The Chinese model of the economy, by and large, does not belong to the models of the market system. State regulation is based on socialist principles, mixed economy. China is characterized by the development of market relations and private property, a large share of foreign investment.
State intervention in the market is very significant, which is why some areas of China are in a socialist regime, while others are developing on a free market.
The Chinese model of the economy is very peculiar, first of all it is a communist country, the only large one in the modern world. Economic development is controlled by the apparatus of the Communist Party and the government. At the moment, the country is undergoing a transition to a more progressive development model with the help of macro-regulation, regulatory market regulation, and unified state planning.
The main features of the Chinese economic model:
1. A large share of the state production sector, it accounts for approximately 60% of the entire economy of the country. Especially strong positions of the state in oil refining, electric power industry, metallurgy, alcohol production.
2. China’s private sector is notable for its efficiency, it began to develop relatively recently, since 1978. The Chinese government encourages the development of individual enterprises.
3. China is characterized by a strong controlling branch of government. Every year, the country conducts a tax audit, which controls the level of tax collection, checks the financial affairs of enterprises, and the compliance of prices. Penalties for non-payment of taxes average 10 million yuan per year. To exclude corruption, a ban was introduced on the creation of enterprises by employees of legal, military, and police structures.
4. The expansion of the domestic market is one of China’s most important tasks. The volume of sales is growing every year, therefore, social stability is maintained and the purchasing power of the population increases.
5. Thanks to the growth of industry, the export of the country is becoming wider every year. China’s main export destinations are clothing and textiles, electronics, food, plastics and resins, shoes, coal, and more.
6. China’s integration into the system of economic relations of the world characterizes the openness of its economic system. China ranks ninth among exporters and eleventh among importers. The country’s investment share in global investment is 10%, in direct investment 40%. FDI stocks over $200 billion.
7. For the development of new and high technologies in China, free economic zones have become widespread. They allow duty-free trade, they have favorable investment conditions. Thanks to this, additional jobs were provided, citizens got the opportunity to acquire certain skills in work, improve their qualification level.
8. The Chinese diaspora undoubtedly plays a huge role in the Chinese economy. More than 80 million Chinese live outside China, who form their societies, enterprises and entire empires in other countries.
9. The financial and monetary system of China is characterized by the preservation of state management of all financial levers, individuals and legal entities of the PRC are served exclusively by Chinese banks. Converting dollars to yuan is approved by the state, unlike the reverse operation. Export of currency from China is difficult. The population cannot buy a dollar, only receive it from abroad, buy yuan with it, and keep it in a bank.
10. China cares about the needs of the population, paying special attention to the poor.
5 Developing countries
5.1 General characteristics of the economy of developing countries
By the end of the 1970s. There were three groups of developing countries that differ significantly in economic level, sectoral and technological structure, degree and profile of participation in the international division of labor, internal and external conditions of the reproduction process:
1) countries that, in terms of structural parameters and GDP per capita, came closest to the lower limit of developed countries, and even exceeded it. First of all, these are “new industrial countries”. The same group of fairly developed countries should include countries – exporters of oil and other energy resources located in the Middle East;
2) middle-income countries. This is the largest and most heterogeneous group. This includes such large states as India, Pakistan, Turkey, Egypt, South Africa, oil-producing countries – Iran, Algeria, Venezuela, Libya, Gabon, Nigeria; agro-raw material countries of Asia, Africa and Latin America;
3) Least Developed Countries (LDCs), comprising 48 countries in Africa, Asia, the Caribbean and the Middle East, including populous countries such as Bangladesh, the Republic of the Congo, Myanmar, Tanzania, Sudan and Ethiopia.
In the 1970s a historic turning point in the dynamics of the gap between industrialized and developing countries. Domestic economic reforms and the streamlining of the legal framework, which accelerated the development of free private enterprise, helped attract foreign capital. For developing countries as a whole, since 1986 there has been a turning point in the dynamics of net inflows of foreign direct investment.
According to forecasts by Western economists, the inflow of foreign capital into developing countries will increase in the next fifteen years.
The dynamics of foreign direct investment is largely due to the gradual shift of labor-intensive, resource- and energy-intensive, as well as environmentally harmful industries from developed countries to developing ones.
The steady rise in living standards in highly developed countries, the increase in wages, which in many cases outpaces the growth of labor productivity, and the aggravation of environmental problems, lead to a rise in the cost of goods and services produced in these countries and a decrease in their international competitiveness.
All this forces entrepreneurs to transfer labor-intensive and environmentally unfriendly production to developing countries, where labor is cheap, climatic conditions are favorable, and mineral resources are rich. As for the requirements for environmental protection, they are much softer here, and consequently, production costs are significantly lower. Although the level of education of the population in developing countries is clearly insufficient for mastering the latest technologies, however, it makes it possible to master some of the technological processes that are transferred from industrial countries to developing ones.
A special role in this process belongs to TNCs, since it is they who invest foreign direct investment in developing countries.
5.2 economic development of the newly industrialized countries.
The Newly Industrialized Countries (NIEs) are a group of developing countries that have undergone a qualitative leap in socio-economic indicators over the past decades. The economies of these countries in a short time made the transition from backward, typical of developing countries, to highly developed. In the course of world industrial development, a group of new industrial countries (NIS) emerged from the total mass of states. 70-80s of the XX century. these countries were characterized by higher rates of economic development, exceeding those of other developing and industrialized countries. 1 Consequently, NIS cannot be attributed to any of the existing groups of countries: developing, developed, states with economies in transition. They occupied a special position in the world economy and formed a new independent group.
Analysis of their growth:
An analysis of the economic growth indicators of the newly industrialized countries over the past decades shows that their policies are very effective. In terms of such indicators as GDP, GDP per capita, the volume of exports of the NIS of the first wave is already ahead of some developed post-industrial countries of the world. The policy of the NIS of the second wave is most often catching up, but there is a noticeable tendency to approach individual industrialized states. The NIS economy is characterized by the presence of huge reserve foreign exchange funds. (See Annex 1) 4 In terms of the production of high-tech goods (for example: microchips) and consumer goods, NIS has become a leader in the world (See Annex 2). According to the statistics for the end of 2009 – beginning of 2010, the South Korean corporation Samsung Electronics is in the top three manufacturers of microchips with an annual turnover of 17.89 billion US dollars 5 . Thanks to the tangible economic successes achieved by NIS by the end of the 80s. their influence on the structure and direction of international trade has greatly increased. The trends towards the influence of NIS on the state of the internal general economic situation of their main trading partners are also becoming obvious. An example is the trade and economic cooperation of the Russian Federation, as a developing country, with Singapore, the level of which increased by 22% in 2009, and increased by another 43% in the first seven months of 2010, and the cooperation of the United States, as a developed post-industrial economy, with Singapore is the most important for both countries: in terms of exports: the United States ranks second in the ranking of countries importing products made in Singapore (13.3%), as well as in imports: in second place in the ranking of exporting their products to Singapore (13.9 %). In the growth of world exports, countries – “dragons” play a huge role (see Appendix 3).
For NIS, manufacturing has become the main income trend. The NIS of the first wave is generally characterized by higher growth rates of labor productivity in this industry. From 1970 to 2000 the share of manufacturing exports in NIS increased from 20% to 70%. Brazil is the country of the first wave of NIS (the leader in aluminum smelting, in the production of various branches of engineering), as well as the countries of Eastern Europe – NIS of the second wave, which have historically established centers for the development of the textile industry on their territory. 6 Next in terms of exports are the countries of Latin America – the countries of the NIS of the second wave and countries with a catch-up economy. Exports of manufacturing products from Latin America are second only to NIEs in Asia in terms of growth. Since the 80s. Until 2009, their share in world exports of manufacturing products increased from 1.5% to 9.5%. 90s for NIS, they brought the beginning of a process of changing the main priorities of the economy towards an increase in the R&D sector. The most powerful breakthrough in the field of R&D is demonstrated by South Korea. Here, this industry is a priority. Its rapid development began in the mid-80s, and since 1992, semiconductors have been the basis of exports, accounting for 10% of them (according to statistics for 2002). Until now, South Korea is the main manufacturer of memory chips in the world, and chaebols like Samsung have become powerful TNCs. Most of the exports go to developed countries with a post-industrial nature: the United States, Japan, the European Union and the countries of Southeast Asia.
The dynamic development of NIS foreign trade relations with developed countries has led to an increase in the influence of NIS in the world economy. Significant participation in the process of globalization is evidenced by the high quotas of exports and imports of these countries, in particular, among the “dragon” countries, in terms of the total value of exports of goods, the NIS surpassed the leading capitalist states (except Germany and the USA). The share of newly industrialized countries accounts for almost ½ of all exports from developing countries. For example, Brazil successfully competes with Canada in the market for the production of parts and components for cars and vehicles, such competition is carried out on an equal footing. According to the indicators of competitiveness of economic development, NIS occupy leading positions among all countries of the world. The success of NIS in competition with developed countries is primarily associated with low production costs, because NIS does not pay due attention to the environmental situation. 7 Numerous oil spills in the South China Sea, accidents at the largest chemical plants in China, an accident at the Petrobras oil refinery in the city of Araucari in southern Brazil can serve as an example. As a result, we can talk about the possibility of NIS to use the price factor in the competition. The constantly growing quality of export products, the expansion of the assortment, the application of marketing achievements, and taking into account the current and long-term market conditions allow NIS companies to successfully conquer world markets.
In the NIS countries, there is an active process of concentration of production and the formation of banking capital. A broad monopolistic structure is taking shape, and the activities of national corporations are taking on an international character. In the most developed of the NIS, TNCs were formed, in terms of their scale they were not inferior to the TNCs of the leading capitalist countries. Along with the export of goods, the export of entrepreneurial capital is growing, and a network of branches and subsidiaries of a production nature is being formed abroad. Direct foreign investments are beginning to be supplemented by the export of capital in the form of loans. Gradually, the NIS are drawn into the struggle for the market for the sale of goods, the sphere of investment of capital, the economic redistribution of the world.
The characteristics and features of socio-economic development noted above are most clearly seen in such Asian countries as South Korea, Taiwan, Hong Kong, Singapore, and Latin American states such as Brazil and Mexico 8
The emergence of countries with this type of economy is a natural result of rapid industrial development according to a progressive model. The process of industrialization of NIS can be divided into three stages: the first is the development of import-substituting industries, the second is the creation of export potential and basic industries, and the third is the development of knowledge-intensive industries. At all stages of industrialization, the economic development of NIS took place with the active participation of foreign capital and TNCs from the leading capitalist countries. The modern industrial structure of the NIS was formed largely under the influence of TNCs, which influenced the pace, nature and proportions of industrial development.
Unlike most developing countries, NIS has managed to make the most efficient use of foreign investment and modern technology. Most of the NISs have been able to put the advantages of TNCs into the service of accelerating their socio-economic development. Now, in terms of the level and nature of economic development, some NIEs, for example, South Korea and Taiwan, can easily be classified as industrialized countries.
5.4The position of Russia in international economic relations
Russia’s share in world trade is less than its share in world production of goods and services. This is evidenced by the fact that Russia’s export quota is much lower than the global figure. In terms of exports in 2003, Russia ranked 17th in the world (1.7%). Even in the USSR, the economy was skewed in the structure of exports towards a small amount of raw materials, especially energy. In post-Soviet Russia, this has intensified even more. Russia exports very little industrial and consumer goods, machinery and equipment. One of the reasons for this is the low competitiveness of Russian industrial goods on the world market. Food and consumer goods occupy a significant place in Russian imports, the share of industrial equipment is also very low.
Russia’s participation in global financial flows can hardly be called normal. In the 1990s external state and non-state debt increased rapidly. At the same time, huge amounts of private capital “leaked” from Russia for economic and other reasons. Russia needed foreign direct investment to bring new technology with it, but it came in small amounts. The legal export of capital from Russia in the form of direct investment is also extremely small.
However, Russia has favorable factors of production: a skilled, organized and low-paid labor force; the richest natural resources; high scientific and technical potential.
The reasons that these favorable factors still do not have a positive impact on the economy and international economic relations of Russia are as follows:
1. Having destroyed the planned socialist economy, Russia was unable to create an effective private capitalist economic system in its place;
2. the collapse of intra-union integration ties is being heavily replaced by a new system of international division of labor in the post-Soviet space;
3. moving away from the militarized economy of this model while maintaining efficient sectors of military production is also a difficult process;
4. Like the flight of capital, the “brain drain” is of great importance – the emigration of personal carriers of scientific and technological progress.
Russia needs the so-called reindustrialization, that is, the creation of a modern economy based on the introduction of advanced technologies in all sectors of the economy and spheres of life. The development of healthier international economic relations can accompany Russia’s economic recovery.