Introduction
Economics studies the allocation of scarce productive resources that includes workers, machines, and land to different productive activities particularly factories, offices, farms, labor, and machinery whose purpose is to generate commodities that will satisfy consumers’ needs. In the economists’ own language, economics examines how scarce, or limited, factors of production usually defined as land, labor and capital can be used wisely when there are many competing uses. In brief, economics is hailed as the science of rational choice under conditions of scarcity (1998). Economics is the study of how people choose to allocate its scarce resources to meet unlimited wants in order to maximize benefits to the society and distribute benefits according to effort exerted. It is concerned with the production, distribution, exchange, and consumption of goods and services.
Economists focus on the way in which individuals, groups, business enterprises, and governments seek to achieve efficiently any economic objective they select. Other fields of study also contribute to this knowledge: Psychology and ethics try to explain how objectives are formed; history records changes in human objectives; sociology interprets human behavior in social contexts (1999). It tries to explain the behavior of the economy by building hypotheses or theories. Specific versions of these theories are sometimes referred to as economic models. These models are simplifications of the real world that are potentially useful in illustrating some key feature of how the world works. Theories are tested by their internal consistency, by their conformity with established principles, and against available data. The latter is the ultimate test of how useful economics is to non-economists. It tries to give answers to questions like does it help explain or predict things that are going on in the real world (1997).
In democratic communities, it is exceedingly difficult to generate public support for assistance to foreign countries when average wage earners are themselves under serious financial pressure. It is no easier politically to permit cheap foreign merchandise and materials to freely enter American and European markets when they are viewed as the cause of unemployment among domestic workers ( 1997). Opinions differ as to how long sustained economic growth can continue.
Optimists pin their hopes on the ability to improve crop yields and enhance industrial productivity through technological innovation. Pessimists point to diminishing resources, unchecked population growth, excessive military spending, and the reluctance of rich countries to share their wealth and expertise with less fortunate nations. Government instability, endemic corruption, and wide swings in economic policy make the Third World’s economic prospects seem even less auspicious in the 1990s (1997). Countries make sure that their economy is doing well so that they can harvest its benefits. The paper will discuss about china and its economy. The paper will also discuss the advantages and disadvantages of China’s accession to the WTO. Lastly the paper will discuss to what extent will the current rapid growth in the Chinese economy be sustainable in the future.
China and its economy
Officially the People’s Republic of China, China is a country in East Asia, the world’s largest country by population and one of the largest by area. The name China was given to it by foreigners and is probably based on a corruption of Qin, a Chinese dynasty that ruled during the 3rd century B.C. Beijing, located in the north, is China’s capital and its cultural, economic, and communications center. Shanghai, located near the Yangtze, is the most populous urban center, the largest industrial and commercial city, and mainland China’s leading port (1977). Chinese culture dates at least as far back as 3,000 years. Its main influences are probably more recent but even so it is one of the longest and most durable around. The three bonds of loyalty bound the society with loyalty to the ruler, filial obedience and fidelity of wife to husband. Chinese society today is thus the result of a long process of adaptation to changes in this cultural environment (2001).
China developed an agricultural economy more than 2,000 years ago. During the Han dynasty the Chinese developed several tools and practices that farmers in Europe and the Middle East adopted only centuries, or even a millennium, later. The cast-iron moldboard plow, for example, made it easier to cultivate hard or stony land. Although heavier than wooden plows, these plows created much less friction and could be pulled by a single animal, even in the waterlogged clay soils of southern China. After the Han period, however, China’s agriculture and economy advanced more slowly (2003). In the 1950s China’s Communist government began bringing a majority of economic activity under state control and determining production, pricing, and distribution of goods and services.
In 1979 China began implementing economic reforms to expand and modernize its economy. The reforms have gradually lessened the government’s control of the economy, allowing some aspects of a market economy and encouraging foreign investment; however, the state-owned sector remains the backbone of China’s economy. China refers to this new system as a socialist market economy As a result of the reforms, China’s economy grew at an average annual rate of 10.2 percent in the 1980s and by 10 percent annually in the period of 1990–2001. This was among the highest growth rates in the world. However, the reforms also have caused problems for China’s economic planners. Income gaps have widened, unemployment has increased, and inflation has resulted from the extremely rapid and unbalanced development (2003).
In 2001 China’s gross domestic product (GDP) was ,159 billion. The size of the country’s economy, which is comparable to that of Canada (4 billion), makes China a significant economic power; despite this, it remains a low-income, developing country because it must support a huge population of more than 1.2 billion. In 2001 China’s per capita GDP was just 0, compared to ,340 in Canada. Industrial activity that includes manufacturing, mining, and construction contributes the largest percentage of the country’s GDP, amounting to 51 percent in 2001. Transportation, commerce, and services together accounted for 34 percent. And agriculture, together with forestry and fishing, contributed 15 percent (2003).
WTO
World Trade Organization (WTO) is an international body that promotes and enforces the provisions of trade laws and regulations. The World Trade Organization has the authority to administer and police new and existing free trade agreements, to oversee world trade practices, and to settle trade disputes among member states. The WTO was established in 1994 when the members of the General Agreement on Tariffs and Trade (GATT), a treaty and international trade organization, signed a new trade pact. The WTO was created to replace GATT. The WTO is based in Geneva, Switzerland, and is controlled by a General Council made up of member states’ ambassadors who also serve on various subsidiary and specialist committees. The ministerial conference, which meets every two years and appoints the WTO’s director-general, oversees the General Council (2001). Since its creation, the WTO has attracted criticism from those concerned about free trade and economic globalization. Opponents of the WTO argue that the organization is too powerful because it can declare the laws and regulations of sovereign nations in violation of trade rules, in effect pressuring nations to change these laws. Critics also charge that WTO trade rules do not sufficiently protect workers’ rights, the environment, or human health.
Some groups charge that the WTO lacks democratic accountability because its hearings on trade disputes are closed to the public and press. WTO officials have dismissed arguments that the organization is undemocratic, noting that its member nations, most of which are democracies, wrote the WTO rules and selected its leadership. WTO supporters argue that it plays a critical role in helping expand world trade and raise living standards around the world (Sampson 2001). WTO gives different help to its member countries with regards to their economic problems. It is worth recalling that the United Nations the major source of legitimacy in the international system was the political and legal framework within which the world community first sought to lay the foundations of a fair and free world trade system.
The General Agreement on Tariffs and Trade (GATT) was drafted and negotiated within a United Nations Committee and concluded as an annex to the International Trade Organization (ITO), which was approved in 1947 at the United Nations Conference on Trade and Employment in Havana. Even though the ITO never came into being, it was the United Nations that later provided the staff who went on to form the first GATT Secretariat. The GATT became the cornerstone around which the multilateral trading system was built. It was also at Havana that the Latin American countries first insisted on the link between trade and development. Later, when the developing countries of Africa and Asia achieved independence, they joined in a global initiative to create an international trading system consistent with the promotion of economic and social development throughout the world. The UN Conference on Trade and Development (UNCTAD) was established in 1964 with the mandate to pursue this objective (2001).
As the successor to GATT, the World Trade Organization (WTO) represents a new order in multilateral trade. It intensifies multilateral trade disciplines and extends them into new areas; and it provides the improved, and more secure, access to markets that is a prerequisite for successful export-oriented development strategies. On the other hand, it also imposes tighter constraints on the range of policy options open to developing countries in pursuing their development strategies. The WTO has become a forum for continuous multilateral negotiations. Indeed, many countries find themselves engaged in trade negotiations simultaneously at the regional and sub regional levels. Developing countries need to be able to exploit the export opportunities that this opens up for them, but also to defend their acquired rights and interests and to formulate development-oriented trade policies. No less important is the need to establish the universality of the WTO itself (2001).
WTO and china
China has become noticeably more nationalist since the early 1990s. This trend is both reactive and proactive. The reactive process has developed in response to outside pressures, especially from the United States. From the point of view of ethnic minorities, the most important source of this nationalism is the constant criticism over China’s human rights record, notably that over Tibet and other minority areas. However, the growth in nationalism results also from internal factors like the continuing growth in the Chinese economy, its resumption of sovereignty over Hong Kong in mid-1997 and Macau at the end of 1999, and its strategic power in the world. It seems evident that Chinese nationalism is in tension with any rise in minority identities. This is because the state will give even less space than formerly to any form of ethno nationalism, such as is quite likely to flow from ethnic consciousness ( 2003).
One scholar has even coined the phrase essentializing the Han highlighting how the majority Han have represented China’s minorities as exotic as a means of marking out their own identity and promoting their own nationalism. The tension between ethnic identities and Chinese nationalism may mirror that between globalization and localization. Chinese markets will open further because the country has joined the WTO, and China will be even more subject to ideas and social trends from outside than it was beforehand. But Chinese nationalism is likely to remain strong, and could even strengthen. The increased globalizing influences that have followed China’s entry into the WTO could inspire a strengthening of a wish among the ethnic minorities to maintain their own differences in political, economic, social and cultural terms ( 2003).
Advantages of China’s accession to WTO
China joining WTO can give the country different benefits. This includes an increase in popularity in the international economic community; improvements in the country’s economic status; creation of stability and creation of trading opportunities. The accession of china to WTO can increase its popularity with other nations. It can help in attracting other countries to invest in China. The accession of China to WTO can create improvements in the country’s economic status. With a better image slowly but surely the country’s economic status will improve after completing its accession with the WTO. More countries will be interested in taking a look at the country and what business probabilities it can offer.
The accession of China to WTO can create stability in the country. This is due to the different kind of assistance it can have from different countries that are members of the WTO. Lastly the accession of China to WTO can create more trading opportunities. Trading is important for a country to survive economically. It can help in bringing added source of national income to a country. By having accession to the WTO the country can have new trading partners that are member countries of WTO.
Disadvantage of China’s accession to WTO
There are disadvantages of China’s accession to WTO. This includes more powerful competitors for local businesses; the increase of the tension between the ethnic minorities and Chinese government; anxiety about the future and displacement in the work force. China’s accession to the WTO created more powerful rivals for local businesses. The new players are the ones established and have a name in its industry. Thus most local businesses will have a hard time competing with newer companies. Another disadvantage of China’s accession to WTO is increase of the tension between the government and ethnic minorities.
Some of the minority sector may not agree with the accession to WTO. Some of the ethnic minorities may have a hard time accepting changes. This may increase the tension and disagreements between them and the government. A disadvantage of China’s accession to the WTO is anxiety for the future. The accession of China to WTO causes anxiety for the future. Some people are uncertain whether the accession to WTO will be good for the country. Some think that at first the accession will bring good things but in the future the opposite will be the one experienced. Lastly China’s accession to the WTO creates displacement in the workforce. Accession to the WTO may lead to businesses being closed because of the competition thus people lose their jobs. The accession to WTO may also open China to possibility of automating their processes thus people are not needed anymore to produce products.
Extent of the current rapid growth in the Chinese economy
Economic sustainability is most commonly interpreted as a condition of non-declining economic welfare projected indefinitely into the future. A number of recent papers have sought to combine optimality and sustainability in some way by pruning out of consideration those consumption paths that are ethically indefensible, by treating environmental goods as a source of utility in their own right, as well as inputs to production and by making sustainability an extra constraint on the optimal growth path. The problem with these treatments is that they do not capture the diversity of the contribution of the natural environment to the economy, and they are of very simple economies that are often subject to restrictive assumptions. Such models may yield useful insights, but their application to real economies and environments is inevitably limited. If considerations of optimality and sustainability lead to different policy prescriptions, then for the purposes of public policy one or other of them needs to be accorded priority. There are a number of reasons for challenging the usual economic perception that optimality should be the dominant policy objective. First it may be noted that optimality is often not the basis for public policy (2000).
The current growth in the economy of China in the future can be maintained as long as it continues to implement the economic policies they have even after the accession to the WTO. It should not let itself be overly affected by its accession to WTO and in the process change the country’s economic policy. It should remain firm with its policy but accept corrections from the WTO. The current growth in the economy of China in the future can be maintained as long as the country tries to satisfy the different sectors making up the economy. The country should accommodate all the sectors making the economy whether or not they are local or international sectors.
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