The Chinese economy

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Chinese Economy

Define the concept of a fully funded pension system. What is the demographic argument for China to adopt a funded pension system?

A fully funded pension system denotes a kind of pension system that has been developed to the optimum level and has all the liabilities fully funded by a sponsor. For the plan to be funded, it should have sufficient capital contributions and return on investments from the sponsor.

China gradually abandoned the birth-to-grave welfare provided by the state in the mid nineties. This scheme was in fact funded by the working population. The one-child policy compounded with high life expectancy has led to a larger ageing proportion of the population. Thus fewer workers end up supporting more pensioners, a system that could not be sustained for long. This led to establishment of a new system with both the mutual-help social pensions and individual retirement accounts.

What are the major features of age structure in China in the near future (2000-2010) and beyond? What the medium and long term economic implications of this?

The demographic of age in China is stated below.

0-14 years: 19.8% - Dependants

15-64 years: 72.1% - Work force

65 years and over: 8.1%- Dependants

This means that China has a large percentage in the productive age of 15 to 64 years. This is due to the one child policy and improved healthcare; it keeps the below 14 years few but the few who are born grow to adulthood. In the near future, the over 65 years of age will be more.

The medium economic implication is to cater for the high number of productive people who must be give opportunities to earn a decent living or crime and revolt may arise. The long term is that China must invest in healthcare to anticipate the rise in ageing population form the middle age group.

How did local governments react to the problem of floating migrants? Explain the economic consequences of their responses.

Chinese immigrant workers are more than 150 million, most probably the largest movement of internal labor in human history. The floating population is a force behind the country's rapid economic propulsion (Chase, 2000).

The local government attempts to employ various strategies to deal with the problem of floating migrants. These include imposing barriers such as licenses and restrictions of employment as well as limit their entitlement to local public schools and healthcare. These economic measures have indeed served to reduce the number of floating migrants.

Consequently, the local governments responded by creating more job opportunities for them as well as other social amenities. These immigrants are the force behind China's massive industrial revolution in terms of labor. Most of the cities in China passed laws limiting the immigrants from relocating to the Chinese towns in an effort to provide labor. Most of them were expected to go for several health checks. At the same time, they were expected to have permits for them to live and work in the cities. The end result was that the poor people were left out of the towns as they could not afford all the requirements to be able to work in the towns. Their levels of poverty kept rising as they were left with no option but to do manual jobs in the rural areas. Most of the immigrants, being illegal, could not complain of poor working conditions and poor pay. This as a result made most of them to be misused by their employers by getting a very poor pay for heavy work.

The economic consequence of these actions has seen China's labor market swarmed by more locals than foreign migrants. There have been less floating migrants since the economic situation for the migrants has been complicated by the Chinese government. Limiting healthcare and school attendance has made the floating migrants to prefer living without children so as to survive in the tough China state.

What are the three trade regimes in China in the post-1949 period? Describe and discuss the major features of each regime.

The Pre-reform central planning

This regime had the main trading partners being the other economies that were centrally planned. More than half of the foreign trade was carried out with the Soviet Union. The pattern of trade involved the importation of machinery, the exportation of food products and textiles. There were monopolies in each of the markets involved, with the foreign exchanges being under strict control to ease any forms of severe shortages on the domestic market and other bottlenecks involved in production.

The Post-Reform and Pre-WTO Regime

This regime is also referred to as the dual trade regime. The exporters could keep a certain percentage of foreign exchanges and at the same time use the swap market. The dual track allowed for the two sectors, the import and export. This encouraged a free market that had no disruption between the two sectors.

The Post-WTO:

This is indeed a convergence to a uniform and international standard. This regime led to the granting of most companies direct rights to exporting and importing. This resulted from the increase in the number of companies dealing in foreign trade. VAT rebates were also awarded. This made the trading process easier and more manageable due to the relaxation of most of the controls.

How did the dual-track foreign exchange market work? How did the dual-track in foreign trade work?

China has had a rigid foreign exchange policy since 1950's with the Chinese currency (Renminbi or RMB) that was never affected by demand, supply nor changes in the world market. The macropolicy environment was skewed with artificially low interest rates and overvalued exchange rates. Between 1978-1994 China gradually initiated changes in its foreign exchange policy. The changes allowed the distribution of profits an losses among different export and import products and would not affect the trade balance.

The dual exchange rate system was introduced in response to China's market oriented reforms. The dual exchange system and the retention system where traders were accorded quotas according to foreign exchange earned allowed for a flexible pricing of exports.

Why a dual-track instead of a single-track? Use the examples in foreign exchange and foreign trade to explain the advantages and disadvantages of a dual-track.

The 1984 introduction of dual-track price system was such that commodity trade was settled at a rate of 2.8 Yuan per dollar while the official rate of 1.53 Yuan per dollar applied to non commodity transactions. This allowed state enterprises to sell their output in excess of quotas at market prices and to plan their output accordingly. This would in turn reduce the marginal price distortion in the state enterprises' production decisions as the state still controlled material allocation. The state controlled retail prices and exchange rates in the single track system. The interest rate was artificially maintained at a low level to facilitate the growth of capital-intensive industries.

The dual track allowed the exporters to reap maximum benefits from their trade while it in turn exposed them to the fluctuation of international trade which single track system cushioned them from.

Why is there a huge discrepancy between the average statutory import tariff and the actual tariff revenue share in import values in China?

This is related to smuggling and exemption. Indeed, smuggling and exemptions have an adverse economic effect. This may however be reduced if most tariffs were removed and the other barriers that are put on trade. As more and more cases of smuggling arise in China, there is a large discrepancy that is created between the tariff on imports and the real tariff value that is collected. To reduce the discrepancy, the cases of smuggling should be brought under control. At the same time, there are some goods which are exempted from tariffs, therefore raising the discrepancy levels.

China offers different import tariffs to products from different nations. There are the Most Favored Nations (MFN) rates which are lower and apply to WTO members and nations who have established trade relations with China. General rates are higher and apply to non-MFN nations because most of its imports are from MFN states. Then the Special preference or S.P. is applied to those nations who have signed trade agreements with China and the import duty rates are even lower than the most favored nation rates. These S.P states include the Association of South East Asia Nations (Thailand, Malaysia, Indonesia, Singapore, etc.), as well as Hong Kong in the Closer Economic Partnership Arrangement (C.E.P.A). The solution therefore lies in eliminating smuggling and exemptions so that the government revenue is adequately collected.

What are the major structural changes in China's exports in the last 20 years? What were the forces behind such changes? Explain.

The government in 1993 announced a plan to start three development banks with the aim of financing long-term projects and import/export. Introduction of Foreign exchange retention system in 1979 and Internal Rate for Trade Settlements in 1981 are examples of changes initiated by China. In 1990 the volume of the share of foreign exchange earnings retained by enterprises and local governments went up (Lardy, 1992).

Decentralization of foreign trade rights and economic decision making power which led to the rationalization of prices based on market forces and less export plan for commodities.

Why was China so eager to join the WTO? Explain the top three reasons.

The reform minded Chinese leaders believe that foreign investments upon joining would increase and give the state run enterprises a healthy competition to spur growth. The reforms in 1990s had brought tremendous development and China felt a need to go a notch higher.

China being a credible member of international community would lead to acquiring intellectual property rights o its products (especially after signing the Information technology Agreement in 2005) and bring high-tech economic revolutions.

China's growth in exports had stagnated due to its semi-closed economy as countries felt that China was interested in exporting only. Joining WTO would make other states feel that Beijing is reciprocating by allowing other states to export goods into China.

Discuss the special challenges for China's accession to WTO, both in negotiation and implementation.

China had challenges negotiation to access the WTO. Its economy is not a complete type of market economy, but rather it is still under development. It is large and at the same time growing fast, leading to the complex process in the negotiations. It took a long duration to negotiate, between 1986 and 2001. The implementation process involved a reduction of the tariff and the removal of barriers not related to the tariff. Most of the licensing and other restrictions had been removed by 2005.

The challenges were more political than economical. America used its clout in WTO to sign a bilateral agreement with China first before supporting its accession. This was delayed by several political intrigues including the bombing of Chinese embassy in Belgrade.

China wanted to reintroduce price controls in agriculture to cushion the transition which was not accepted. AIG had operated in China for long and the new WTO rules insists that foreign insurance companies to have 50% Chinese ownership, this was fronted by Europeans but America was against it.

What is Tariff-Rate Quota (TRQ) system? What are the three important parameters in TRQ? What is the purpose of TRQ?

Tariff Rate Quotas (TRQs) was enshrined in the WTO Uruguay Round Agreement on Agriculture among other policies. It was intended to improve access to markets and continued management of trade for politically sensitive commodities.

The three important parameters are based on the binding nature of the quota:

  • If it is binding, the rate of premium is zero
  • If it is binding but the import rates are equal to the quota, then the rents are equated to the level multiplied by the rate of the premium
  • If the imports are more than the quota, the holders of the quota have the ability to import at the lowest rate within the quota and sell at the highest rate within the quota.

The TRQ operates as a pure tariff when the price of an import equals the world price. When demand is high for an import good the MFN tariff will be imposed on the high volume and so the price will be cushioned. Therefore TQR operates to deter manipulation from multinationals controlling these politically explosive agricultural goods.

Under the terms of China's accession to WTO, can the U.S. impose quantitative restrictions only on imported goods originating from China? Can the U.S. do the same to other WTO members? Why?

China has not honored all of the WTO commitments especially in intellectual property rights and other policies seemed harmful to the U.S. The U.S congress has asked the Obama administration to institute its trade laws of anti-dumping law and safeguards to protect itself from China's unfair trade practices.

In line with the rising concerns, several bills have been brought to congress to try and buttress U.S. case with China. The U.S on its own can not do much but to file a case with WTO and use its influence in the organization to push its agenda. The U.S can not do the same through the right channels but it can apply internal laws and use its influence in the world on other countries.

In antidumping cases, why can China not use its domestic production costs as a basis for calculating the normal value of its export? What can China do in this circumstance?

The value of China's exports tends to be lower because of mass production. The production cost may be high but it is covered by the volumes of sales. China can try to improve the quality of goods and produce volumes that will be sold at reasonable prices.

What are the risks for China's agriculture sector after it enters the WTO? What are the possible solutions?

When china opens its market for agricultural imports from other countries will lead to loss of jobs to the tune of 10 million. China can improve on improving the level of agricultural production in terms of quantity and quality with little inputs. This will involve dumping traditional farming methods for mechanized farming and capital advance incentives to farmers. Then they can compete with cheap imports from Europe and America. The other option will be to develop the service and non-agricultural sector of the economy to absorb the people who will lose their jobs.

Why do economists consider China's financial sector very fragile after the WTO accession? What are their arguments?

China has a high labor resource and a low capital base. This will attract labor intensive investments will take advantage of the cheap labor and low investment on capital. To protect the financial markets, the government has put up exorbitant capital requirements and a slow license approval to limit the ability of foreign banks to spread their branch networks.

The Chinese government has bought large reserves of the dollar and instituted restrictions and controls over capital transactions. This has led to the dollar being undervalued to the RMB. Rather than hoard the dollars, china has opted to invest the dollar in American security assets.

What are the distinct patterns of foreign investment in China? Name some government policies that are directly responsible for such patterns. Explain.

That imports of raw materials used for production of products for export are duty free. This means that china attracts investors who will produce goods for export while limiting importation of goods into the Chinese market. The Export processing Zones are definitely labor intensive investments producing mass products for export.

China imposes quotas on imports if trade with a certain country does not favor it. A good example is the importation of wool from Australia, despite Australia supporting china's WTO accessing, trade between the two countries has been low. Australia exports expensive mineral based products and wool while china exports labor intensive products which tend to be cheaper.

In what aspects are Special Economic Zones in China special? How are Special Economic Zones in China compared with Export Processing Zones in other Asian economies?

They are zones within a country where certain special policies are initiated to promote economic growth that may not be applicable to the rest of the country. Their operations strategies are not uniform in the whole country giving an impression that it is discriminatory. They are similar to export processing zones because they are both geared to produce goods for export. Both also specialize in one or two products.

What are the three major forms of foreign direct investment in China? What is the dynamics in the relative importance of each form over time? Explain the reasons.

Equity joint ventures (EJVs). This refers to the joint venture where foreign investors and Chinese parties pool money in agreed proportions. The returns in profits and losses are shared in proportion to each party's equity stake. This form of investment is promoted by China.

Fully foreign-owned subsidiaries (FFSs). This is where a fully owned foreign company can be incorporated in China. The capital and input costs, marketing, and management are all accrued by the investor, which runs for an agreed period. Profits can be remitted overseas after deduction of tax.

Contractual joint ventures (CJVs). The foreign firm contacts a Chinese enterprise for a specific period which is shorter than the above options. The Chinese firm provides the land, premises, and labor services to the foreign firm which invests capital, and technical expertise. The flexibility and short period makes it popular with foreign investors.

What are the comparative economic advantages of Hong Kong and Taiwan respectively in the near future?

Hong Kong and Taiwan are moving toward increased integration with China. The two supply the dynamism and the mainland (China) the market. Products from the two are commanding loyalties of mainland consumers. Hong Kong has a legal system that is very well established and based on the English common law. It provides a very strong foundation for most companies and individuals to raise funds, therefore boosting the confidence of investors in the country. The country also has a strong banking system for the investors to put their finances into. The banking system is secure and this will the investors have the desire to invest in Hong Kong.

Taiwan has a lot of expertise in information technology and other traditional industries like food processing and the production of garments. This expertise will draw most investors in the new future as they seek for better products, more so in the manufacturing of auto parts.

Though the Hong Kong and Taiwan share of investments is shrinking as the other investors rise, China provides a market for their products. The economic development of China will rub off on Hong Kong and Taiwan in terms of the rise in Chinese buying power.

What are the three categories of government fiscal revenue in China? How should one calculate the true government debt in China?

There are three categories of government fiscal revenue in China, namely; budgetary revenue, extra-budgetary revenue and off-budgetary revenue. Budgetary revenue implies that revenue that is set aside by the government in order to meet the government's annual financial obligations. On the other hand, the extra-budgetary revenue acts as emergency revenue which only comes to play in case there is a budgetary shortfall. This is important as it prevents the government from borrowing finances from outside sources. Finally, the off-budgetary revenue refers to the government's fiscal revenue which is a reserve.

The true government debt in China is calculated by determining the budgetary revenue against the total government expenditure for a particular fiscal year.

Is it true that fiscal contracting practiced in China between 1980 and 1993 has led to a significant increase of the share of local government expenditure in total government expenditure? What is the major feature the fiscal contracting between the central and local governments, and what is the economic rationale?

Fiscal contracting is the decentralization of revenue operations to the regional and local governments (Dethiers, 2000). This has led to increase of local government expenditure as they had to lay out structures to maximize revenue collection and put accountability structures as well.

The local governments do much of the spadework while the central government is left with oversight role and its share of the revenue. This increases accountability in the local governments by placing decision making and implementation in local leadership. This also leads to sharing of revenue as per the economic need of the said region thus lifting the general state of the poor in that region.

How did local governments respond to the fiscal contracting between 1980 and 1993?

During the period of "fiscal contracting system" the discrepancy between pre implementation of contracts and post implementation was relatively small, suggesting that the fiscal contracts were viable. Second, we find a much higher correlation, between the local government's budgetary revenue and expenditure during 1980 and 1993 as compared to 1970s, showing that the local governments faced much stronger post fiscal incentives after reform. Third, stronger pre fiscal incentives, measured by the contractual marginal retention rate of local governments in its budgetary revenue, lead to faster development of the non-state sector as well as more reforms in the state sector of local economies.

What are the major components of fiscal and tax reform of 1994?

The Chinese government reviewed the fiscal contracting system in 1994 due to low revenues in a growing economy. This led to the review of central-local fiscal and administrative relations to the local governments where the local government now collects only 'local' taxes. While significant institutional reform has occurred, the domestic fiscal imbalance has seen limited success. The reforms are a reminder to local governments of the central government holds power to revise fiscal and institutional arrangements (Strauss, 1996).

Compare value-added tax, sales tax, and personal income tax. Explain the major advantages and disadvantages of each in the context of today's China from the perspectives of efficiency and equality.

  1. Income Taxes: These taxes are paid out by anyone who earns an income by any means. Income taxes are subject to deductions and tax credits; people under a certain income or who have special situations such as a disability are exempted. Income tax is on the rise in china and is the most efficiently collected especially from the working population.
  2. Value Added Taxes: These are taxes on goods or items that are being used by either an individual or business and it is added to prices at point of sale. This is collected from business men who sell goods from a percentage of the selling price. It is the least in terms of collection efficiency.
  3. Sales Tax: All businesses pay taxes on the income made in their business. Each business pays it in regard to the amount of sales. This tax is usually the one that requires a professional to figure out the complicated tax requirements. This includes the tax on imports and exports though some goods are exempted. It is relatively well collected.

VAT helps in avoiding the effects brought about by sales tax because it only taxes the value that is added at every stage of production. It applies to all the goods and services. In China, VAT and sales tax are the major sources of revenue because the high rates of unemployment render the other sources of income inadequate. However, it generally leads to a reduction in the amount of revenue collected and therefore there is loss of autonomy.

Explain the two basic economic roles of law in the modern economy. Why does one make a distinction between rule of law and rule by law?

The rule of law encompasses all agents which include the government. The rule of law therefore creates an orderly and conducive atmosphere for economic activities to go on. The second role of the rule of law is to provide controls and parameters upon which these economic activities will be carried out. The rule of law is bottoms up approach where every individual is aware of his responsibility and the effects of his deviation from the societies value standards.

On the other hand, the rule by law denotes that which the government uses law in order to govern, but remains not constrained by such laws. This distinction is important so as to determine how the rule of law is generally applied in comparison to the rule by law principles.

On what legal basis can the Chinese government be sued by its citizens and organizations? What are the major limitations in such a lawsuit?

The Chinese government can be sued by its citizen or by organizations if it fails to administer its mandate towards its people or organization in relation to limiting the environmental pollution in the country. The government is basically supposed to ensure an environment free from pollution. Breach of this administrative right would amount to a legal suit against the government. The limitation to this would relate to the political process in China. Most of the big firms in China wield lots of powers since they remit billions in taxes annually, hence the government would not be quick to take action against them in case they increase their environmental pollution.

What are the most common contract-related lawsuits in China? What are the most common administrative litigation cases?

The most common contract-related lawsuits in China relate to employment contracts, such as age-discrimination, wrongful termination, among other employment related lawsuits. Similarly, cases related to breach of intellectual property rights are quite high in China.

On the other hand, the most common administrative litigation cases in China are those related to the environmental pollution. This is because, the onus of ensuring that the citizen are free from pollution lies with the Chinese government.

What is judiciary local protectionism? Why is it so prevalent in China but not in the U.S.?

Judiciary local protectionism refers to the system where local judges side with the local litigants to win a case. In China, judiciary local protectionism is common among the local courts as most of the local investors are favored against the foreign investors. In judiciary local protectionism, the local litigant who is resident in the country where the legal suit has been brought is often likely to win against his other opponent.

Judiciary local protectionism is prevalent in China more than the US since China protects its local investors as they are able to spur more economic growth and lead to a more stable country's growth more than the foreign investors who may pull out any time, leaving the Chinese economy shaking. Moreover, the judiciary local protectionism is more common in China since China is a communist state.

Explain the relationship between law and Guanxi (connections) in the context of economic contracting?

The term "Guanxi" literally means "relationships" in the Chinese business world, where parties cooperate and support one another. The Chinese businessmen work with a mentality of "You scratch my back, I'll scratch yours." it boils down to exchanging favors which are exchanged regularly and voluntarily.

The Guanxi effect leads to a subversion of the law as people favor their interpersonal relationships more than the rule of law. If a partner can come in handy from time to time and his effect felt yet the law is viewed as favorable to the state.

Using the quantity equation of money to explain why the link between money growth and inflation in China is not as tight as in other countries.

The Chinese estimated long-run income elasticity is more stable over time and consistent. The estimated demand for money and the actual money stock provides an estimate of monetary disequilibria. Currently it is evident that monetary conditions have tightened since the macroeconomic adjustment began in 2004. The quantity equation of money relates the real GDP and the GDP deflators which are the basic determinants of the money growth and inflation in China.

The quantity equation of money determines the price level, a factor that measures the money growth as well as inflation in China. The domestic inflation in China has not undone the stimulus from the exchange rate subsidy that devaluation of the Renminbi brings. Inflationary pressure induces consumers and businesses in China to try to acquire fixed assets; rather than overall inflation a remarkable increases in the relative prices of such items are realized.

What are the Chinese government policies to fight inflation? In which aspect the Chinese government used the policy instruments that are different from those used by the U.S. Federal Reserve Bank?

The main policy of keeping the Renminbi value lower than the actual value amounts to export subsidy. This has kept inflation rate low as the prices of imports are kept stable while exports may end up as subject of world market trends. The U.S. Federal Reserve Bank lets the dollar to be guided by the world markets and may bail out institutions and enterprises whose slump may trigger the weakening of the dollar and thus inflation.

What is the macroeconomic policy pursued by the Chinese government in the period between 1998 and 2002? What is the economic rationale?

China's government policies have promoted export trade majorly in consumer electronics and areas that are advanced for it economic level. As a result, China has a sophisticated export market regime than what would be expected for a country at its economic level. The rationale is to retain the domestic income within by exporting more complete products while importing more raw materials (Zhang, 1999).

What are the forces making pressure on China's currency to appreciate since 2005?

The Chinese currency is under pressure to appreciate from Europe and America that are pushing for china to implement WTO agreement points. The other is the internal pressure from investors who are eager to reap from a fully market controlled foreign exchange market. With China joining the WTO, various sectors of its economy have been opened up to scrutiny by other trade partners who demand fair trade practices.

Explain the reasons for the pressure of Yuan appreciation from the perspective of China's domestic macroeconomic policies.

The domestic macroeconomic policies where Agriculture has been pushed to second position to export manufacturing means that China has export trade tilted t its favor. This has led to the appreciation of the Yuan as the inflation level is kept low. Exporting Agricultural products after adding value by processing is more profitable. Export attracts foreign exchange which makes the Yuan appreciate.

Discuss the historical process of China's regional economic emergence.

The socialist government of china had closed china from external markets for a long time. The state was in control of every sector of the agricultural based economy. In 1978 the government started reforms that attempted to pursue a capital-intensive heavy-industry-oriented development strategy where the labor rich economy was constrained by capital scarcity.

The advantages of the Chinese economy are in labor-intensive sectors. If investments had been left to market forces to determine the growth then incentives would have induced entrepreneurs to adopt capital-saving and labor-using production by investing more on labor-intensive industries. This has led to emergence of Export Processing Zones where investors take advantage of cheap labor to produce goods for the regional markets.

What is the Trade Triangle and what is significance for China's role in Asia?

The trade triangle encompasses China, Pakistan and India. The combined market in these countries is so large that one would not need the other players were it not for raw materials. Their main concern is security in the region and other political relations that will enhance trade and economic growth in that region. China is definitely the Asian power house and its role will be to watch for general social and political stability in Asia as this is crucial for its long term plans.

In addition, it is different as these three countries together form a block with almost half the world's population. The triangle is crucial in political terms as they can influence the political environment of the region to their advantage. They can also influence on U.S.A and Europe by manipulating on their relationships to suit each other's need of relationship with the West.

Discuss the linkage between Asian regional integration, China's WTO accession, and globalization.

The Asian regional integration provides China with more favorable trade incentives. This means that it is more tilted towards Asian regional integration into a powerful economic block than WTO. The accession into WTO was driven by the desire to gain access to raw materials for its manufacturing industry and opening markets for its goods. The WTO ensures a level trading ground for its member states thus ensuring that China is able to benefit from the trade agreements that it enter with other countries.

Consequently, China has thus emerged as a third largest economy and is thus bound to shape and influence the global socio-economic scene. With China joining the WTO, it has clout in the world and thus can really influence the road towards globalization as long as it suits its interests. Globalization would therefore enable China to seize most of the growth opportunities that the global economies provide. This would in turn spur growth of the Chinese economy.

What are the significant issues regarding labor market dynamics for China's sustained growth?

China is perhaps renowned for its cheap labor. China has a good supply of labor more than any other world economy. It is attracting labor intensive investments while the growth in export trade has enabled the government to pull more people out of the poverty zone.

The rural urban migration is on the rise in China, hence impeding the rural growth in agriculture. However, there is likely to be an increased demand for food, thus making the farmers to grow in revenue as they seek to satisfy the urban markets. There have also been issues related to age-discrimination as well as wrongful termination in China. This has made the labor market in the country to come under spotlight and legal scrutiny.

Discuss how China's land, water, and energy resource use can be expected to evolve over the next generation.

Land, water and energy are the most imperative resources that spur the economic growth in China. The demand for water will increase due to the rise in urban population and increased industrialization. To maintain high health standards and general health of population the government must work out ways of factoring water in development plans. There land policy must be in line with the economic growth of China. With more FDI (Foreign Direct Investments), land will need to be available for construction and production of essential raw materials. With more urban population, rural land should be restructured for production of more food for the population and essential raw materials or industries.

Therefore, over the next generation, China should be able to recycle more water resources and make use of renewable energy solutions. This would reduce the depletion of these vital resources. China should be on the forefront advocating for better resource management techniques, having thousands of industries producing varied products.

What is China's appropriate role in global climate negotiations?

China is one of the main producers of green house gases in the world. The industrialization in virtually every major city in China is responsible for pollution of air in the country. With developing nations pushing for the developed nations to cut down on emissions as well as compensate them for its effects, China and the U.S are bound to be affected more if it is passed. The climate change negotiations agreed upon must be backed by China because if China does not honor the agreements then it is null. Therefore, as a major economy, with the highest population in the world who are bound to be affected by effects of climate change it has a more central role in these negotiations. China has been on the fore front in oil and mineral exploration worldwide and these have effects on the environment.

As a major player, China has a role in mitigating effects of climate change as well as formulating a long term policy on the same. The developing countries are being attracted to China for aid and trade and this gives china a good bargaining and lobbying power before the real negotiations begin. It is therefore estimated that if China can reduce its carbon emission by adhering to the Kyoto Protocol, then the global carbon emission would drop by over 40%.


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