence of the transient population is alarming in some of the large cities. They have increased the crime rate and overloaded transport, infrastructure, and housing in the city. As social facilities are based mainly on permanent residents, the existence of a temporary population also creates great pressure on social facilities, transport, and housing.

The open-door policy is an essential element of the economic reform process. It encourages foreign investment and promotes foreign trade. Foreign investment has provided capital, new technology, managerial skill, and training for labor to China. It has introduced modern managerial system, business practices and a legal framework for conducting business transactions. In addition it has provided competition in the domestic market, and competition has forced domestic enterprises to become more efficient. Foreign trade has enabled the low-cost and high-quality labor in China to produce goods to be sold at higher prices in the world market, thus increasing the compensation to Chinese labor. It has also enabled the import of technology and high-quality capital goods for use in production in China, as well as the import of high-quality consumer goods. The availability of high-quality capital goods improves productive efficiency. The availability of high-quality consumer goods not only increases consumer welfare directly; it also acts as an important competitive force in the Chinese consumer market that stimulates the improvement of the quality of domestically manufactured products.

China's entry into the WTO will make China's door even more open. Both foreign investment and foreign trade are expected to increase. Foreign firms will begin to penetrate China's financial and telecommunication sectors. Trade will increase in both directions and Chinese tariffs will be lowered and Chinese goods will have better access to world markets open to members of the WTO. Using foreign competition to stimulate the domestic economy is a major objective in seeking to join WTO, The Chinese government is well aware of the economic and social-political costs and benefits of joining WTO. While it is pursuing institutional reforms in state-owned enterprises and the banking and financial sectors, it is aware that the reforms and the accompanying globalization of the Chinese economy have to proceed in an appropriate speed. If foreign competition enters China too rapidly, adjustments by Chinese producers and enterprises may be too severe to be socially desirable. The harmful effects of foreign competition are monitored by putting into practice gradually the reduction of import tariffs and the admission of foreign competition in the financial and communication sectors.

Posted by HuiLin at December 17, 2004 4:51 AM

Almost all the toys I buy for my children are stamped "Made in China."

Thanks for this brief glimpse into the other side of that economic transaction.

Posted by: Dennis G. Jerz at December 19, 2004 9:59 PM

history sucks

Posted by: tom at December 6, 2007 9:26 PM
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