Chinese Economy Assignment Example | Topics and Well Written Essays - 5250 words

Chinese Economy - Assignment Example During this period the trade regime comprised of central planning that was generally a Residual category with respect to domestic capacity. Post-reform and pre-WTO: This was also called dual trade regime. There was devaluation of currency from $1 which was equivalent to 1.4 Yuan to 1 dollar being equivalent to 8.7 Yuan, this was a around 1994.Expoters were allowed to keep percentage of foreign exchange In 1996 there was current account convertibility. Dual track was advantageous in the following ways, in that the new sector benefit whereas the old sector is not hurt. Free market was also introduced and did not interfere with the existing old sector. Post-World Trade Organization. During this period there was tariff reduction and also removal of non-tariff barriers that included quotas, licensing and quantitative restrictions. Major services included telecommunication with advent of internet provision; there were also financial services and professional services like consultancy and a ccounting. 2. How did the dual-track foreign exchange market work? How did the dual-track in Foreign trade work? This period was majorly between 1986 and 1993.It involved: a) Currency devaluation from one dollar which was equivalent 1.4 Yuan to one dollar being equivalent to 8.7 Yuan in 1994. The devaluation of currency was encouraged to promote the number of exports. ... The Chinas foreign reserve by 2006 was over one trillion dollars which was more than a year’s import. d) In this period there was duty free and many processing zones were created, there were witnessed tax holidays for some specific industries to steer their growth. e) Little interference was witnessed and also free duty on goods purchased for the purpose of making export goods .Other countries that did the same were Island in India Ocean and Mauritius. f) The period experiences an increase in the no. of trade in terms of international firms. In general the exporters were in insulated against the forever world trade in general. 3. 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 Dual track referred to coexistence of two coordination mechanisms (plan and market) and not to the coexistence of two ownership systems the dual-track system allowed state firms to transact and cooperate with non state firms, allowing valuable flexibility. But the growing importance of collective, private, and foreign-invested firms should be considered. It implied two tier pricing system for most goods. The greatest advantages of the dual as opposed to single track were that there was the introduction of free trade. In this system there were tax holidays that further encouraged more foreign investments. In respect to this the dual was evidently better than one single track system that was not as economically viable because single track meant the entire economy was planned. Planned economy in a way reduced investments and discouraged free trade. 4. Why is there a huge discrepancy