Question

Research and identify at least 5 different reasons/arguments against conducting trade with China. Include any statistical information and/or other evidence to support your arguments.

Answer 1

These are few reasons why trading with China might be disadvantageous:

Depreciating Yuan : 9% of its GDP is used to subsidize the exports, which is done by the Chinese government and has been a reason of great concern for the companies and other economies.

Rising cost: While it is well known that China has been working on low labor cost, the recent trends have shown that there is rise in demand of skilled worker which ultimately rises the cost of labor in the country. In 2012 when 30 companies were surveyed, it turned out that there was 10-15% of raise in their wages.

Administrative Challenges: The surveyed companies have said that license and approvals from the Chinese government has been a tedious task for them lately and also no improvement seem to happen in that sector. The approval of selling and producing goods have been very difficult because of the delayed process and further increasing the loss margin.

Intellectual property violation: The Chinese government fails to protect the intellectual property of the western companies. According to a Deloitte research there are 20% of the companies who prevent themselves from sharing their technological information with Chinese government . Almost half of the companies in China limit their production because intellectual property is not enforced.

Protectionism : China might have opened its economy but one cannot escape the protectionism that it carries in the domestic market. 34% of the foreign companies have noticed that the domestic market receives and access subsidies that they are not allowed to avail. With Federal laws giving preference to domestic market, it also restricts foreign markets to venture into some sectors.

Lack of transparency:It is well known that half of the things in China are censored and not shown to public. The State Council, for example, published less than 15 percent of its own rules in 2013. This further leads to foreign industries not being aware of violations and then at the end paying for something they were not given knowledge about.