ASSIGNMENT 1 Torres, Ann Nathalie G.

INTBUS-18 F 5:30-8:30PM

1. the world trading system;

China's rise was aided by its incorporation into an international structure focused
on laws. Competitive pressures and sensitivities, on the other hand, strained relations
with many of Beijing's main trading partners, especially when Beijing used its economic
clout for strategic interventions across Asia, as well as in Europe, Africa, and Latin
America. However, China is not alone in using its economic clout for political gain; the
US has imposed sanctions on Iran and Venezuela, as well as used punitive trade
measures against China and other countries. Although their interventions vary in
design, the global trading mechanism is now being undermined by the authoritarian
behavior of its key creator​ and major beneficiary.

China's use of aggressive measures to further its political needs grew as it

became more incorporated into the global economic system. After joining the World
Trade Organization (WTO) in 2001, it was able to establish itself as the hub of a global
manufacturing network, receiving parts and components primarily from the Northeast
Asian economies of Japan, South Korea, and Taiwan – totaling 40 percent of all
Chinese imports, and they were being processed for re-export to the United States and
Europe. China's rise to fame as the world's assembly plant enhanced East Asia's
economic influence. China, on the other hand, was seen as exacerbating global
macroeconomic imbalances and sowing the seeds of increased tensions with the West.
With its increasingly global reach, Beijing has grown more dependent on intimidation to
express its frustration with foreign policy problems, regularly imposing trade restrictions.

2. the world monetary system;

The world is moving toward a three-currency structure, with the US dollar, the
euro, and an Asian currency at its base. It is premature to expect that the renminbi will
quickly become Asia's main primary currency, if not one of the world's. It is dependent
on the speed and extent of China's domestic reforms (particularly institutional reforms)
as well as the US dollar's resilience or weakness. Asia's strategic financial and currency
collaboration should be improved, with the promotion of renminbi internationalization a
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top priority. An Asian currency unit (ACU) could serve as a focal point for regional policy
coordination and exchange rate alignment.

It is important to understand the essence of the mechanism into which China is

proposing to incorporate while contemplating the renminbi's internationalization, as well
as the broader issue of China's entry into global financial markets. The current
organization of the IMS is not well captured by economists' current theoretical
infrastructure, as several scholars have recently pointed out, for example, McKinnon
2013; Prasad 2014. As a result, policy recommendations focused on the typical
apparatus run the risk of misunderstanding all future benefits and pitfalls posed by the
existing structure. The following sections establish an alternate apparatus based on the
premise that the IMS is a payments scheme, and that foreign money is the ultimate form
of payment for debt settlement.

3. the business strategy of today's European and U.S. global corporations;

and

China's abundant low-cost labor has helped it to succeed globally in some

low-cost, labor-intensive industries. As a measure, consumer goods account for a large
portion of China's exports. Parts and pieces that are assembled into finished goods,
such as consumer electronic products and laptops, and then shipped, make up a large
portion of China's imports. In certain instances, the value contributed by Chinese
employees to such goods in China is negligible concerning the overall value of the
commodity as it is exported abroad.

China's leadership has raised confidence in its economic model as a result of its
strong economic development and emergence as a global economic force. Many agree
that one of the most challenging problems facing the US is persuading China that it has
an interest in preserving the international trade system, which is primarily responsible
for its economic growth, and that it should take a more involved leadership position in
ensuring the system's continued existence. Lowering trade and investment barriers in
China will improve competitiveness, lower commodity prices, raise economic growth,
and stimulate innovation. However, many U.S. stakeholders are worried that China's
efforts to promote indigenous innovation and technology would result in increased state
interference, such as subsidies, trade, and investment barriers, and discriminatory
policies, which will damage IP-intensive firms in the United States.

Different people have different ideas about how to negotiate with China on major
economic issues. Some people believe that engaging China through different platforms
is a good idea. Others advocate for a hybrid strategy that blends cooperation where
possible with a more robust use of WTO dispute resolution mechanisms to counter
China's discriminatory trade policies. Others, who see China as an increasing threat to
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INTBUS-18 F 5:30-8:30PM
the US economy and global trading environment, support a strategy of controlling
China's economic influence and using restrictive measures, such as increased tariffs
under Section 301, to either reduce the detrimental effect of China's industrial policies
on US companies or compel China to reform distortive and discriminatory policies. such
as the Made in China 2025 initiative.

4. global commodity prices.

For commodity markets, China is becoming increasingly relevant. China's market

position and effect on global trade and prices vary by commodity; for example, it has
become the world's largest importer of base metals and agricultural raw materials, with
a smaller yet increasing presence in the food and energy sectors. The price of oil and
some base metals is affected significantly and persistently by shocks to aggregate
production in China. Shocks to obvious consumption, on the other hand, have little
effect on consumer prices (due in part to inventory demand).

China's influence on global commodities markets is growing, but it is still less

than that of the US. This is mostly due to the patterns of economic activity growth
shocks in the United States, which appear to be more frequent and have greater global
consequences. One of the conclusions of a VAR-based analysis is that the effects of
supply shocks could be underestimated. The discovery that supply disruptions do not
affect markets is counterintuitive and challenges other scientific results. There seems to
be clear evidence that supply shortages, especially long-term ones, may have major
effects on actual commodity prices.

Looking ahead, China will gradually decide commodity market trends, with the
only question being how significant the China influence will be. Understanding how
Chinese commodity demand will change as its economy moves away from investment
and exports and toward consumption will remain the biggest challenge for future
research in this area.
ASSIGNMENT 1 Torres, Ann Nathalie G.
INTBUS-18 F 5:30-8:30PM

References:

China’s Economic Rise: History, Trends, Challenges, and Implications for the United
States - EveryCRSreport.com
https://www.everycrsreport.com/reports/RL33534.html

The China Effect and the Future of Commodity Prices - Columbia Business School
https://www8.gsb.columbia.edu/articles/chazen-global-insights/china-effect-and-future-c
ommodity-prices

CHINA’S ENGAGEMENT WITH AN EVOLVING INTERNATIONAL MONETARY

SYSTEM A PAYMENTS PERSPECTIVE - Institute for New Economic Thinking
https://www.cigionline.org/sites/default/files/china_engagement_cigi-inet_special_report
_web_0.pdf