Commercial Law

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1.

Economic power is the ability of countries, businesses, or individuals


to improve their standard of living. It increases their freedom to make
decisions that benefit themselves alone and reduces the ability of any
outside force to reduce their freedom. Purchasing power is a significant
component of economic power. Countries, companies, and individuals
can acquire economic power by improving their income, thereby
adding to their wealth. That allows them to purchase more and better
goods and services to meet their needs. The way to increase income is
to produce a good or service that provides a real benefit to the
world. The laws of supply and demand will see to it that customers will
pay the highest price to receive that benefit. For a country, it might
mean manufacturing high-tech equipment, providing cheap labor to
make consumer products, or having lots of oil.
2.Prior to the initiation of economic reforms and trade liberalization
nearly 40 years ago, China maintained policies that kept the economy
very poor, stagnant, centrally controlled, vastly inefficient, and
relatively isolated from the global economy. Since opening up to
foreign trade and investment and implementing free-market reforms in
1979, China has been among the world’s fastest-growing economies,
with real annual gross domestic product (GDP) growth averaging 9.5%
through 2018, a pace described by the World Bank as “the fastest
sustained expansion by a major economy in history.” Such growth has
enabled China, on average, to double its GDP every eight years and
helped raise an estimated 800 million people out of poverty. China has
become the world’s largest economy (on a purchasing power parity
basis), manufacturer, merchandise trader, and holder of foreign
exchange reserves.
3. The economy of the People's Republic of China is a mixed socialist
market economy which is composed of state-owned enterprises (SOEs)
and domestic and foreign private businesses and uses economic
planning. Since the 12th National Congress of the Communist Party of
China in 1982, the economy has been described as socialism with
Chinese characteristics. The income generated by state-owned
enterprises accounted for about 40% of China's GDP of US$14.4 trillion
in 2019, with domestic and foreign private businesses and investment
accounting for the remaining 60%. As of the end of 2019, the total
assets of all China's SOEs, including those operating in the financial
sector, reached US$78.08 trillion. Ninety-one (91) of these SOEs belong
to the 2020 Fortune Global 500 companies. Direct foreign investment in
China, which totaled about US$1.6 trillion as of the end of October
2016, directly and indirectly contributed about one-third of China's GDP
and a quarter of jobs there. As of the end of June 2020, FDI stock in
China reached US$2.947 trillion, and China's outgoing FDI stock stood
at US$2.128 trillion. Total foreign financial assets owned by China
reached US$7.860 trillion, and its foreign financial liabilities US$5.716
trillion, making China the second largest creditor nation after Japan in
the world.China is the world's largest economy when measured
by Purchasing Power Parity, which is said to be the most accurate
measure of an economy's true size
4. China can still rely on the advantage of backwardness, and it has the
potential to maintain dynamic growth for another 20 years or more
because of the following reasons:
1 In 2008, China’s per capita income was 21 percent of U.S. per capita
income measured in PPP.5 The income gap between China and the
United States indicates that there is still a large technological gap
between China and industrialized countries. China can continue to
enjoy the advantage of backwardness before closing up the gap.
2 Maddison’s (2010) estimation shows that China’s current relative
status to the United States is similar to that of Japan’s in 1951, Korea’s
in 1977, and Taiwan’s in 1975. The annual growth rate of GDP grew 9.2
percent in Japan between 1951 and 1971, 7.6 percent in Korea
between 1977 and 1997, and 8.3 percent in Taiwan between 1975 and
1995. China’s development strategy after the reform in 1979 is similar
to that of Japan, Korea, and Taiwan. China has the potential to achieve
another 20 years of 8 percent growth. By that time, China’s per capita
income measured in PPP may reach about 50 percent of U.S. per capita
income. (Note that Japan’s per capita measured in PPP was 65.6
percent of that of the United States in 1971, Korea’s was 50.2 percent
in 1997, and Taiwan’s was 54.2 percent in 1995.) Measured by PPP,
China’s economic size may then be twice as large as that of the United
States; and measured by market exchange rates, China may be at least
the same size as the United States.

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