Impact of trade and foreign investments on the industrial change in China

Essay, 2011

10 Pages, Grade: 2,0


Table of Contents

1. Introduction

2. Trade in China
2.1 Import and export patterns
2.2 Evolution of trade
2.3 Liberalization of trade

3. Impact of Trade and investments on the industrial structural change in China
3.1 Ownership restructuring
3.2 China´s expansion in high-tech market

4. Conclusion

References III

1. Introduction

Since 1978 the economic reform process in China has been in progress. It transformed the economy of the People’s Republic of China (PRC) from a centrally planned into a socialist market economy with Chinese characteristics. A basic feature of this reformation was the encouragement of foreign direct investment inflows as well as the liberalization of trade in China.1

In the present essay, I will trace the evolution of trade patterns together with their associated consequences on China’s industrial structure.

2. Trade in China

2.1 Import and export patterns

China is due to its labour abundance a big exporter of traditional labour-intensive goods. Therefore in the 1980s the major industrial sectors were the production of textiles, clothes, food and fuel products. The PRC’s imports consisted of capital and skill-intensive products like machinery, electronics and heavy, process technology products. China’s trade pattern hence matches well with the principle of comparative advantage due to the fact that the country has large labour endowments, but scarce abundance of capital and land.2

However China’s patterns of trade have evolved. There was a dramatic increase in the exports of manufactured goods from about 25% in 1984 to 70% in 1990 and nearly 90% in 2000. This significant change in exports can be explained by a shift in the comparative advantages of China. The PRC’s comparative advantage in traditional sectors declined in the 1990s such as in the production of natural-based products like agriculture products, fuel and food. But China has become an important exporter of manufacturing products due to new comparative advantages in manufacturing of computer and telecommunication equipment and electronics.3

2.2 Evolution of trade

In the following, it will now be analyzed how trade in the PRC has developed and what the major changes have been.

Volumes of trade have increased strongly from about 10% of GDP (gross domestic product) in 1978 to more than 70% of GDP in 2006. Numerically expressed, total trade of China climbed from US$ 38 billion in 1980 to more than US$ 474 billion in 2000.4 Exports as well as imports also experienced a significant increase during the last two decades. China’s exports augmented from less than 10% of GDP in 1978 to more about 40% of GDP in 2006, imports escalated also from less than 10% in 1978 to more than 30% in 2006. But this strong rise in exports and imports and in volume of trade can also be observed when regarding China’s position in world trade. In 1980 China accounted for less than 1% of total world exports. However China’s exports accelerated strongly and reached a share of nearly 10% of total world exports.

Hence China climbed from number 23 in the ranking of international trade in 1978 to number 7 in 2000 and further to number 3 in 2005 with a value of export of US$ 762 billion (compare table 1).5

illustration not visible in this excerpt

Table 1: Top ten exporting nations in the world 2005

Today China ist the second largest exporter followed by Germany with an export amount of US$ 1217.8 billion which means a share of 8.7% of total world exports and an annual growth of 26%.


1 Fung, Iizaka, Tong (2002), p. 3.

2 Ding, Knight (2008), p.23.

3 OECD (2000), p.16.

4 Fung, Iizaka, Tong (2002), p. 12.

5 WTO (2008): International Trade Statistics, p.12.

Excerpt out of 10 pages


Impact of trade and foreign investments on the industrial change in China
University of Applied Sciences Stuttgart
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ISBN (eBook)
ISBN (Book)
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impact, china
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Andreas Müller (Author), 2011, Impact of trade and foreign investments on the industrial change in China, Munich, GRIN Verlag,


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