Financial Crisis in China

China has shown success in overcoming the economic crisis. While in developed countries, business suffers from a shortage of bank loans, China’s banks continue the process of lending to the economy. Government measures support domestic production and significantly increase the value of the shares of Chinese companies on the stock market, and expand the consumption of Chinese goods in the country and abroad. China reduced the duties on the export of more than 600 products significantly in 2010. They changed this for such points as supply of coal, granite, optics and medicine, in particular according to the Ministry of Commerce. At the same time, the agency does not indicate to what point facilitated export policy will act.

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Experts note that the Chinese government makes the new step and aims to support export-oriented companies that are most affected by the financial crisis, but do not rule out a new wave of anti-dumping proceedings against China by the EU and the U.S. China foreign trade showed an increase up to 9,8% compared to November 2008 and reached $208,2 billion. In just the first 11 months, the volume of China’s foreign trade reached $1,96 trillion, that is 17,5% compared to the same period in 2008. Because of the financial crisis, the volume of trade between China and its three main trading partners reduced: EU, U.S. and Japan by 17%, 13,4% and 17,4% respectively.

The benefits of the commodity market in China are related to an affordable and high-quality goods produced by local factories. Many companies have already discovered the “Chinese” way, and now their reward is a considerable profit and substantial cost savings. The reason for the increased interest in the commodity market of China by traders and producers is for such reasons and the possible benefits like the development of advanced, commercially viable areas, changing suppliers, purchase for further re-exported to countries in Europe and beyond, the decision dilemma “make or buy”, and placing special orders for the exclusive, unique production.

The demand for local products of the Chinese population is huge. However, local Chinese companies and multinational corporations are able to export a considerable amount of various products. Interest in Chinese goods is growing all over the world. Chinese goods are not only a good alternative for the price, but also a decent offer for quality, responding to the highest international standards. Today, the market is full of goods from China and almost anyone can find a suitable price and quality product. Products from China overcome all barriers, the commodity market is booming. In order to import products from China, there are different patterns of transport available. This involves rail, road, sea or air transport. Air and sea transport are considered to be the most optimal, with the help of which the cargo is delivered securely and in almost limitless quantities. Hundred of countries all over the world import a huge amount of different products from China every day.

Due to the dynamic development of industrial steel, coal, oil, cement and other raw materials production, which at one time were in short supply, are available in abundance now. This has led to the increase of economic potential of China, provided and stimulated sustained and rapid growth of the economy. At the same time, the Chinese market is abundant of clothing, household appliances, food, and other light industrial products. The largest cities in China represent a broad spectrum of production expertise.

Yunnan is developing areas such as non-ferrous metallurgy, machine building, electric power, textile, leather, food, chemical industry, building materials, printing, and instrumentation. Shanghai developed the automotive, electronics and communications equipment, metallurgy, petrochemical industry, complete equipment for power plants, the cotton industry and shipbuilding. Beijing is specialized in the steel industry, machinery, and textile, automotive and petrochemical trade.

Hong Kong is a center of the textile and clothing industry, the electrical and electronics industry, watch making, manufacture of plastic products and toys, as well as printing industry. Macau promotes clothing and textiles, electronics, optics, food and traditional crafts.

A large number of companies are now organizing the delivery of goods from China, but the most extensive selection of Chinese products can be seen in the domestic markets of China. China provides greater access to foreign investors as stock and bond markets in the pilot phase of the reform on the opening of the financial system. In particular, the country will increase quotas for foreign institutions to invest in the domestic capital market. According to official statistics, by the end of 2009, 12,000 Chinese investors in 177 countries have invested in the creation of 13,000 foreign companies. The total amount of foreign investment was $245,75 milliards; the total assets of their companies abroad exceeded $1 trillion.

In 2010, China has kept a relatively high volume level of direct foreign investments. According to the statistics from the Department of External Investment and Economic Cooperation of Ministry of Commerce, in 2010, Chinese investors have invested a total of 3125 foreign investment in companies in 129 countries worldwide. A total volume of mediocre foreign investment in the informal sector was 59 billion with a growth of 36,3%.

External investment in China comes in most Asian countries. According to the statistics, China’s foreign investments are mainly placed in Asia and Latin America. By the end of 2008, the amount of such investment was $131,32 and $32,24 billion, respectively. Most of the investment is in Asia due to geographical advantages and traffic count. In the context of investment activity with a focus on resources, there is a marked increase in direct investment to Africa. By the end of 2009, the total volume of Chinese investments in Asia, Latin America and Africa, respectively, amounted to 185,54 billion U.S. dollars, $30,6 billion and $9,33 billion. Indicators of China in Europe, Australia and North America, were $8,68 billion, $6,42 billion and $5,18 billion.

China is experiencing the largest obstacle in investing in developed countries. The rapid development does not mean a guarantee against risk to direct abroad investing. Among the different ways of managing the risks of transnational direct investment is much more than the import-export trade. Many countries have relatively strict accesses for China to their investment market. China is a new player in the international market of direct investment.

The problem is that in some countries there is too high tendency to protectionism, most Western countries consider China as a strong contender, and this fact complicates the situation, especially in the U.S. China is growing and it is important to mention that it enjoys sharing with others the results of development. This is proved by the facts that in 2000 China’s import growth was twice more than the average increase of imports in the world. China is rapidly increasing amount of foreign investment, providing assistance to other countries.

The global financial and economic crisis that began in the second half of 2008, affected the economy and the financial institutions of all countries. The scope and depth of the recession forced the world’s governments to take concerted action to maximize recovery. One of the main objectives of the Government in 2009 was to keep the economic growth rate at 8% mark. In the year of 2009, this point reached 9%. Due to the internal organization and the measures taken by the Government, they were able to maintain the pace of growth, it demonstrates the inherent strength of the economy and economic policy.

For decades, China’s economy has developed rapidly due to its export-oriented industries and the inflow of foreign direct investment. State Council approved 10-point program to improve the economic situation, which were aimed primarily at increasing the level of domestic demand in the country.

They include the following: accelerating the construction as part of a guaranteed cost effective and suitable housing for the population, expanding the construction of infrastructure facilities in rural areas, increasing the pace of construction of railways, highways, airports and other key infrastructure, accelerate the development of health, culture and education, increase the pace of construction of environmental facilities, and the promotion of independent innovation as well as structural change; accelerating reconstruction in the aftermath of the disasters, raising the incomes of urban and rural residents; lastly, promotion of technical reconstruction and increase in the degree of financial support for economic growth. The Chinese government succeeds in all of these.

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