Part 1 Facts and Figures

The Global Economy “Dancing with the Dragon”

From “Layman” to “Master”: China's Accession to WTO Tilts the

Balance of the Global Economy

Since its reform and opening-up, China has chosen to develop its own way of economic development. It follows rather than challenging the game rules of the global economy, and actively takes part in, rather than isolating itself from, the global economy.

On 11 July 1986, China officially requested to resume its membership of the General Agreement on Tariffs and Trade（GATT）. From that point onward, the new China had been on the GATT-resumption path for over eight years. From 1 January 1995, with the establishment of the World Trade Organisation（WTO）, China spent nearly seven years on its bid to access to the WTO.

The critical moment came at 7: 30 pm Doha（capital of Qatar）time on 11 November 2001, or 12: 30 am Beijing time on 12 November, at the Al Majlis Conference Hall at Doha Sheraton Hotel. The then China's Minister of Foreign Economic Relations and Trade, Mr Shi Guangsheng, represented China's Government, signed the official docu ment prepared by director of Legal Affairs Division of WTO. After 30 days, China officially became the 143rd member of the WTO.

The then WTO Director-General, Mr Mike Moore, said at the signing ceremony, “We need China to play a leading role in economic development. The global economy is slackening, and a lot of employment opportunities will be lost. Hence China's accession to the WTO is not only a historic moment for China, but also for WTO and the world. ” If this exciting moment represents the end of a lengthy series of talks that is full of twists and turns, then it also suggests that China is starting to march towards the economic globalisation with a broader vision and a stronger determination, and at an even faster pace.

According to WTO's requirements of the principle of transparency, China implemented broad-brushed reforms with an iron fist, in a bid to enhance the transparency of the legislative process. From the central government laws, to the over 3,000 regulations of the 30 government departments, and to the 190,000 rules and systems of local authorities, everything was cleared or adjusted. The reversal system formed by external pressure has expedited the changes in the functions of the Chinese Government. Looking back on the development path of the Chinese economy, we will find that the difficulties and efficiency of these measures were hard to be easily assessed through numbers.

China's accession to the WTO means it has changed from a mere spectator to a player. Playing the game of global trade is like we assume a double role of both the player and the umpire, changing our face every now and then. The player who participates more in the game rules will be the one who enjoys more of the benefits of global trade. China's metamorphosis from a cabby to an international star is progressive, starting from zero.

Less than a month after China's accession to the WTO, the 4th Ministerial Conference of WTO was held in Doha. China took part in the meeting in the capacity of an observer because it needed one month to confirm China's membership. When developed countries such as the US and the European Union confronted developing countries headed by India, Mr Shi Guangsheng chose to do shopping. At that time, China's Vice Minister of the Ministry of Foreign Trade and Economic Cooperation and chief WTO negotiator Mr Long Yongtu was relaxing in the swimming pool. Mr Long's feeling at that time was, “During the WTO talks, the situation was—the minority was negotiating, while the majority was drinking coffee. ”

In 2005, WTO's 6th Ministerial Conference was held in Hong Kong. China took part in all the seven “Green Room Meetings” with only 32 participants. （The official name of Green Room is CCG, or Chairmen's Consultative Group—the most important talk venue in WTO. ）China expressed its views on major issues, becoming a member that drinks coffee on the one hand, and a “minority person” in the talks on the other hand.

For instance, paragraph 6 of the Hong Kong Manifesto states that all the members should cancel their agricultural export subsidies by 2013. The 110 member countries of six organisations, such as ACP Group formed by the island countries in the Carribean Sea and the Pacific Ocean, signed a joint declaration that demands the abandonment of all subsidies in 2010. However, the European Union insisted that this deadline should be extended to 2013. This issue then became the tug-of-war focus in the Green House Talks. As various parties held on to their positions, China suggested that on the basis of rigorous and clear conditions, the plan propounded by the European Union to cancel export subsidy in 2013 should be accepted. This was endorsed by India's and Mexico's Green House members.

Once the outsider enters the house, he becomes one of the masters in the house. In today's global market, no one can afford to neglect China's voice. As “Made in China” runs towards the global market, as an unprecedentedly large and new market, China becomes one of the greatest countries that absorbs the largest amount of foreign direct investment. As at the end of 2010, over 90% of the 500 largest enterprises have started businesses in China, and there are over 1,400 companies set up by multinational corporations in China.

The gigantic China market not only affects the price fluctuations of international commodities, it also has bearing on the global strategies of multinational corporations. At present, all the corporations in the world are interested in the tastes of Chinese consumers—they set up their R&D centres in China, put their core purchasing function in China, and without doubt, the China market is the centre of attention for many financial statements of multinational corporations. At the same time, the progressively robust Chinese enterprises are setting off to compete in the global market.

Of course, in the arena of world trade, China, as an outstanding athlete, has often been questioned by cynics as a player of dubious integrity. In the decade following China's accession to WTO, China answered and clarified over 3,500 queries raised by WTO members, making it the “most diligent” candidate in any test imaginable in the world. Putting all the answers together, the number of words amounted to 500 million, which is equivalent to 2 million copies of Steve Jobs: A Biography, or 3 million copies of the Bible.

When China entered into WTO, the Chinese were worried about “dancing with the wolf”. After its accession, China transformed itself and impacted the world at an astounding speed and with tremendous passion. Today, in the face of the consolidated strengths of Chinese enterprises, the hot topic in international discussions is how to “dance with the dragon”.

China's accession to WTO has accelerated the world's embrace of China and the process of China's integration with the world. This has had positive and profound influences on China's economy and the global economy. China's development brings opportunities to the world, and the soaring of the great dragon benefits both China and the world. China's peaceful development has not constituted, and will not constitute, any threat to the world. On the opposite, it will definitely bring more opportunities and benefits. Indeed, armed with a workforce of high quality and low pay, as well as a huge economic scale coupled with high technology, China has become one of the greatest beneficiaries in economic globalisation.

From “B+” to “A+”: A Diligent Student in the Testing Ground on Global Economy

When we look back on the decade following China's accession to WTO, we will remember that in the early years, people in different fields were worried that the move would impact China's national economy, the employment market, and even agriculture, foreign trade, financial market, cars etc. The outcome was that the world did not shake China. On the other hand, China stunned the world. China's economy has acquired unprecedented space for development, with rapid growing strength. In the words of Mr Pascal Lamy, WTO Director-General, China's performance in the first decade of its accession to WTO was A+.

From 2001 to 2010, China's Gross Domestic Product（GDP）grew sustainably at 10.5% a year—from US$1,300 billion in 2001 to US$7,500 billion in 2011—an increase of over 5 times. In 2002, China's GDP overtook Italy and became the world's 6th largest economy. From 2005 to 2007, China got three promotions, with its GDP overtaking France, UK and Germany, to gain a place in the world's three greatest economies. In 2010, China with its economic growth of 10.4% and a total GDP of RMB 40,150 billion（equivalent to about US$6,000 billion）, became the world's second biggest economy, outperforming Japan, who had occupied this position for over 40 years.

In the 10 years, after accession to WTO, China's dependency on foreign trade grew from under 40% prior to WTO entry to 50%, progressively expanding its market access in agriculture and manufacturing. Meanwhile, the total tariff level dropped from 15.3% to 9.8%. China also abandoned all its non-tariff measures such as the quota system and permits, and completely opened up its foreign trade operating rights for outside parties. For instance, the tariff for agricultural products in 2005 decreased from 23.2% before China's accession to WTO to 15.35%, much lower than that of developed countries like the US, Japan, and the European Union. In fact China is now one of the countries with the lowest tariffs for agricultural products. Due to the cutting of tariffs and export subsidies, China's growth in agricultural imports far exceeded its growth in agricultural exports. A trade deficit first appeared in 2004, and this deficit is set to increase year by year, and China became the largest importer of the agricultural product in the world.

In 2001, China's exports in commodities trading amounted to US$509.7 billion. This grew to US$1,100 billion in 2004, three years after WTO entry—a twofold increase. That year, China's export growth rate set a new record of 35.4%. In 2010, exports increased to US$2,970 billion—a 20.2% average annual growth within 10 years, and a total growth of 4.8 times. Meanwhile, the total trade soared to world No.2 from No.6. In this decade, the size of exports increased 4.9 times to gain top place in the world, accounting for 10.4% of the world total. Meanwhile, import size grew 4.7 times, occupying second place in the world, accounting for 9.1% of the global import figure, as compared with 3.8% prior to WTO entry.

In the 10 years in WTO, China optimised its foreign trade structure both in quantity and quality. From the standpoint of export commodities, manufactured products accounted for only 90.1% of the total commodities exports in 2001. The figure increased to 94.8% in 2007, and maintained at this high level in the ensuing four years. Correspondingly, primary products such as agriculture and mining products as well as raw materials accounted for 10% of the commodities exports in 2001, but dropped to 5.2% in 2010. In recent years, the Chinese Government promoted the transformation of the structure and mode of foreign trade growth, and products that suffer from high energy consumption and high emissions were under effective control, and high-tech products and products with high value-added became the new focus of growth.

From the standpoint of trade method, China's foreign trade demonstrated the formation of “balance+ surplus + deficit”. Trade in general goods is basically balanced, but there is a trade surplus in processing goods, and a deficit in service trading.

In the decade following China's accession to WTO, China's total service trading increased fourfold from US$71.9 billion to US$362.4 billion. The total service trading imports and exports ranked No.9 and 12 respectively in 2001, and they rose to No.3 and No.4 respectively in 2010. China is progressively expanding its market access for the service industry. Among the 160 plus service trading departments based on WTO's categorisation, as many as 100 are already opened up, which is close to the level of developed countries.

As the saying goes, “If you have planted phoenix trees, then you don't have to worry about the phoenixes not coming. ” In the eyes of foreign businessmen, China's opening-up policy has become more stable and more transparent. In the decade in which China was in WTO, China has attracted a cumulative US$759.5 billion from foreign businessmen, with an average annual growth of 10%, maintaining its top position within developing countries in the last 20 years. Even in 2009 when the impact of the international financial crisis was the most serious, foreign investments still exceeded US$90 billion. In 2010, China actually used US$105.74 billion in foreign capital, exceeding US$100 billion for the first time. It reversed the falling trend in the decrease of 2.6% in 2009. On the other hand, there was an increase of 17.4% compared with the same period in the previous year, accounting for 9.4% of the world total, and ranking second globally.

Direct investments cannot be single-directional—only in and no ou. t In 2002, the Chinese Government proposed the “going out” strategy on top of the “coming in” strategy. Over the decade, the Government built its own structure on a pilot basis, and gradually started to boldly introduce equity investment as well as merger and acquisition. Chinese entrepreneurs explored their own path by diligently learning and reflecting, and through trial and error. This is still continuing. In 2012, China's Geely Automobile acquired Sweden's Volvo, and this was reported in both Chinese and European publications. At that time, neither the Auto industry nor the labour unions were optimistic about the future of this move. However, after several years of development, building an international team and accumulating highly market-driven local operations, and practising price negotiations, Chinese enterprises grew rapidly to become an integral part of the global market.

For various industries in China, direct foreign investment is starting to show positive elementary results. Some provinces grew rapidly, with annual growth rates ranging from 40% to 80%, even faster than the growth rate in the foreign capital capture phase. In 2002, China's non-financial enterprises registered direct foreign investments of only US$2.7 billion, but in 2005 the figure soared to over US$10 billion. In 2010, China's all-industry direct foreign investments ranked No.5 in the world, with a total investment of US$68.81 billion, an increase of 24 times over 2002. Non-financial investments accounted for 87.5%, amounting to US$60. 18 billion, an increase of 25.9%（See Table 1.1 and Figure 1.1）. Chinese enterprises have been discharging their social responsibilities in their host country. As at 2010, they have employed nearly 800,000 local staff, and paid local taxes of over US$10 billion annually.

The decade following China's accession to WTO was the period in which China developed most rapidly and achieved the most. In 2001 China's average per capita income was US$800, and this increased to US$2,500 in 2009, and during that period, over 200 million Chinese people were freed from poverty. Based on the categorisation of the World Bank in 2011, China's label before the mid-1980s—“low income country” —has gone through “lower middle income country” to reach the status of “upper middle income country”.

In that decade, China's foreign exchange reserves increased nearly 13 times, and in 1996, it was the first time it exceeded US$100 billion, in 2006 it exceeded the US$1,000 billion mark for the first time to reach US$1,066.3 billion. In 2009, it exceeded the US$2,000 billion mark for the first time to reach US$2,399.2 billion, and at the end of 2010, it reached US$2,850 billion. Under the influence of changes in the economic environment both inside and outside the country, the foreign exchange reserves have still been increasing, but at a slightly lower rate.

On 21 July 2005, after 11 years of RMB merging of exchange rate reforms, the People's Bank of China officially announced a managed floating foreign exchange rate policy, based on market demand and supply, and with reference to a basket of currencies. On that day, RMB's exchange rate against the US Dollar increased by 2.01% from 8.2765 to 8.1100. Henceforth, the RMB exchange rate was no longer pegged to only the US Dollar. Thereafter, China has created a more flexible exchange rate mechanism. On 5 December that year, the five cities of Harbin and Changchun（both in the northeast of China）, and Lanzhou, Yinchuan and Nanning（all in the west of China）started to enjoy RMB businesses operated by foreign capital organisations. This was one year ahead of the date promised by China as it entered into the WTO. At the same time, the China Banking Regulatory Commission also promised to open up this RMB business to Shantou and Ningbo. Thereafter, Chinese cities opened to foreign capital institutions increased from 18 to 25.

Being proactive, progressive and manageable has always characterised the RMB exchange rate reform in China. In July 2009, the pi lot scheme for RMB clearing for cross border trade was officially commissioned. In June 2010, the clearing pilot sites expanded to 20 provinces, districts and cities, and overseas clearing sites were extended to all countries and regions. To effectively deal with the impacts of the 2008 international financial crisis, and to prevent the intrusion of “bad elements” from outside, the RMB exchange rate, for a certain period, was pegged to the US Dollar, and was maintained at the level of about 6.82 for nearly a year. On 19 June 2010, China resumed the reform on RMB system. On 21 September 2010,13 January,29 April, and 11 August 2011, and on 10 February 2012, the medial rate in the US Dollar to RMB exchange rate broke through the 6.7,6.6, 6.5,6.4 and 6.3 respectively.

From “Threat” to “Opportunities”: Changes in China during the Global Financial Crisis

Since 2011, the profound impacts of the international financial crisis have continued, making it difficult for developed economies to revive. Since the last quarter, the debt crisis in the European countries have been fermenting and expanding, and the US economy in the first quater of 2012 has still been fragile. The Japanese economy is still fatigued, and the GDP growth rate in the second quarter significantly slackened. The economic growth rate for newly industrialized economies also slackened and was entangled with the inflation in commodity prices. In short, the global economy started to slacken, and the external needs for China were weak.

In the face of complex and threatening environments inside and outside the country, the Chinese economy maintained steady and rapid development, to give a good start to the 12th Five-year Plan period（2011 to 2015）. According to the initial audits of the National Bureau of Statistics of China, while containing the commodity prices to an overall level of 5.4%, the annual GDP in 2011 was RMB 47,156.4 billion, an increase of 9.2% over the previous year. In the first and second quarters of 2012, China's GDP reached RMB 22,709.82 billion, an increase of 7.8% over the same period in 2011（See Figure 1.2）.

On the foreign trade front, according to the statistics released by China Customs in January 2012, China's commodities import and export totalled US$3,640 billion, an increase of 22.5% over the corresponding period in the previous year. Export reached US$1,900 billion, an increase of 20.3%, and import was US$1,740 billion, an increase of 24.9%, and 4.6% higher than the increase in export growth rate（See Figure 1.3）. Since the latter half of 2011, China's import and export trade growth rate slackened but the development of trade balanced—import and export developed in good coordination, and the surplus in foreign trade narrowed. The annual import-export differential（export minus import）was US$155.14 billion, US$26.37 billion less than 2010. The figure continued to narrow 14.5% on the basis of the 7.2% gap compared with 2010.

In 2011, China's foreign trade mode and structure continued to improve. General trade resumed in strength, and the difference widened. Processing trade total and surplus grew by about 13%, and service trade grew steadily.

General trade import and export amounted to US$1,924.59 billion, an increase of 29.2%, accounting for 52.8% of China's total import-export value, and this percentage was 2.7% higher than 2010. Out of this, exports amounted to US$917.12 billion, an increase of 27.3% and 7% higher than the previous year in terms of total exports. Imports amounted to US$1,007.47 billion, an increase of 31%, and 6.1% higher than the previous year in terms of total imports. General trade items showed a negative difference of US$90.35 billion, widening the gap by 85.8%.

Processing trade import and export amounted to US$1,305.21 billion, an increase of 12.7%. Exports amounted to US$835.42 billion, an increase of 12.9%, while imports amounted to US$469.79 billion, an increase of 12.5%. The surplus under value-added trade was US$365.63 billion, an increase of 13.4%.

Service exports continued on the growth trend, with total imports and exports exceeding US$400 billion for the first time, setting a historical record. Exports and imports continued to rank among the world's highest numbers, occupying 4th and 3rd places respectively.

In 2011, China's foreign trade partners grew in diversity. Growth in trade with traditional markets of Europe, US and Japan was steady, while the growth in trade with new markets was even stronger（See Table 1.2）.

China-European trade amounted to US$567.21 billion, an increase of 18.3%, but in terms of growth rate, it was 4.2% lower than the growth in total import and export over the same period in China. ChinaUS trade amounted to US$446.65 billion, an increase of 15.9%, and 6.6% lower than the growth in total import and export in China over the same period. China-Japan trade amounted to US$342.89 billion, an increase of 15.1%, and 7.4% lower than the growth in total import and export in China over the same period.

China's trade with ASEAN countries amounted to US$362.85 billion, an increase of 23.9%, and 1.4% higher than the growth in import and export in China over the same period. Export to ASEAN countries was US$170.08 billion, an increase of 23.1%. Import from ASEAN countries was US$192.77 billion, an increase of 24.6%. The negative difference in trade with ASEAN countries was US$22.69 billion, an expansion of 37.1%.

Total import and export between China and Brazil, Russia and South Africa amounted to US$84.2 billion, US$79.25 billion and US$45.43 billion respectively, an increase of 34.5%,42.7% and 76.7% respectively. These were all higher than China's total import and export growth, indicating that trade growth was strong in China's trade with new and developing countries.

According to statistics from the Chinese Ministry of Commerce, in the first half of 2012, China's total imports and exports amounted to US$1,839.84 billion, an increase of 8%. Exports amounted to US$954.38 billion, an increase of 9.2%. Imports amounted to US$885.46 billion, an increase of 6.7%. From the responses from various parties at the G20 Summit in Mexico, we can see that China's foreign trade balance is progressively gaining recognition from the international community. A horizontal comparison with its trading partners shows that China's foreign trade development is quite good, with very few zero or negative growth with other countries. It is evident that China can still hope to achieve the 10% growth for the entire year.

In parallel with the slackening growth, China's foreign trade has exhibited some positive changes. For instance, if we observe the data on China's shoes exports, we can see that the export amount showed little growth, but the value of the exports was increasing. This shows that China-made shoes are moving from low-end products to high-end products. In other words, China's trade conditions are improving. Also, we can see that more and more traditional enterprises are determined to strengthen their research and development to enhance their product positioning and their competitiveness in the market.

In May 2012, in the factory of Zhejiang Qingmao Textile Printing and Dyeing Co. , Ltd in Pujiang, Shaoqing, Zhejiang, production was full steam ahead. Although the time was not yet the prime season, the company's total exports in the first five months of the year was already 19.5% higher than the same period in the previous year. In recent years, with the appreciation of the RMB and the sustainable rise in labour costs, China is losing its competitive edge against countries like India and Vietnam in terms of the prices of textile products. As the traditional pillar industry in Zhejiang's foreign trade, the labour-intensive textile printing and dyeing industry is still facing a lack of overseas demand. So what made Qingmao Textile so busy？

“This must be attributed to our accurate market positioning and sustainable research and development. ” the Company's General Manager Xu Jianfeng said. Qingmao Textile invested heavily on research and development, and developed textiles that were water proof, stain proof, grease proof, and non-combustible. While ordinary cotton textiles fetched about US$1.5 per metre, the improved fire-proof textiles could fetch US$4 to US$5.

In 2011, China's non-financial industries actually utilized US$116 billion of FDI funds, an increase of 9.7%. The annual non-financial direct foreign investment amounted to US$60.1 billion, an increase of 1.8% over 2010. Localisation is the best form of globalisation, and this has become a core value for Chinese enterprises that have multinational operations. One Chinese entrepreneur has said, “If you are serious about settling in another country, you have to integrate with this country. You cannot give people the impression that once you have made your money, you will leave. If you aim for quick money, you will not go anywhere. ”

A lot of Chinese companies selling to overseas countries have localised their workforce. In their branch companies in Europe, US and Japan, the staff from salespersons to chief executives are all local people. According to statistics, for Chinese companies in the US, for every 10 jobs created in China, they will create 15 jobs in the US.

At the end of 2011, China's foreign exchange reserves exceeded US$3,000 billion to reach US$3,181.1 billion, an increase of US$333.8 billion compared with late 2010. At the end of 2011, the RMB exchange rate was RMB 6.3009 to US$1, an appreciation of 5.1% compared with the end of 2010. On 21 June 2011, the central bank of China promulgated the “Notice on Related Issues on Cross Boundary RMB Businesses”, officially laying out the pilot methods for foreign businesses that directly invest in the business of RMB clearing. This became an important measure in promoting RMB cross-border circulation.

According to the “Global Competitiveness Report 2010—2011” released by World Economic Forum, China's ranking in terms of competitiveness rose from rank 29 to rank 27. As the only country in the four BRICS countries registering a rise in ranking, China deserves recognition as the most competitive and vibrant emerging economy in the global economic arena.

From “Imitation” to “Innovation”: Transformation of China's Industry Structure

Industry is the pillar of a country's economy. From its reform and opening-up to its accession to WTO, from its integration into the international arena to its rise in international competitions, China's industries have conquered numerous obstacles, won battles, and achieved enviable results. This shows that China's industry structure has always been in a state of dynamic adjustment.

In 2005, the world finally recognised China's car industry. From about 100 spare parts product radio sets produced in 1985 to about 1,000 spare parts product TV sets produced in 1995, and then about 10,000 spare parts product cars are being produced. This is the realisation of the dream of several generations. China is driving into the car society in two directions: the cars running on Chinese roads are all “cars made world-wide”, while Chinese-made cars on other countries'roads are increasing in number.

On the one hand, China's car market is a highly international one, and imported cars are developing in the long term—from 50,000 cars in 2001 to 770,000 cars in 2010. On the other hand, cars made in China have not only withstood the impact of imported cars, but they have actually captured the international market. For Chinese national brand cars, only 180,000 were produced in 2008, but two years later—in 2010, the number increased to 3.63 million. In 2005, a surplus appeared for the first time in China's car trade. In 2001, Chery exported 10 cars to Syria, putting an end to the era of zero export for China-made cars. Since then, Chinese cars have been exported to Iran, Cuba, Malaysia and the US. Following the export of 2,000 Great Wall Haval（长城哈弗）H5 to the European Union in June 2010,593 Great Wall Haval SUV and Great Wall Wingle（长城风骏皮卡）were exported to another high-end market—Australia—in September 2010.

When China entered into WTO, the country produced only 2 million cars. At that time, China was the only country in the world where goods vehicles outnumbered passenger vehicles. In 2009, China produced 13.791 million cars and sold 13.6448 million of them, for the first time exceeding 10 million cars, instantly becoming the world's number one car producing and car selling country. In 2010, when the world economy was still recovering from the financial crisis, China's volume of cars manufactured and sold increased by 32% against the previous year, exceeding the 18 million mark and retaining its position as world No.1 （See Figure 1.4）. Among the cars produced, passenger vehicles were over three times that of commercial vehicles. In that year, China's car production accounted for 23.5% of global production, a dramatic increase from 3.5% in 2000. Meanwhile, China's car exports exceeded US$50 billion, of which the export of spares and parts accounted for over US$40 billion—78% of the total export of car commodities.

According to statistics from the China Association of Automobile Manufacturers, in 2011, although the domestic demand of cars in China were under restrictions for different reasons as traffic jam and the demand slowed down, yet export of cars still maintained its rapid growth. In that year, the export of various types of cars numbered 814,300, an increase of 49.95% over the same period in the previous year, and 269,400 more than the previous year. This set a new historical record. This contributed as much as 60.79% over the same period. Of these, 476,100 were passenger cars for export. This was an increase of 269,400 over thesame period. Passenger cars exported numbered 338,200, an increase of 29.12%.

In the first half of 2012, the export of China's national brand cars amounted to 487,900, an increase of 28% over the same period last year. Of these, the export in May and June each exceeded 100,000 cars. Historical records were broken in the months of April, May and June continuously. Great Wall cars'exports to Southeast Asia and the Middle East are on the increase, while the two major China national brands Chery and Geely were far ahead of the average in size—exceeding 10,000 cars in June. In the first half of 2012, the total car sales in China were 9.6 million. If the macro economic situation in the latter half of the year takes a turn for the better, people can look forward to an 8% increase in performance, and breaking through the level of 20 million in sales.

Since its accession to WTO, another important industry of China—information technology production—is also on the rise. According to statistics, from 2001 to 2010, the production of IT products was on the rapid rise. In 2010, China's production of mobile phones, colour TV, personal computers and digital cameras crowned the world. The total import and export of electronic information products increased from US$124.1 billion in 2001 to US$1,012.8 billion in 2011, accounting for over 30% of China's total trade imports. Exports soared from US$65.02 billion in the past to US$591.2 billion, representing an annual increase of 27.8%.

China has enjoyed constant breakthroughs in researching into electronics and information technology. This has exemplified how this research permeates into the national economy and achieves a motivational effect. During the 11th Five-year Plan, the important project in information technology created an array of innovative products that own autonomous intellectual property. The computer systems of Dawning 5000A, Lenovo Shenteng 7000 and “Tianhe-1A” all achieved success, and maintained and even enhanced China's leadership status in developing high power computers. On the Tianhe-1A computer system, the China-made Central Processing Unit（CPU）FT-1000 finds verification and application. In the meantime, the project on integrated circuit equipment “65 nm Dielectric Etching machine” has already been sold in China, and has received orders from overseas.

If Americans excel at creation, then the Chinese have a competitive edge in innovation. Everyone has an equal chance to apply his intelligence. In the age of online information, whether it be ethnic Chinese brought up in the Western world, or professionals serving overseas enterprises in China, we can assert that in the development of various economies, Chinese high-tech professionals have achieved superb research results. China is completely capable of autonomously developing its pool of high calibre talents. With the inj ection of capital and technological policy support, China is in an excellent position to rise to the very top on the global highway of information technology. China can, from a side angle, ride on the pulse of global scientific and economic development, and lay the foundation for the transformation from “musclelabour” economy to “intellectual-labour consolidation” and “intellectual economy” （See Figure 1.5）.

The fact is also just this. In the realm of communications and net work technology, China is either catching up with, or trying to overtake the world. Following the introduction of the TD-SCDMA at the Beijing Olympics in 2008, China has successfully commercialised this system. Meanwhile, TD-LTE-Advanced, which owns autonomous intellectual property, has become a candidate for the 4th generation standard. Then the successful launch of the IEC61784-2/CPF14 has secured for China the enviable right of speech on the stage of international standardisation, which is dominated by the developed countries.

According to the “2011 Statistics on the Electronic Information Industry” released by the Ministry of Industry and Information Technology, the total imports and exports of electronic information products in 2011 totalled US$1,129.23 billion, accounting for 31% of China's foreign trade imports and exports. The three major exports were: notebook computers（US$105.88 billion）, with an increase of 11.1%; mobile phones（US$62.76 billion）, with an increase of 34.3%; and integrated circuits（US$32.57 billion）, with an increase of 11.4%. Revenue from the Chinese software industry accounted for over 15% of the global total. China's production of electronic products such as colour TV sets, mobile phones and computers accounted for 48.8%,70.6% and 90.6% respectively of the global production volume—achieving top global ranking on all fronts.

As the world's largest brand for home appliances, the Haier Group commands an 8% global market share. In the first half of 2012, China exported 42.2 million mobile phones to the US, an increase of 21.3% over the same period in the previous year, and an 80.9% increase in dollar terms. Meanwhile, China exported 43.9 million mobile phones to the European Union, an increase of 26.8% over the same period in the previous year. Due to the relatively low baseline in 2011 and other entrepot factors, China's exports to the European Union achieved an increase of 156% over the same period in the previous year. In 2011, China exported US$229.39 billion worth of computers, maintaining a growth rate of 5.6%.

On the list of Global Top 500 Enterprises, there are 54 Chinese enterprises,43 more than that of 2001. Of these Chinese enterprises, 30 are central government-owned enterprises, with Sinopec, State Grid Company of China（SGCC）and PetroChina among the top 10. Among the Global Top 500 Enterprises in 2012, Mainland China（including Hong Kong but not including Taiwan）companies continued the increasing trend for the 9th year running, with 73 companies on the list, with 12 new additions such as Geely compared with 2011. If we include Taiwan, then China has a total of 79 companies on the list. Indeed the number of Mainland China companies on the list has overtaken Japan, and is second only to the US, which is with 132 companies.

After accumulating several years of experience, China is now in a strong position to go overseas to do “bottom fishing” （抄底）. The 2011 “Yellow Paper on World Economics” released by Chinese Academy of Social Sciences（CASS）stated that Chinese enterprises are changing roles—from companies being acquired, to companies acquiring assets. In 2010, the amount of acquisitions and mergers was ranked No.2 in the world, second only to the US.

From “Out” to “In”: Chinese Economic Blood Line Began to Present to World Supply Network

China's development cannot be isolated from the world. Since the late 1970s, multinational corporations from Japan, Europe and the US have been landing in China, bringing with them capital, advanced technology and management experience. This not only played a critical part in motivating the technological progress of Chinese enterprises, but it also opened the door for China in acquiring nutrition from the global economy.

The export markets and import sources for Chinese corporations have become more diversified. On the one hand, this provided an outlet for the nearly saturated production capacity in many places, and on the other hand, it boosted the energy supply for the middle and latter stage in the process of industrialisation. The absorption of Chinese export commodities in the world market has alleviated the unbalanced supplydemand in the Chinese domestic market, increasing the income for Chinese people in urban and rural areas, promoted employment, and enhanced social stability.

The imports from various economies in the world has alleviated the inadequacy of China's own resources, and safeguarded the huge demand for resources, energy and raw materials for the rapid growth of China's economy. Since 1993, China has been a net importing country for petroleum. In 2009, China imported 125.834 million tons of coal, an increase of 211.9% over the previous year. Meanwhile, China exported 22.4 million tons of coal, a 50.7% drop over the previous year. This made China a net importer of coal, with a net import of 10,300 tons. In recent years, with the discovery of new gas fields and with technological development, China's production of natural gas has been on the increase year by year. However, this has still not been able to catch up with the fast increasing domestic demand. According to the data released by the National Development and Reform Commission, the production of natural gas from January to May 2012 has increased by 7.3% over the same period in the previous year. Meanwhile, the consumption of natural gas has increased by 15.9% over the same period in the previous year, with an import of 16.3 billion cubic metres of natural gas—an increase of 42.8%.

The integration of the regional economy has enhanced the welfare of Chinese producers and consumers. The streamlining of customs procedures and the coordination of management have lowered the transaction costs and enhanced the efficiency of trade as well as boosted the profits of export enterprises. Now, consumers are able to directly feel the benefits brought by product diversification and the convenience of choice. For instance, with the establishment of the China-ASEAN Free Trade Area（CAFTA）, people in Nanning can buy from the various supermarkets a great variety of fruits and foods—Garsinia mangostana from Thailand, dried mangos from the Philippines, golden cakes from Indonesia and dried pineapples from Vietnam. Beijing residents can now buy fresher tropic fruits like durian. In short, the special produces from ASEAN countries are now available over a short time in different parts of China.

Not only is the trading of commodities and services nurturing the economic growth of China, the international circulation of other essential factors are important channels for the global economy to permeate into the Chinese economic system. The increased movement of Chinese labour has motivated the international exchange and improvement of technology, and also promoted the improvement of the quality of the workforce and the optimisation of the industrial structure. In 2011,190,000 Chinese citizens returned to China after furthering their studies abroad—an increase of 38% over the previous year. In recent years, Chinese enterprises have been eager to “go out” and map out strategies for the “two markets” —the Chinese domestic market and the international market. They actively coordinate the “two resources” within and outside China, enhancing the efficiency of resource allocation, and effectively steered clear of some of the trade barriers.

As a large developing country without a strong foundation, China definitely gained a lot from its participation in the global economy. However, economic globalisation is a rapier（double-edged sword）to any country, and China is no exception. For instance, as exportoriented economies rely on exports, domestic employment is more prone to the impact of changes in the economic environment. In the summer of 2012, the flux of labourers back to their home town—a phenomenon that used to appear before the Chinese New Year—already occurred. This is related not only to the control of real estate and the structural adjustments in the domestic and overseas economies, but also to the slackened demand in the traditional US and European markets, the critical situation in foreign trade that caused a declined demand in labour in foreign enterprises. Indeed, as the saying goes, water that bears the boat is the same that swallows it up.

Another example is that a prolonged period of foreign trade surplus has become a source of domestic inflation in China. With the increase in foreign exchange reserves, the Central Bank needs to maintain the fundamental stability of the RMB exchange rate and suppress the appreciation of the exchange rate. Hence it is obliged to issue basic money to buy in these foreign exchanges. Although the Central Bank can issue notes for hedging, yet an increase in liquidity is inevitable. And in the increase in foreign exchange reserve, a surplus in foreign trade is an im portant component.

Another example is that various economies in the world are increasingly concerned about the environmental issues in China as a rising large developing country. To protect the environment while ensuring economic growth, we must on the one hand reduce the existing pollutants brought by prolonged economic development, and on the other hand control the new pollutants expected to be emitted as a result of economic development. Hence China is facing greater and greater pressure in protecting the environment in the course of its economic development.