TEMA SEMINAR

Comentati articolul de mai jos. Aveti grija la formularea in limba romana, la cerintele limbajului
academic si nevoia de adaptare a timpului verbelor pt. actiunile trecute (articolele surprind
situatia anterioara declansarii crizei financiare). Tema se va redacta in aprox. 4 - 4, pagini scrise
de m!n".
1. China - Comparative Advantage Not Cause of Trade Surplus. There are several reasons for the current
huge foreign trade surplus http!""".#$revie".com.cn%andat&t'(()-(*1+content,)'-.*,'.htm
Since adopting/ the reform and opening-up polic0 in the late 11)(s2 China has constantl0 e&panded its
foreign trade #0 giving full pla0 to its comparative advantage in production cost. 3o"ever2 no"ada0s2
pro#lems previousl0 camouflaged #0 high 456 gro"th have #egun to emerge from the "ood"or7.
E&ternall02 China is faced "ith pressure on the 0uan8s appreciation resulting from the trade surplus2 as
"ell as trade frictions "ith the 9nited States and the E9. Internall02 the pro#lem is e&cess li%uidit0 due to
over :1 trillion in foreign e&change reserves2 coupled "ith a si;;ling stoc7 mar7et and sharpl0 rising
housing prices. In a recent intervie" "ith '1st Centur0 <usiness 3erald2 6rofessor =ustin >i-fu ?in from
China Center for Economic Research2 6e7ing 9niversit02 "ho "as the first person to
introduce the concept of @comparative advantage@ to China2 responds to the man0 dou#ts people have
a#out the theor0. E&cerpts!
'1st Centur0 <usiness 3erald! The @comparative advantage@ strateg0 is credited "ith driving China8s
econom0 over the past '( 0ears after the reform and opening-up polic0 "as initiated2 #ut no"ada0s2 more
and more people are #eginning to feel suspicious of this strateg02 #elieving that China8s e&port-oriented
development mode is responsi#le for the im#alance in economic structure and increasing trade surplus.
Are these inevita#le results of the @comparative advantage@ strateg0A
=ustin >i-fu ?in! According to the @comparative advantage@ theor02 products short of comparative
advantages must #e imported2 "hile industries "ith comparative advantages can attract more capital and
other resources and thus can develop %uic7l0. The e&port process is much easier for these products. This
is the case in China2 since reform and opening up. 3o"ever2 to import or e&port is decided #0 the factor
endo"ment structure2 and never intentionall0 increased #0 an0one. Although nations follo"ing the
@comparative advantage@ strateg0 can e&port more than countries adopting the @catch-up@ strateg02 it8s not
"ise to confuse a @comparative advantage@ strateg0 "ith an e&port-led strateg0.
Actuall02 comparative advantages come from comparison. Bithout government interference2 industries
"ith and "ithout comparative advantages "ill respectivel0 account for half of the foreign trade sector.
Therefore2 if a nation develops its econom0 #0 strictl0 7eeping to the @comparative advantage@ strateg02
although it "ill more depend on trade than countries follo"ing the @catch-up@ strateg02 its e&ports and
imports must #e in a #alance and2 if not2 the im#alance must #e a temporar0 phenomenon resulting from
industrial structure ad$ustment.
In accordance "ith the @comparative advantage@ strateg02 a countr08s imports and e&ports "ill reach a
#alance. Bh0 does China have such a large surplus in foreign tradeA Is it #ecause of the e&port-oriented
strateg0A
There are several reasons for the current huge foreign trade surplus. Cirst2 it is the overheated investment2
"hich has led to overcapacit0.
1
Second2 the #ig trade surplus also has something to do "ith the 9nited States. As "e 7no"2 Americans
have a lo" savings rate and there is a fiscal deficit. It indicates that the 9.S. mar7et has a large demand2
"hich "ill inevita#l0 lead to a rise in the trade deficit. The 9nited States is the "orld8s largest econom02
accounting for one third of the "orld total. In the mid-111(s2 trade deficit onl0 made up 1 percent of the
9.S. gross domestic product2 #ut no" it has risen to more than . percent. Thus2 inevita#l02 a trade surplus
"ill result in some other countries. Actuall02 during this period of time2 =apan and 4erman0 also sa" a
sharp increase in trade surplus.
Third2 capital-intensive products from some developed economies2 especiall0 the 9nited States2 should
target the Chinese mar7et2 #ut apart from airplanes2 these countries #loc7 the e&port of such products to
China. As a result2 "e can8t get "hat "e hope to import. This situation is not created #0 China.
Courth2 the speculation on 0uan appreciation results in an a#surdl0 high trade surplus. Actuall02 since
'((+2 there has #een mounting pressure on the revaluation of the Chinese currenc0. Speculators #elieve
that the 0uan "ill #e appreciated #0 '(-+( percent. Since the 0uan is not converti#le under the capital
account2 some #usinesses have e&aggerated e&port value "hile underreporting import value2 hoping to
increase their foreign currenc0 reserves in order to profit from the supposed appreciation. Bhen the
e&change rate #egins to rise sharpl02 this "ill happen in an0 countr0 "here the capital account is
restricted. <et"een 11*D and 11*)2 =apan greatl0 appreciated its 0en2 "ith the rapid gro"th of current
account surplus and foreign e&change reserves.
An inevita#le assumption for the @comparative advantage@ theor0 is the free flo" of commodities among
different countries2 #ut this is not the case in realit0. The impact of China8s ever increasing e&port volume
is much #igger than the reaction caused #0 the e&port-oriented strategies of the Cour Asian Tigers. Is it
possi#le for China to cop0 the model of the Cour Asian TigersA
?oo7ing #ac7 at the '* 0ears since China adopted the reform and opening-up polic02 in 11)12 China8s
e&port volume "as :1+... #illion and the import volume "as :1D..) #illion. The num#ers respectivel0
$umped to :D1+.+' #illion and :D.1.'+ #illion in '((-. The gro"th rates of import and e&port volumes
are almost the same. It "as onl0 in '((D that trade statistics #egan to lose their accurac0 #ecause of
e&panding speculative capital.
Although China8s rising e&ports are providing competition for other countries2 the rising imports are also
opening a #ig mar7et for the rest of the "orld. There is some difference2 ho"ever. Bhile "e are e&porting
la#or-intensive products2 "hat "e import are capital-intensive products2 that is to sa02 China8s e&ported
products can offer relativel0 more emplo0ment opportunities than imported products.
En one hand2 China has a large domestic mar7etF on the other hand2 China is facing increasing trade
frictions. 3o" should China deal "ith the relationship #et"een the domestic mar7et and international
tradeA
Bhen an econom0 ta7es the @comparative advantage@ strateg02 it "ill #ase its development on full0
tapping into the international mar7et. As long as its products have comparative advantages2 the0 "ill #e
competitive in #oth domestic and international mar7ets.
Moreover2 from the perspective of domestic demand2 comparativel0 spea7ing2 to develop the econom0 in
accordance "ith comparative advantage2 the domestic demand "ill also rise. If China ta7es the @catch-up@
strateg02 the "ealth0 "ill invest in the capital-intensive industries and these industries "ill provide
relativel0 limited $o#s2 "hich ma7es it impossi#le for man0 poor people2 "ho ma7e mone0 #0 "or7ing as
la#orers2 to participate in the econom0 and en$o0 the fruits of economic development. As "e 7no"2 the
'
rich are not much inclined to spend mone02 so "hen the "ealth is controlled #0 a small num#er of rich
people2 the "hole societ0 "ill tend to spend little.
In line "ith the @comparative advantage@ strateg02 the Chinese econom0 "ill #ecome ver0 competitive2
"hich "ill of course #e ver0 sta#le. In a sta#le econom02 people tend to #e more confident a#out future
earnings and spend more. If "e tr0 to overta7e other countries2 the economic circle "ill change sharpl0.
As a result2 the government does not need to protect and su#sidi;e enterprises that are tr0ing to overta7e
others #ut can8t survive #0 themselves. Instead2 the government can put more pu#lic finance into social
securit02 education and health.
Industries that rel0 on the advantage of la#or costs and resources usuall0 fall into the lo"-threshold
categor0 and thus "ill attract the attention of more #usinesses2 regions and countries. Bill China8s
comparative advantage decline or even disappear in this scenarioA
Comparative advantages are felt through comparison. As long as there is the possi#ilit0 of comparison2
the advantage "ill remain indefinitel0. Cor e&ample2 the la#or force in Giet Nam is cheaper than that in
China2 and some are afraid that China8s advantage of cheap la#or force "ill #e overshado"ed #0 Giet
Nam. The %uestion is that since "e have more capital than Giet Nam2 should "e still continue la#or-
intensive industriesA If "e continue to do so2 "e have to offer su#sidies2 #ut "h0 do "e su#sidi;e
enterprises that do not have comparative advantagesA
The 7e0 no" is ho" to further improve the mar7et econom0. As long as "e have a "ell-developed mar7et
econom02 mar7et competition "ill drive enterprises to continue industrial and technological upgrading.
Against the #ac7drop of glo#ali;ation2 developed countries are al"a0s at the high-value-added end of the
industrial chain2 in the international la#or division s0stem2 "hile the vast ma$orit0 of developing countries
are relegated to the lo"-value-added end. If all countries tend to manufacture products of comparative
advantages2 is it possi#le that "hile the original advantages "ill #e continuousl0 strengthened2 developing
countries "ill never catch up "ith developed countriesA
Crom the perspective of comparative advantage2 it8s completel0 possi#le for developing countries to catch
up "ith developed countries. The reasons are as follo"s! Cirst2 as developing countries have relativel0
limited capital2 the return rate "ill rise and this "ill promote accumulation of capital. Second2 after capital
is accumulated2 upgrading of the industrial structure is in urgent need. 3o"ever2 if the0 onl0 depend on
themselves for technological research and development2 the chance of success is lo". 5uring the period
of capital accumulation2 if there is no technological progress or the progress is slo"2 capital return "ill
slo" do"n2 together "ith capital accumulation. 5eveloping countries2 ho"ever2 have opportunities to
largel0 cop0 and import technologies from developed countries2 "ith lo" cost in innovation. Bith rapid
innovation2 the capital return rate can remain at a relativel0 high level.
4iven the a#ove t"o points2 in developing countries that follo" the @comparative advantage@ strateg02 the
upgrading of the factor endo"ment structure "ill #e faster than it is in developed countries. After
developing countries catch up "ith developed countries in terms of factor endo"ment structure2
industries2 technologies and income levels are li7el0 to 7eep up "ith developed countries8.
China is pa0ing more attention to independent innovation2 "hat steps should #e ta7en "hen dealing "ith
technolog0 imports and independent innovationA
+
If technolog0 imports are possi#le2 of course "e should do it2 as this "ill save more costs than if "e do
the research and development "or7 #0 ourselves. Nevertheless2 from the perspective of comparative
advantage2 innovation is still necessar0.
Cor e&ample2 technologies imported from developed countries are often of high automation level2 so the0
do not necessaril0 suit the situation in China and must #e read$usted accordingl0. To sum up2 "hat ma7es
China competitive is not a high technological level #ut lo" production cost.
-

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.