Globalization in China as it relates to MacroEconomics Essay

Globalization in mainland China as it relates to Macro economics - Essay role model(U.S. Commercial Service)China has been doing an admirable job of attracting hostile direct Investment (FDI), which has made it a powerful force to reckon with in the World Economic scene. In 2004, China kept its place as one of the top two destinations in the world of FDI adding $64 billion. Over $564 billion of FDI has been invested in China since it opened to the world in 1979.Executives overwhelmingly consider China to be the undisputed top FDI destination for the third year in a course of action in 2004. About 40% of global investors expressed a more positive outlook on Chinas economy, four times the number of executives who had a dim view of China.The path to economic liberalization has been a difficult but fruitful one for China. It has triumphed due to its determination and commitment to open up its markets to foreign investors. A Business Week article in 2001 stated that after two decades o f steady but halting reforms, Beijing is now racing to dissipate the last vestiges of a command economy. Let us trace the FDI history in China.Since late 1978, China has carried out massive economic reforms in an effort to restructure its economy to be more market oriented. FDI was one of the primary goals of its reforms. The government has over the years slowly liberalized the restrictions on FDI to gain engineering science transfer, modern management skills and foreign switch. The governments first move to entice FDI was taken in 1979 with the Equity Joint Venture Law. This law allowed the legal entry of FDI and provided a statutory basis for the establishment of joint ventures in China. But Investment was allowed in only designated Special Economic Zones (SEZs) and was encouraged via tax incentives. As investments grew, superfluous laws were required. In 1983 another law was issued which provided greater details on all joint ventures in FDI. The government also expanded the S EZs in 1984.Then it passed Foreign vary Balance Provisions and Encouragement provisions in 1986, which facilitated FDI and allowed firms to solve foreign exchange problems. (Jun Fu, November 2000). In 1994, China conducted a new round of FDI reforms. It abolished the official exchange rate and adopted a market rate. It also abolished the exchange quota retention system. In 1996, the government adopted IMF article A that removed all restrictions on foreign exchange transactions. All these reforms went a long way to boost investor confidence. In the November 1999 US-China WTO Accession Agreement, China agreed to several ground breaking reforms. (Sandra Berkun, 2001). around of them wereChina will phase in trading rights and distribution services over three years, and open up sectors relating to distribution services such as repair and maintenance, warehousing, trucking and air-courier services (US-China Business Council).China committed to allow FDI in its telecommunications industr y.Increased access in banking, insurance and securities will be phased in the next five years resulting in full market access in all activities and regions. China also promised national treatment for foreign banks and nonage ownership in domestic security firms and more insurance businesses.(Lardy ,1998)Increased access for professional services including accounting, consulting, engineering, medical and Information Technology. (Lardy,