China's Economic Policy Impact on the United States

Since the initiation of economic reforms in 1979, China has become one of the world's fastest-growing economies. From 1979 to 2007 China's real gross domestic product (GDP) grew at an average annual rate of 9.8%. Real GDP grew 11.4% in 2007 (the fastest annual growth since 1994). While China is expected to continue to enjoy rapid economic growth in the years ahead and could become the world's largest economy within a decade or so, it faces a number of challenges, including widespread corruption, an inefficient banking system, over-dependence on exports and fixed investment for growth, pollution, widening income disparities, and growing inflationary pressures. The Chinese government has indicated that it intends, over the coming years, to create a 'harmonious society' that would promote more balanced economic growth and address a number of economic and social issues. Trade and foreign investment continues to play a major role in China's booming economy. From 2004 to 2007, the value of total Chinese merchandise trade nearly doubled. In 2007, China's exports (at $1,218 billion) exceeded U.S. exports (1,162 billion) for the first time. China's imports were $956 billion and its trade surplus was $262 billion (a historic high). Well over half of China's trade is conducted by foreign firms operating in China. The combination of large trade surpluses, foreign direct investment flows, and large-scale purchases of foreign currency have helped make China the world's largest holder of foreign exchange reserves at $1.5 trillion at the end 2007. China's economy continues to be a concern to many U.S. policymakers. On the one hand, U.S. consumers, exporters, and investors have greatly benefited from China's rapid economic and trade growth. On the other hand, the surge in Chinese exports to the United States has put competitive pressures on various U.S. industries. Many U.S. policymakers have argued that China often does not play by the rules when it comes to trade and they have called for greater efforts to pressure China to fully implement its World Trade Organization (WTO) commitments and to change various economic policies deemed harmful to U.S. economic interests, such as its currency policy, its use of subsidies to support state-owned firms, trade and investment barriers to U.S. goods and services, and failure to ensure the safety of its exports to the United States. Concerns have also been raised over China's rising demand for energy and raw materials, its impact on world prices for such commodities, increased pollution levels, and efforts China has made to invest in energy and raw materials around the world, including countries (such as Iran, North Korea, and Sudan) where the United States has political and human rights concerns. This book provides an overview of China's economic development, challenges China faces to maintain growth, and the implications of China's rise as a major economic power for the United States. CHINA’S ECONOMIC POLICY IMPACT ON THE UNITED STATES......Page 3 CONTENTS......Page 7 PREFACE......Page 9 CHINA’S GROWING DEMAND FOR OIL AND ITS IMPACT ON U.S. PETROLEUM MARKETS*......Page 11 TWO SCENARIOS OF FUTURE DEMAND GROWTH IN CHINA......Page 13 CONSEQUENCES OF SLOWER AND FASTER GROWTH IN DEMAND......Page 15 CHINA’S TOTAL PETROLEUM USE......Page 17 A SHIFT IN DEMAND TOWARD LIGHT PETROLEUM PRODUCTS......Page 18 KEY DETERMINANTS OF MOTOR FUEL USE......Page 20 THE CHANGING STRUCTURE OF THE CHINESE OIL INDUSTRY......Page 26 GOVERNMENT PROGRAMS THAT AFFECT THE DEMAND FOR PETROLEUM......Page 28 Fuel Economy Standards......Page 29 Price Controls......Page 30 Energy Taxes......Page 31 SCENARIOS OF FUTURE DEMAND GROWTH IN CHINA......Page 33 MAJOR OIL MARKET FORECASTS......Page 34 Demand Response to High Oil Prices......Page 39 Reversal of Some Temporary Demand......Page 40 New Fuel Economy Standards and Easing of Limits on Small Car Use......Page 41 THE CASE FOR FASTER GROWTH IN DEMAND......Page 43 Migration to the Cities......Page 44 The Growing Vehicle Stock......Page 45 CONSEQUENCES FOR MOTOR FUEL MARKETS IN THE UNITED STATES......Page 47 Crude Oil Prices and Costs of Refining......Page 48 Price Volatility......Page 51 THE IMPACT OF RISING TOTAL OIL DEMAND ON WORLDWIDE CRUDE OIL PRICES......Page 53 THE IMPACT OF INCREASING DEMAND FOR LIGHT PRODUCTS ON THE COSTS OF REFINING PETROLEUM......Page 55 OTHER INFLUENCES ON COSTS TO REFINE OIL......Page 60 IMPLICATIONS FOR POLICIES AFFECTING INVESTMENT IN U.S. REFINERIES......Page 62 APPENDIX ADETAILED TABLES......Page 64 Why GAO Did This Study......Page 71 WHAT GAO FOUND......Page 72 ABBREVIATIONS......Page 73 RESULTS IN BRIEF......Page 76 BACKGROUND......Page 78 USTR IS REQUIRED TO REPORT ANNUALLY TO CONGRESS ON CHINA’S COMPLIANCE WITH ITS TRADE COMMITMENTS......Page 79 USTR’S ANNUAL REPORTS TO CONGRESS DO NOT SYSTEMATICALLY ANALYZE CHINA’S PROGRESS IN RESOLVING COMPLIANCE ISSUES......Page 80 USTR’S ANNUAL REPORTS LACK SYSTEMATIC ANALYSIS AND COMPARATIVE INFORMATION......Page 81 USTR’S REPORTS CONTAIN A SIGNIFICANT NUMBER AND WIDE ARRAY OF REMAINING COMPLIANCE ISSUES......Page 82 WHILE CHINA RESOLVED SOME ISSUES, MOST ISSUES HAVE PERSISTED WITHOUT RESOLUTION......Page 84 CHINA’S PROGRESS ON COMPLIANCE ISSUES SLOWED SINCE 2004......Page 88 PROGRESS VARIES BY TRADE AREA IN USTR’S ANNUAL COMPLIANCE REPORTS......Page 89 ANNUAL REPORTS DESCRIBE THE TYPES OF U.S. ACTIONS TO RESOLVE COMPLIANCE ISSUES......Page 91 CHINA MADE FURTHER PROGRESS ON VARIOUS COMPLIANCE ISSUES IN DECEMBER 2007......Page 93 TRADE AGENCIES HAVE MADE CONSIDERABLE PROGRESS IN IMPLEMENTING TOP-TO BOTTOM ACTION ITEMS......Page 94 U.S. GOVERNMENT INCREASED BILATERAL ENGAGEMENT WITH CHINA ON VARIOUS TRADE ISSUES......Page 95 Staff Levels Increased......Page 98 Staffing Gaps and Turnover Remain......Page 100 Language Skill Gaps Remain......Page 101 USTR USES THE TOP-TO-BOTTOM REPORT AS A PLANNING TOOL BUT DOES NOT FORMALLY ASSESS ITS PROGRESS IN IMPLEMENTING IT......Page 102 Results Not Measured......Page 103 Other Key Agencies Have Some Related Plans......Page 104 LACK OF LINKAGES AND SPECIFICITY MAKE IT DIFFICULT TO ASSESS PROGRESS......Page 105 Plans Have Not Been Updated......Page 106 CONCLUSIONS......Page 107 APPENDIX I: OBJECTIVES, SCOPE, AND METHODOLOGY......Page 108 APPENDIX II: STATUS OF TOP-TO-BOTTOM REVIEW......Page 112 APPENDIX III: COMMENTS FROM THE UNITED STATES TRADE REPRESENTATIVE......Page 115 GAO COMMENTS......Page 121 GAO’S MISSION......Page 125 SUMMARY......Page 127 THE RATIONALE FOR U.S. POLICY AND INITIATIVES......Page 129 TRADE POLICY DEVELOPMENTS......Page 131 S. 377......Page 133 SUMMARY OF TRADE DATA......Page 134 CHINA’S TRADE BALANCE AND IMPORTS......Page 137 CHINA AND THE ASIA PACIFIC REGION......Page 139 CHINA’S TRADE WITH THE UNITED STATES, EUROPE, AND JAPAN......Page 142 U.S. Exports to China......Page 144 U.S. IMPORTS FROM CHINA......Page 146 BALANCE OF TRADE BY SECTOR......Page 149 Iron and Steel......Page 151 Specialized Industrial Machinery......Page 153 Office Machines and Computers......Page 154 Telecommunications and Sound Equipment......Page 155 Road Motor Vehicles......Page 157 Furniture......Page 160 Travel Goods and Handbags......Page 161 Apparel and Clothing......Page 163 Footwear......Page 164 Photographic and Optical Equipment and Timepieces......Page 166 FOREIGN DIRECT INVESTMENT IN CHINA......Page 168 APPENDIX......Page 169 SUMMARY......Page 177 U.S. TRADE WITH CHINA......Page 179 MAJOR U.S. EXPORTS TO CHINA......Page 181 MAJOR U.S. IMPORTS FROM CHINA......Page 184 Health and Safety Concerns over Certain Imports from China ......Page 186 The Consumer Product Safety Commission (CPSC)......Page 187 China’s Poor Regulatory System and Implications......Page 188 CHINA’S CURRENCY POLICY ......Page 190 The Bush Administration’s Response......Page 191 China Changes its Currency Policy......Page 192 CHINA AND THE WORLD TRADE ORGANIZATION......Page 193 WTO IMPLEMENTATION ISSUES......Page 194 U.S. WTO Cases against China......Page 196 History of U.S. Efforts to Improve China’s IPR Regime......Page 197 The Scope of the IPR Piracy Problem in China......Page 200 The U.S. Files Two WTO Cases Against China on IPR......Page 202 APPLYING U.S. COUNTERVAILING LAWS TO CHINA ......Page 204 TEXTILE AND APPAREL PRODUCTS54......Page 205 THE U.S.-CHINA STRATEGIC ECONOMIC DIALOGUE (SED)......Page 206 Currency Legislation......Page 208 Other Legislation......Page 210 SUMMARY......Page 213 CHINA’S ECONOMIC CONDITIONS......Page 214 MOST RECENT DEVELOPMENTS......Page 215 China’s Economy Prior to Reforms......Page 216 THE INTRODUCTION OF ECONOMIC REFORMS......Page 217 CHINA’S ECONOMIC GROWTH SINCE REFORMS: 1979-PRESENT......Page 218 CHINA’S INDUSTRIAL SECTOR......Page 219 MEASURING THE SIZE OF CHINA’S ECONOMY......Page 221 FOREIGN DIRECT INVESTMENT IN CHINA......Page 222 CHINA’S TRADE PATTERNS......Page 223 CHINA’S MAJOR TRADING PARTNERS......Page 224 MAJOR CHINESE TRADE COMMODITIES......Page 226 CHINA’S GROWING ECONOMIC TIES WITH AFRICA, NORTH KOREA, AND IRAN......Page 228 China’s Mineral Fuel Imports from Africa......Page 229 China’s Exports to Africa......Page 230 CHINA’S TRADE WITH NORTH KOREA......Page 232 CHINA’S GROWING OVERSEAS DIRECT INVESTMENT......Page 233 MAJOR LONG-TERM CHALLENGES FACING THE CHINESE ECONOMY......Page 235 OUTLOOK FOR CHINA’S ECONOMY AND IMPLICATIONS FOR THE UNITED STATES [38]......Page 238 REFERENCES......Page 241 SUMMARY......Page 245 China Reforms the Peg.......Page 246 CHINA’S CONCERNS OVER MODIFYING ITS CURRENCY POLICY......Page 247 Effect on Exporters and Import-Competitors.......Page 248 Effect on U.S. Borrowers.......Page 249 The U.S.-China Trade Deficit in the Context of the Overall U.S. Trade Deficit.......Page 250 CONGRESSIONAL LEGISLATION......Page 251 S. 1607......Page 252 INDEX......Page 255

"Since the initiation of economic reforms in 1979, China has become one of the world's fastest-growing economies. From 1979 to 2007 China's real gross domestic product (GDP) grew at an average annual rate of 9.8%. Real GDP grew 11.4% in 2007 (the fastest annual growth since 1994). While China is expected to continue to enjoy rapid economic growth in the years ahead and could become the world's largest economy within a decade or so, it faces a number of challenges, including widespread corruption, an inefficient banking system, over-dependence on exports and fixed investment for growth, pollution, widening income disparities, and growing inflationary pressures. The Chinese government has indicated that it intends, over the coming years, to create a "harmonious society" that would promote more balanced economic growth and address a number of economic and social issues. Trade and foreign investment continues to play a major role in China's booming economy. From 2004 to 2007, the value of total Chinese merchandise trade nearly doubled. In 2007, China's exports (at $1,218 billion) exceeded U.S. exports (1,162 billion) for the first time. China's imports were $956 billion and its trade surplus was $262 billion (a historic high). Well over half of China's trade is conducted by foreign firms operating in China. The combination of large trade surpluses, foreign direct investment flows, and large-scale purchases of foreign currency have helped make China the world's largest holder of foreign exchange reserves at $1.5 trillion at the end 2007. China's economy continues to be a concern to many U.S. policymakers. On the one hand, U.S. consumers, exporters, and investors have greatly benefitedfrom China's rapid economic and trade growth. On the other hand, the surge in Chinese exports to the United States has put competitive pressures on various U.S. industries." "Many U.S. policymakers have argued that China often does not play by the rules when it comes to trade and they have called for greater efforts to pressure China to fully implement its World Trade Organization (WTO) commitments and to change various economic policies deemed harmful to U.S. economic interests, such as its currency policy, its use of subsidies to support state-owned firms, trade and investment barriers to U.S. goods and services, and failure to ensure the safety of its exports to the United States. Concerns have also been raised over China's rising demand for energy and raw materials, its impact on world prices for such commodities, increased pollution levels, and efforts China has made to invest in energy and raw materials around the world, including countries (such as Iran, North Korea, and Sudan) where the United States has political and human rights concerns." This book provides an overview of China's economic development, challenges China faces to maintain growth, and the implications of China's rise as a major economic power for the United States.

"Many U.S. policymakers have argued that China often does not play by the rules when it comes to trade and they have called for greater efforts to pressure China to fully implement its World Trade Organization (WTO) commitments and to change various economic policies deemed harmful to U.S. economic interests, such as its currency policy, its use of subsidies to support state-owned firms, trade and investment barriers to U.S. goods and services, and failure to ensure the safety of its exports to the United States. Concerns have also been raised over China's rising demand for energy and raw materials, its impact on world prices for such commodities, increased pollution levels, and efforts China has made to invest in energy and raw materials around the world, including countries (such as Iran, North Korea, and Sudan) where the United States has political and human rights concerns." "This book provides an overview of China's economic development, challenges China faces to maintain growth, and the implications of China's rise as a major economic power for the United States."--Jacket