Doing Business in China

Doing Business in China

China is one of the emerging economies that provides a lot of market opportunities for foreign investment. After more than a quarter-century of reform and opening the country to the outside world, China has grown to become the second largest in the world after the United States of America when they are measured in terms of purchasing power parity basis. Despite the tremendous growth, the government is still working on the growth of the economy and has a target of doubling the per capita GDP.

Just like other governments, the Chinese government intervenes in the economy to achieve political, social or economic objectives. They often create barriers that benefit local interests like domestic firms, industries, and labor unions. The primary reason for creating the barriers is to protect local firms from harsh economic conditions that may be presented by large firms that may enter the local market with huge financial muscles and create unfair competition from outside. Government intervention is against the doctrines of free trade which advocates for the unrealistic flow of products, services, and capital across national borders. However, some studies support the idea of market liberalization and free trade as being one of the major catalysts of economic development. Countries that have embraced openness especially the developing countries have shown tremendous growth in GDP exceeding 4% compared to those that have restricted international trade. This paper aims at explaining how the Chinese government was implementing protectionism to grow the economy.

Nature of government intervention

Protectionism is one of the leading forms of government ways to initiate economic growth in the country. Protectionism entails the formulation of national economic policies structured to restrict free trade and protect domestic industries from foreign competition. Significant forms of protectionism include tariffs, nontariff barriers such as quotas and administrative rules that are designed to discourage imports and encourage exports. Various methods exist on the manner in which the government administers barriers like customs, enhancing checks and scrutiny at the ports at the entry points of the country, importing to only allowed quantitative measures over a specified period as China is becoming more integrated into the interactions economic institutions and markets, there is a growing awareness of the importance of external factors in shaping the regulatory structure, laws and governing its economy.

China is one of the countries that is mostly affected by protectionism as revealed by cases involving the state at the World Trade Organization. According to the WTO, there are close to 73 instances revolving around anti-dumping involving China and ten countervailing duty cases facing China which accounts for 35 percent and 71 percent of the world’s total respectively. China has encountered 58 trade remedy cases that involve Chinese products of an approximate worth of $8 billion. It has been alleged that some protective measures are solely targeted towards China. China has been seen to be on the receiving end of protectionism measures enhanced by different countries. For instance, the United States of America act 2009 which was passed by the nation’s Senate which was aimed strictly restricting poultry products imports from China. Additionally, the US international trade Commission ruled against China in a safeguard investigation involving specific passenger vehicle and light truck tired where the US levied a tax to a tune of 55 percent. Despite the values of these cases involving China and the US account for a tiny percentage compared to the overall Chinese economy. However, the dangers of the instances can harm the economy for a long time exceeding the estimated $8 billion through China trade, economic recovery, and growth.

Main reasons for protectionism

There are various that drive protectionism for countries. These include protection of the nation’s economy, protection of infant industry, national security and national culture and protection of the national economy, frontiers of these argue that advanced economies cannot compete with those in developing economies fairly. The developed nations have advanced infrastructure that makes it possible to produce many goods at low cost. That is the opposite of developing countries where the cost of production is quite high. Intervention is necessarily by the government because if imports are not controlled to render the local goods expensive compared to imports which are cheaper because of cheap labor. Trade barriers interfere with the nation’s specific specialization of labor. Governments can develop a competitive advantage when they are protected and later use it to trade internationally. However, China is on the receiving end because many countries like the U.S are forming barriers to prevent imports from China because China produces a low cost compared to others.

Protection of the infant industry is also another reason for protectionism. During the first stages of development, countries often lack experience and expertise to operate. Additionally, their sizes are not very big because and cannot compete like many other huge companies which are already developed. A small comply may require temporary protection against foreign companies. It is because of such protections that some infant companies in the developing countries have been able to grow and gain a large share of the market. For instance, government intervention allowed some states to develop modern industrial sector.

Consequently, China developed pharmaceuticals industries through protectionism. Moreover, Japan and Korea have evolved to be one of the giants in global automobile and electronics. Such measures of protecting the infants have also affected China negatively in that the United States of America imposed tariffs on the import of inexpensive Chinese solar cells to protect the emerging U.S solar power industry.

Protection of national security is another reason why countries will implement tariffs on goods that are perceived to be a threat to national security in terms of defense. Some of the products that are mainly focused on when achieving this are mostly military technology and computers. Additionally, the government may also place embargos on exports as a control measures to prevent trading with other countries due to some reasons. For instance, some countries refuse to export plutonium to North Korea because the company is rampant with nuclear weapons that have caused unrest in many parts of the world. Some of these countries are said to be having a soft spot for terrorists.


China has been one of the most significant economies of the world and has provided a lot of foreign investment. Many countries implement protectionism due to many reasons majorly being protecting the nation’s economy, protection of infant industry, national security, national culture, and identity. The barriers have had both negative and positive implications for China. Consequently, China has suffered dramatically due to obstacles placed by other nations against them like the United States of America. On the other hand, China has been able to develop its pharmaceutical after implementing a policy to prevent foreign countries entry.


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