Chinese average GDP growth at 10 percent, for more 20 years attract in average 600 000 investments companies over interest on the opportunities to gain low labour cost and special tax treatment, involving 1billions dollars per week on the FDI. Due to this huge attraction employment rates is very high and the middle class (over 250- 350millions of people) and logically consuming power increasing by a huge amount, like since 30 years, the numbers mobile phone users is around 500 millions, or largest auto market in the world etc… (Data from Shiqiang GU, Timothy Weckesser, interview).
A past focus on manufacturing is increasing as keep going up due to cheap labour, technology and management learned from aboard increasing the competitiveness factors, strong tax incentives, emphasize export policy (Data from Shiqiang GU, Weckesser interview). This leads to create positive balance of visible trade inside Balance of payment, in other word the ratio of Exports and imports is positive and leads to explain one of the reasons of the GDP expansion. From “world’s work shop” in order to add value and shift the dominate feature of foreign trade from quantitative and qualitative the government is pushing exports from domestic Chinese firms in order to” gain more comparative advantage”. (Michael E. Brown, Owen R. Cote, Jr Sean m. Lynn-Jones and Steven E. Miller, 1991, Preface)
Therefore, the meaning of this policy based from politic focusing has the impact of maintaining manufacturing base,” in order to enhancement of independent innovation capability as the central link and will promote market-oriented & enterprise-led innovation”: (from Shiqiang GU, Weckesser interview)
Increase R&D spending from 1.3% of GDP in 2005 to 2% by 2010 and2.5% by 2020
Emphasize Support for S&T, Education, Entrepreneurship, and Shift in “Encouraged” foreign investment categories:
Ø Targets include biotechnology, nanotechnology, renewable energy, etc.
Ø IC research –Nano circuits and smaller
Ø Biomedicine ‐Major biotech centers in Beijing and Tianjin
Ø Civil aircraft
Ø Satellite applications
Ø New materials
Ø Tax equalization between FIEs and domestic firms, but
Ø 150% deduction for qualified R&D expenditures
Ø 4% of GDP on education
The problem according to china will be an increasing of the RMB and lead to decrease the profit of the competitiveness and the profit made from his past investment inside the capital account. Therefore, by reversal effect US want to increase Chinese currency in order to decrease the amount paid related to the 3rd part of the paper, also from the paper currencies manipulation by china accused by US (blog Sinous 2010).
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