.. main agricultural products to 14.5% or 15%. Therefore, more and more foreign agricultural products will enter out market more conveniently. In telecommunication field, six years after the entry, we must open nearly 50% market shares for investment. In automobile industry, according to the agreement, by the year of 2006, the import tariff on automobiles should be reduced from todays 100% to 25%. In banking system, foreign banks will provide RMB service to domestic enterprises after two years, and same service to civilians after five years, in addition we have to get rid off restriction of regions on foreign banks. All these are so challenging that we must make a change.
To reform the old enterprise system especially the SOEs is an efficient solution. Here are some measures wed better take. First, to change attitude towards international market, and try to be harmonious with worldwide competition. Second, to adopt a creative view on competition and find out shortways to the right answers. Maintain and explore market space. Third, to renovate enterprises main products and services according to the demands of the market. Market means everything to us around clock.
Forth, to establish new structures in enterprise system, use the experience of other countries for reference, and to set up huge groups in order to defend oversea multinational enterprises. Last, but not the least, to build up a complete enterprise training system, make more and more entrepreneurs understand the domestic and international markets and take it easy to compete with foreign enterprises. Every year high-level officials from all over the world gather in Davos, Switzerland to held Global Economic Forum (GEF). And this year in early February, they met again to exchange their opinions on the growth of the world economy. This years topic is Economic Globalization.
All the participants agree that economic globalization is an irreversible historical trend. If a country wants to develop its economy, it is impossible for it to exist without the effects of economic globalization. The concept of Economic Globalization is a trend of integration, which happens to manufacturing, distribution, and consumption of economies around the world. While the trend goes on, there is a problem faces to us: Is China ready for the inevitable economic globalization? Now, the answer is unfortunately No! At first, in the field of foreign trade, because of our unfavorable position on international division of labor and some structural problems in our economic system, the competitiveness of export has an inclination to reduce. Because our industrial structure is in a low standard, our export commodities are mainly focused on labor-intensified products, we would be affected by two problems at least.
Challenges from other low-cost countries. If their cost is relatively low, our products would have no advantages at all. Accompanied with the cyclical movement of world economy, the worldwide demands for traditional products dropped gradually. These all make us difficult to get advantage from international trade. Second, we have two serious problems in utilizing foreign investment.
One is the failure on Market to Technology policy. Although we give a lot of market shares to multinational enterprises and expect to get technologies in return, we still could not get some real advanced ones. Another is the industrial structure of foreign investment is unreasonable to some extent. According to the statistics from National Statistics Bureau (NSB), the amount of foreign investment on high-tech industries is too small to make us enjoy advantages. Finally, according to nowadays condition of Chinas financial market, it could not resist the impact from outside capitals (esp. international capitals).
There are two reasons to prove it. First, banks are still enjoying themselves in the past planned economy, and a large amount of bad debts and low profit rate make our banks vulnerable to the market risks. Second, the entry of a huge amount of capitals will fluctuate our market dramatically or even generate a financial turmoil, because of the small capacity of our financial market. Third, our small financial market is not a flawless one, its information canals are not so smooth as them should to be, and a little hindrance may make the entire system bankrupt. To every lock, there must have a key. Although we now have mal-prepared for the economic globalization, we could do something to change the situation. The first wed better do is structural adjustment.
It includes there aspects: Adjustment on products structure. Try to make products more intellectualized through the help of information technology. Develop high-tech, high-profit and brand new products. Adjustment on industrial structure. The aim of the adjustment is to raise our countrys strength in the international competition.
To make adjustment on industrial structure helps us to achieve our aim.Adjustment on economic structure. As a developing country, we must leap over two economic eras, develop the automobile industry as well as the information industry. Second, to deepen reform on SOEs. In the middle 80s, SOEs had been the center of Chinas economic reform. Although we adopted many methods, we still could not get any expected good results. In addition, we get a lot of new troubles in return.
Why? Actually, our SOEs are still affected by the dying planned economy. Some entrepreneurs transform government capitals to their own property. So we must deepen SOEs reform in two ways respectively. First one is to tighten up the management of SOEs. Second, we could unnationalize those profit-oriented SOEs, make them more competitive in the world market.
All these efforts can separate the functions of government from those of enterprises and give them more right to handle their own affairs. Third, to set up nation-wide uniform market system. Nowadays, our market is separated by some man-made factors. These factors hinder our reform seriously. Through some research, now we realize that this separation in our market is mainly caused by local governments excessive interventions to markets and social economic activities. In order to solve this problem, we also have two things to do.
One task is to change the function of our government department. With the deepening reform, government departments should act as directors of the social economic activities, but not participants. The other task is to rationalize the relationship between central and local governments. To distinct different functions of these two powers. Things concerned with state sovereignty and security are under central governments control.
Things related to common public services are business of local governments. Last, but not the least, to develop higher education system, invest more money on cultural establishments. According to statistics, 16.36% 15 and over 15-year-old people in China is illiterate or semi-illiterate. According to the world standard, when a countrys GDP (General Domestic Products) is $300, $500, and $600 per capita respectively, its average budget on education should be 3.2%, 3.5%, and 4% namely. But when our GDP came to $836 per capita, our budget on education is only 3.4%, apparently under the average level.
This causes the shortness of human resources. In addition, this lack affects our efficiency on foreign investment. Meanwhile, the most important one is that the lack of human resources accumulation makes us difficult to develop our economy through technical innovation. In 1997, our investment on R&D (Research and Development) is 3.4 billion dollars, just 1.91% of the United States. Its an astonishing difference. So, if we want to have a brilliant future in road of economic globalization, focus on R&D and improve our education system are helpful solutions. Till now, we have looked three big problems: the tendency of deflation, the problems after the entry into WTO, and the outcomes of economic globalization.
In fact, we still have many other troubles to solve. I now just point some of them. First Id like to raise a new concept Reform Cost, which means the cost of some twenty years reform. After many years of reform, we can see that the living condition of our people has increased a lot, but there so many people still live in poverty. Meanwhile, there are several millionaires enjoy their life through drugs and outlaw activities.
Is it a fair play? The answer is absolutely not. The rich try to evade taxes and do not like to share a little with their fellows, or even dare to invest any money to help them. Simultaneously the poor experience the torture of reform cost, such as, unemployment, laid out, extremely hard works. Its the poor and the average people take the responsibilities of reform cost, but not the rich. This makes our economy develops in a lopsided and abnormal way. We must stress more restrictions on the rich and force them to invest their money to help others development.
At the same time, we also need set up perfect social security system for the poor. Another trouble I refer to is the bureaucracy in our economic system. We could find this kind of bureaucratic taps (also called red taps) everywhere. They hinder our economic growth and the entire countrys development. They set up unfair competitions and make people believe they are the masters, it is impossible to develop yourself without their helps.
If we want to compete in just environment, we must set up an impartial and honest government. No justice, no competition. Because we are now setting up socialist economic system with Chinese characteristics, there have no direct and indirect experiences for us, we must practice with our own experiences, and perfect ourselves through changes and improvements. There has an old saying that Practice makes perfect. With all these problems I point out ahead, its really difficult for us to achieve a promising future. On the other hand, if we deal with these troubles properly, they will give us a kind of power, a kind of responsibility, by which we could get a happier life in near future and accomplish great national rejuvenation of our country.
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Irwin, Inc., Boston, M.A., 2nd Edition, 1992. Business.