Mercantilist: International Trade and Basic Free Trade
1. Read the Country Focus (on page 164 in hill’s textbook) on “Is China a Neo-Mercantilist Nation?” a) Are the claims that China is following a neo-mercantilist policy valid?” why or why not?
Yes, the claims that China is following a neo-mercantilist policy are valid because China has been trying to maintain a trade surplus (which is the definition of neo mercantilist); placing high import tariffs on certain goods (refer to qtn 3). Besides, the cheap currency encourages domestic investments, discouraging imports and also leads to cheap capital exports.
What I found from the internet:
China's commercial engagement with the rest of the world is largely scripted from mercantile theory: export boosting policies that are meant to stimulate a balance of payment in China's favour, ie, manipulating their currency to keep it artificially devalued in support of cheap capital exports and a mechanism of forced high savings, which in effect promotes policies that subsidises Chinese manufacturers (to lower their cost of production and hence cheaper products to increase exports and domestic demand of such domestic goods) at the expense of their own households and manufacturing jobs in the consumption-crazed US-and-eurozone - a process that leaves China's state-coffers endowed in huge surplus reserves. b) What incentive does China have to open its markets to foreign products? Why might China resist such a move?
Incentives:
By opening its markets to foreign products, China can exploit its comparative advantage and specialize in the production of goods that it produces most efficiently and to buy good that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself. Hence, companies in China can lower their overall cost structure or improve the quality and functionality of their product offering, allowing them to compete more effectively.
Besides, globalization is becoming
Yes, the claims that China is following a neo-mercantilist policy are valid because China has been trying to maintain a trade surplus (which is the definition of neo mercantilist); placing high import tariffs on certain goods (refer to qtn 3). Besides, the cheap currency encourages domestic investments, discouraging imports and also leads to cheap capital exports.
What I found from the internet:
China's commercial engagement with the rest of the world is largely scripted from mercantile theory: export boosting policies that are meant to stimulate a balance of payment in China's favour, ie, manipulating their currency to keep it artificially devalued in support of cheap capital exports and a mechanism of forced high savings, which in effect promotes policies that subsidises Chinese manufacturers (to lower their cost of production and hence cheaper products to increase exports and domestic demand of such domestic goods) at the expense of their own households and manufacturing jobs in the consumption-crazed US-and-eurozone - a process that leaves China's state-coffers endowed in huge surplus reserves. b) What incentive does China have to open its markets to foreign products? Why might China resist such a move?
Incentives:
By opening its markets to foreign products, China can exploit its comparative advantage and specialize in the production of goods that it produces most efficiently and to buy good that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself. Hence, companies in China can lower their overall cost structure or improve the quality and functionality of their product offering, allowing them to compete more effectively.
Besides, globalization is becoming