China budges America economically … 2018

China budges America economically … 2018

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Shatha Khalil *
The reports issued by the International Center for Development Studies, and its center in British capital , London confirm that the 2018 will be the year of the major shifts in the world, and that the balance of economic power will tend to favor of emerging countries, including East Asian countries that its economies will produce the majority of goods and services in the world and contribute 55% of them, while the contribution of the economies of developed countries will be declined compared with them to become 45%.
Forecasts indicate that the share of the economies of Asian countries, particularly China and India will reach 75% of the world’s economic growth so that the dynamism of its markets will control global markets.
The report notes that China’s currency, the Yuan will become part of important cash reserves just like the dollar and the euro.
Yuan has moved from the 13th rank in global payments to fifth place, surpassing the Canadian and Australian dollar, it is expected to exceed the Japanese Yen ranked the fourth easily.
With the openness of markets in China to global companies , Global Center for Development Studies report considered more probable that many of the giant companies to start using the Chinese al-Yuan in dealings in the daily business in the next few years.
China is economically among major countries in terms of production, it is one of the top ten countries in terms of gross national product, and if the production is measured with the number of the population, China is backward and lagging behind, and more than half of the world surpass it in terms of average per capita income, which it is considered for this reason from Developing countries.

The national government imposes its control over most of the economic interests; it runs factories, transport companies, banks and foreign trade, and the state’s income depends on the collection of taxes from the profits generated by government departments, and these taxes are typically used in the development of industries.

China has made significant progress in economic growth by the implementation of a five – year development plans, and the distribution of invested amounts on various sectors thoughtfully , providing many job opportunities, which provides better life for the population ; and it depended in its progress on its active people who enjoys high technical expertise, and the availability of fuel and various metal sources , which provides an opportunity for China to become in the ranks of developed countries, and raise the level of its economy.
China saw in the first of July 2017 the twentieth anniversary of the end of British colonial rule of Hong Kong and its return to the motherland, and the Basic Law of the administrative of the area of Hong Kong related to the People ‘s Republic of China provides that the capitalist system and the pattern of Hong Kong ‘s life will remain unchanged for fifty years , Hong Kong and Macao have kept their capitalist system , and a society in which there is a pluralism and a high degree of freedom, while the rest of China keeps the socialist system, and this is what is known as” the one country with two systems “, a phenomenon that is unprecedented in the history of mankind.

Hong Kong is of the leading financial centers in the world, and its economy is characterized , founded on services, by the the low – taxes , and trade port is exempt almost, and firm international financial market .
The Hong Kong enjoys an integrated market economy system, and infrastructure facilities on a global level, the government characterized by integrity, and loyal professionals staff, easy tax system, and the rate of low tax, and the provision of a social system and the social security, and backed by a large market of fast growth. And no one in Asia enjoys with these advantages other than Hong Kong. That during several years of development, it has made progress in local industries.

Since then , China has signed several agreements to swap currency , most notably with Saudi Arabia, Turkey, the UAE and Egypt, which boosted its presence in many countries of the world, however the direct non- financial
Investment of China’s overseas amounted 1.12 trillion Yuan (161.19 billion US dollars) in 2016, while the foreign direct investment in China 785 billion Yuan.
Its currency is called Hong Kong dollar and issued legally by three major international commercial banks, linked to the US dollar, and the interest rate is determined by individual banks in Hong Kong to ensure that it is fully equal to market forces, and Hertag Foundation has been awarded – its HQ in the United States – in the annual survey Hong Kong the title “the more free economy in the world”.

It is noted; that Hertag Foundation promotes the conservative public policy, and assesses economic freedom based on the rule of law and the extent of efficiency of regulatory systems and size of governments and open markets.
When the factors of destabilization hit the financial markets in Hong Kong, they were monitored and controlled by the Monetary Authority and the central bank, located in Hong Kong.
Hong Kong enjoys self – governing since it became a special administrative region in China , which is the second largest economy in the world, after the United States, and marked by a policy of ” one county with two systems , ” which was the impetus for the development of the economy, improve people ‘s living standards and make contributions to economic construction, and the role of China in pushing the growth of the world economy and its leading position has become more clearly, so its double superiority was increased , and with the virtue of the “one – state” and “two systems”, and the important role by linking between the country ‘s needs and the advantages of Hong Kong, the opportunities are available to it. ”

The central government and main land China supports Hong Kong to consolidate and raise its traditional position and its global competitive abilities as a “global economic center,” especially supports its status as a “global financial center” and ” a global trading center” and “shipping center globally ,”in addition to support Hong Kong in doing personal business by Chinese currency (Renminbi).

The Hong Kong is a global center for finance and trade and air freight of goods, and its airport is still the first between the airports of the world, and there are seventy banks among the hundred largest banks in the world, with offices in Hong Kong.

The stability and prosperity and development of Hong Kong over the past two decades is due to the unlimited assistance from the motherland “China” when the region is facing any problems, and retaining its original system, and its close relationship with the mainland.

At the end of the year 2016, Hong Kong remained the largest source of capital and external financing flowing to the mainland, and the most important destination for the investments of foreign mainland.

The belt and road initiative highlighted the role of Hong Kong as a starting point of China towards the world, making it a platform for integrated services, investment, finance and exchanges.

China is the international competent custody and multi – functional marine center and service center of international law and dispute resolution, which means that Hong Kong and the main land China are heading towards a common brilliant future.

China is interested in, more than ever, the role of intellectuals and the competent in the country’s development. In the period of the Cultural Revolution (1966- 1976) the intellectuals are subject to the exclusion from the various segments of society. Chinese leaders have always emphasized on the reform and openness policy, especially after the eighth National Congress of ten Chinese Communist Party.

The strategy of investment driven by innovation entirely in China aims to transform the fruits of science and technology achieved by creators and innovators to the scientific and technological products to a greater extent, and to raise the enthusiasm of innovation in technology, information , and employ the role of creators in the social and economic development service, and focus on the transition from a big country to a strong state in the field of sufficiency, to achieve economic development.

China is a big country in terms of population, and regarding the quantity, it can be said that it is a big country in the field of the competent , and according to data from the Ministry of Human Resources and social security of China, the number of the members of the Chinese Academy of Chinese Sciences and the Chinese Academy of the Chinese engineering has reached more than 1,600 academics until the end of 2015; there are 172 thousand experts who have special government premium; and more than 5,300 people are selected in a project of one hundred efficient people and project of thousand efficient people at the national level; and 97.17 million people who enjoyed with credentials (letters of credence) for technical personnel in various fields .
There is a long way in front of China to be transformed from a big country to strong country in the field of the competent. The Dean of Institute for interdisciplinary information Sciences Andrew Chi –Chi Yao also said, “in order to achieve this goal, we must make scientists believe that the return to China is the best choice for them.”

In the 2016 , the International Monetary Fund (IMF) included the Chinese currency (Yuan) to its reserve currency basket , which includes the «Dollar – Euro – Yen – Sterling Pound», this is the development , Beijing described it as «historic turning point», and the Director of the International Monetary Fund Christine Lagarde said : The addition of the Chinese Yuan to the basket of currencies of the fund is : « an important historical event».

and she urged China to continue reforms and modernize its economy to make the Yuan more attractive as a reserve currency, while the Chinese central bank said that this is the fruit of the reforms and the opening of China’s financial sector, and that Beijing will deepen its reforms and the expansion of the openness of its financial sector and enhance its contribution to strengthening the global financial system.

The fruit of years of Chinese efforts has made «Yuan» an international reserve currency, to suit China’s status as the second economy in the world, and the Yuan will represent 10.9% of the basket of currencies of international monetary, the first currency is added to the Fund’s basket of currencies since 1999.

Agriculture in China:
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Agriculture is the backbone of the Chinese economy; as 60% of Chinese workers are working in agriculture, China produces: rice, sweet potatoes and tea in the southern region. Wheat is the main crop in the north area. The corn crop comes in the second place after wheat, and China produces quantities that are superior in the rate of production than any other country of cotton, potatoes, pears, rice and tobacco. For example, a production of sweet potatoes 85% of world production. China is a leader in the production of apples, cabbage, carrots, corn, melon, rubber, sugar beets, sugar cane, tea, tomatoes, soybeans, and other many products.

It is fit for agricultural production from the Chinese territory only 13% . Accordingly, the task of farmers for securing food for the population is a difficult task, which sometimes forced the state to import small amounts of food from outside the country to fill the shortfall. There are areas in China will help to produce two or more crops per year because of the length of the growing season, as in the south of China, and the availability of necessary irrigation and organic fertilizers helps for it .

And the state adopted since the early fifties of the twentieth century, the idea of collective farms, which proved to be useless, forcing it to shift to the policy of individual farms in the eighties of the same century.

The production of eggs has been increased since the fifties of the twentieth century dramatically; they farmers breed chickens and ducks in their homes, in addition to the pigs that its meat was used for eating and dung to fertilize the land. There are in China about 250 million pigs, and this number is equivalent to one – third of the world’s pigs. There are also large numbers of herds of cattle, horses and cows.

Mining: China is one of the most important countries producing coal; since there are coal mines throughout China. The best types of coal stone that extracted from the North mines during the early fifties of the twentieth century and used coal to generate more than 90% of the energy of the country. And then the Chinese have succeeded in the discovery of oil which is available in large quantities and well used. It is used to generate 25% of the country’s energy and gas is used to generate 3% of the energy. The Chinese developed methods for exploration of iron ore to meet the growing manufacturing needs. Today, China is one of the leading steel producing countries, and the production of material of Tungsten exceeds the production of any other country, and it produces gold, tin, lead, manganese, salt, uranium and zinc.

Shanghai is one of the global manufacturing centers, as its production exceeds any production in China, and then Beijing comes after it in the industrial importance, and the Chinese was able to develop heavy industries, mostly are concentrated in southern and central China.

Communists after assuming power were active in the areas of development, they built factories to transform China into an industrial state. Emphasis was placed on heavy industries and manufacturing of equipment. Industrial growth rate has reached since 1949, an average of 12% annually.
China currently produces cement, fertilizers, chemicals, irrigation equipment, means of transportation and military equipment, ships, agricultural tractors and large transport vehicles. Consumer industries did not develop at the same large level experienced by heavy industries.

Industrial development in China is facing some problems and the the most important of them are the lack of development of technology and the lack of skilled engineers and technicians.
To overcome these obstacles the government took the initiative to send students for training abroad, and contracted with Western companies to develop and modernize the industry.

China has the largest institution for the manufacture of sea fishing; the Chinese are fishing nearly 15 million tons of fish and shellfish annually noting that 40% of this fishing comes from fresh water, and the rest comes from the sea water, some fish farmers breed species to serve as food for humans and other for fertilizer industries .

The rate of China’s currency exchange:
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on June 19, 2010 China decided to amend the value of the Yuan and make it more flexible as part of efforts to improve the exchange rate systems , however , the Chinese central bank decided the Adjustment to be slight and gradually. The announcement comes at a time when international pressure on Beijing, especially by the United States is growing to allow to raise the value of the Yuan to help reduce the huge trade deficit of America with China .
As long as China confirmed according to the words of its officials that the issue of the Yuan ‘s assessment and monetary policy in the country is a purely Chinese matter decided by Beijing according to the internal and external interests and it will not accept the external pressure , forcing them to raise the Yuan.

Western countries are based in its claim to demand China to amend its currency that Beijing through its policy has been negatively affected global economies and this is shown through a significant decline in growth rates while China ‘s continuing of high growth rates despite the global financial crisis that has affected the whole world.

China believes that although the economy continues to grow at good rates and recovering from the effects of the financial crisis it faced problems that were not taken into account, referring to the European debt, which have hurt most of the European countries, the crisis will impact indirectly on China’s trade through the expected decline in Chinese exports, which constitute a high proportion Chinese domestic production.

US and Western pressures
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US Congress indicated in June 2010 to move to impose trade sanctions on China if it continues to refuse to raise the value of its currency, during a hearing session in which US Treasury Secretary Timothy Geithner said that Beijing’s position disrupts global economic reforms.
The administration of the former US President Barack Obama was exposed to pressure from US lawmakers asking him to include China in the list of currency manipulators, which qualifies Washington to impose economic sanctions on Beijing.

These lawmakers see that Beijing deliberately keeps its currency low against the dollar to give its exports an advantage in trade, causing a decline of American industry and thus to lose more jobs.

The US administration say that the evaluation of the Yuan to less than its real value aggravates the trade imbalance that China take advantage from it and cause a damage to the economy of the United States , including the aggravating its trade deficit.

While labor unions and manufacturers in the United States say that the decline in China ‘s currency exchange rate against the dollar, is one of the reasons for the loss of jobs as well as it plunges the US market of Chinese goods and adversely affect the competitive abilities of American goods.
Brazil and India joined in April 2010, to claimants for China to apply a flexible monetary policy on evaluation of its currency, considering that the pursuit of Beijing such a policy would be beneficial for the global economy and said that the decline of the Yuan exchange rate creates problems for many countries.

It is worth to be noted that part of the credit for the transformation of China to an economic dominant power is attributed to the industry of cars and vehicles of all kinds, the total sales of the industry reached in 2015 to 24.6 million vehicles, exceeding the total US sales, which amounted to 17.5 million vehicles in the same year. In addition to the stunning rise in the multi – purpose sports car sales by 52% in 2015, the Chinese vehicles industry is booming constantly.

It seems that they will compete with American manufacturers in the coming years in a real competition, unless the US government imposes high tariffs on imports, to equalize the prices of Chinese vehicles to the American ones.

It is important to know that the cost of production ( in addition to the cost of labor) in China is less than in America, and this can not be underestimated as well, that the world economy is changing, and the globalization is the dominant pattern in it, and its increase means one thing which is to increase the competition.

Economic Unity

Rawabet Center for Research and Strategic Studies