6.9.09

Economy

Guangzhou is the main manufacturing hub of the Pearl River Delta, one of mainland China's leading commercial and manufacturing regions. In 2008, the GDP reached ¥821.58 billion (US $118 billion), per capita was ¥81,233 (US $11,696)[13], ranking 6th among the other 659 Chinese cities.[citation needed]

The China Import and Export Fair, also called "Canton Fair", is held every year in April and October by Ministry of Trading. Inaugurated in the spring of 1957, the Fair is a major event for the city. From the 104th session, Liuhua Complex is not in use to hold Canton Fair. All the booths have been transferred to Pazhou Complex. From the 104th session, Canton Fair has been arranged in 3 phases instead of 2 phases.

Industrial zones

Science City

Future integration plans

In January 2009 the National People's Congress approved a development plan for the Pearl River Delta Region. On March 19, 2009 the Guangzhou Municipal Government and Foshan Municipal Government both agreed to establish a framework to merge the two cities.

Administrative divisions

Guangzhou is a sub-provincial city. It has direct jurisdiction over ten districts (区 qu) and two county-level cities (市 shi) :

SubdivisionPopulationLand area
as of 2006km²
Guangzhou City Proper
Yuexiu-qu越秀区1,151,48132.82
Liwan-qu荔湾区705,26262.40
Haizhu-qu海珠区890,51290.4
Tianhe-qu天河区645,453141
Guangzhou Suburban and Rural
Baiyun-qu白云区767,688825
Huangpu-qu黄埔区193,641122
Huadu-qu花都区636,706961
Panyu-qu番禺区947,607661.88
Nansha-qu南沙区147,579544.12
Luogang-qu萝岗区167,360389.06
Zengcheng-shi增城市810,5541,741.4
Conghua-shi从化市543,3771,974.5

As of April 28, 2005, the districts of Dongshan and Fangcun have been abolished and merged into Yuexiu and Liwan respectively; at the same time the district of Nansha was established out of parts of Panyu, and the district of Luogang was established out of parts of Baiyun, Tianhe, and Zengcheng, plus a part of Huangpu, making an exclave next to Huangpu.

Significant modern buildings

History

The first known city built at the site of Guangzhou was Panyu (Pan-Yü) ( 蕃禺, later simplified to 番禺; Poon Yu in Cantonese) founded in 214 BC.[citation needed] The city has been continuously occupied since that time. Panyu was expanded when it became the capital of the Nanyue Kingdom (南越) in 206 BC.

The Han Dynasty annexed Nanyue in 111 BC, and Panyu became a provincial capital and remains so until this day. In 226 AD, the city however became the seat of the Guang Prefecture (廣州; Guangzhou). Therefore, "Guangzhou" was the name of the prefecture, not of the city. However, people grew accustomed to calling the city Guangzhou, instead of Panyu.[citation needed]

Although the Chinese name of Guangzhou replaced Panyu as the name of the walled city, Panyu was still the name of the area surrounding the walled city until the end of Qing era.[citation needed]. Today, Panyun generally refers to the region to the south of Haizhu District, which is separated by the Pearl River.

Arab and Persian pirates sacked Guangzhou (known to them as Sin-Kalan) in AD 758, ² according to a local Guangzhou government report on October 30 758, which corresponded to the day of Guisi (癸巳) of the ninth lunar month in the first year of the Qianyuan era of Emperor Suzong of the Tang Dynasty.[3][4][5] The Arab historian Abu Zayd Hasan of Siraf reports that in 878 followers of the Chinese rebel leader Huang Chao besieged the city and killed a large number of foreign merchants resident there.[6][7]

During the Northern Song Dynasty, the celebrated poet Su Shi (Shisu) visited Guangzhou's Baozhuangyan Temple and wrote the inscription "Liu Rong" (Six Banyan Trees) because of the six banyan trees he saw there. It has since been called the Temple of the 6 Banyan Trees.

The Portuguese were the first Europeans to arrive to the city by sea, establishing a monopoly on the external trade out of its harbor by 1511.[citation needed] They were later expelled from their settlements in Guangzhou (Cantão in Portuguese), but instead granted use of Macau as a trade base with the city in 1557. They would keep a near monopoly of foreign trade in the region until the arrival of the Dutch in the early seventeenth century.

It is believed that the romanization "Canton" in European languages originated from Portuguese Cantão, which was transcribed from Guangdong. Nevertheless, because at the time of Portuguese arrival the capital city had no specific appellation other than Shang Sheng(省 城, lit. the provincial capital) by its people, the province name was adopted for the walled city by the Europeans. The etymology of Canton, as well as the similar pronunciation with the province name Guangdong might have partly contributed to the recent confusion of Canton and Guangdong by certain English speakers. However, definitive English lexica, such as Merriam–Webster's Dictionary, American Heritage Dictionary and Longman Dictionary of Contemporary English don't list Guangdong as a synonym(or variant) under Canton.

After China claimed control of Taiwan in 1683, the Qing government became open to encouraging foreign trade. Guangzhou quickly emerged as one of the most adaptable ports for negotiating commerce and before long, many foreign ships were going there to procure cargos.

Portuguese in Macau, Spanish in Manila, and Armenians and Muslims from India were already actively trading in the port by the 1690s, when the French and English British East India Company's ships began frequenting the port through the Canton System.

Other companies were soon to follow: the Ostend General India company in 1717; Dutch East India Company in 1729; the first Danish ship in 1731, which was followed by a Danish Asiatic Company ship in 1734; the Swedish East India Company in 1732; followed by an occasional Prussian and Trieste Company ship; the Americans in 1784; and the first ships from Australia in 1788.

By the middle of the 18th century, Guangzhou had emerged as one of the world's great trading ports under the Thirteen Factories, which was a distinction it maintained until the outbreak of the Opium Wars in 1839 and the opening of other ports in China in 1842. The privilege during this period made Guangzhou one of the top 3 cities in the world.[8]

Combat at Guangzhou during the Second Opium War
1919 street scene

Guangzhou's monopoly on English trade ended with the Treaty of Nanking, signed in 1842 to end the First Opium War between Britain and China. The treaty opened four new treaty ports, allowing British merchants to trade in Fuzhou, Xiamen, Ningbo, and Shanghai in addition to Guangzhou.

1888 German map of Hong Kong, Macau, and Guangzhou

In 1918, the city's urban council was established and "Guangzhou" became the official name of the city.[citation needed] Panyu became a county's name to the southern side of Guangzhou.

In both 1930 and 1953, Guangzhou was promoted to the status of a Municipality, but each time promotion was canceled within the year[citation needed].

Japanese troops occupied Guangzhou from October 12, 1938 to September 16, 1945, after violent bombings. In the city, the Imperial Japanese Army conducted bacteriological research unit 8604, a section of unit 731, where Japanese doctors experimented on human prisoners.

After the fall of the capital Nanjing in April 1949, the Nationalist government under the acting president Li Zongren relocated to Guangzhou.

Communist forces entered the city on October 14, 1949. This led the nationalists to blow up the Haizhu bridge as the major link across the Pearl River and to the acting president's leaving for New York, whereas Chiang Kai-shek set up a the capital for the Nationalist government in Chongqing again. Their urban renewal projects of the new communist government improved the lives of some residents. New housing on the shores of the Pearl River provided homes for the poor boat people. Reforms by Deng Xiaoping, who came to power in the late 1970s, led to rapid economic growth due to the city's close proximity to Hong Kong and access to the Pearl River.

As labor costs increased in Hong Kong, manufacturers opened new plants in the cities of Guangdong including Guangzhou. As the largest city in one of China's wealthiest provinces, Guangzhou attracts farmers from the countryside looking for factory work. Cantonese links to overseas Chinese and beneficial tax reforms of the 1990s have aided the city's rapid growth.

In 2000, Huadu and Panyu were merged into Guangzhou as districts, and Conghua and Zengcheng became county-level cities of Guangzhou.

Based on a report in the Guangzhou Daily, there might be as many as 100,000 Africans in Guangzhou, a number that the newspaper reports has been increasing at an annual rate of 30 to 40% since 2003.[9][10]

Geography and climate

Guangzhou is located at 112°57'E to 114°3'E and 22°26'N to 23°56'N. The city is part of the Pearl River Delta.

Guangzhou has a humid subtropical climate influenced by the Asian monsoon. Summers are wet with high temperatures, high humidity and a high heat index. Winters are mild, dry and sunny.

Guangzhou

Guangzhou (simplified Chinese: 广; traditional Chinese: 廣州; pinyin: Guǎngzhōu; jyutping : Gwong²zau¹; Yale: Gwóngjàu), often referred to in English as Canton in the Chinese Postal Map Romanization and formerly known as Kwangchou, is a Sub-provincial city and the capital of Guangdong Province in the southern part of the People's Republic of China. It is a port on the Pearl River, navigable to the South China Sea, and is located about 120 km (75 miles) northwest of Hong Kong. As of the 2000 census, the city has a population of 6 million, and a metropolitan population of roughly 8.5 million (though some estimates are as high as 15.3 million)[2] making it the most populous city in the province and the third most populous metropolitan area in mainland China. The official estimate of the metropolitan area's population at end 2006 by the Provincial Government was 9,754,600. Guangzhou's urban land area is the third largest in China, ranking only after Beijing's and Shanghai's.

Risk in international trade

Companies doing business across international borders face many of the same risks as would normally be evident in strictly domestic transactions. For example,

  • Buyer insolvency (purchaser cannot pay);
  • Non-acceptance (buyer rejects goods as different from the agreed upon specifications);
  • Credit risk (allowing the buyer to take possession of goods prior to payment);
  • Regulatory risk (e.g., a change in rules that prevents the transaction);
  • Intervention (governmental action to prevent a transaction being completed);
  • Political risk (change in leadership interfering with transactions or prices); and
  • War and Acts of God.

In addition, international trade also faces the risk of unfavorable exchange rate movements (and, the potential benefit of favorable movements).

Regulation of international trade

Traditionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in Mercantilism most nations had high tariffs and many restrictions on international trade. In the 19th century, especially in the United Kingdom, a belief in free trade became paramount.[citation needed] This belief became the dominant thinking among western nations since then. In the years since the Second World War, controversial multilateral treaties like the General Agreement on Tariffs and Trade (GATT) and World Trade Organization have attempted to create a globally regulated trade structure. These trade agreements have often resulted in protest and discontent with claims of unfair trade that is not mutually beneficial.

Free trade is usually most strongly supported by the most economically powerful nations, though they often engage in selective protectionism for those industries which are strategically important such as the protective tariffs applied to agriculture by the United States and Europe.[citation needed] The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, China and Russia) are increasingly becoming advocates of free trade as they become more economically powerful themselves. As tariff levels fall there is also an increasing willingness to negotiate non tariff measures, including foreign direct investment, procurement and trade facilitation.[citation needed] The latter looks at the transaction cost associated with meeting trade and customs procedures.

Traditionally agricultural interests are usually in favour of free trade while manufacturing sectors often support protectionism.[citation needed]This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services.

During recessions there is often strong domestic pressure to increase tariffs to protect domestic industries. This occurred around the world during the Great Depression. Many economists have attempted to portray tariffs as the underlining reason behind the collapse in world trade that many believe seriously deepened the depression.

The regulation of international trade is done through the World Trade Organization at the global level, and through several other regional arrangements such as MERCOSUR in South America, the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, and the European Union between 27 independent states. The 2005 Buenos Aires talks on the planned establishment of the Free Trade Area of the Americas (FTAA) failed largely because of opposition from the populations of Latin American nations. Similar agreements such as the Multilateral Agreement on Investment (MAI) have also failed in recent years.

International trade

International trade is exchange of capital, goods, and services across international borders or territories.[1] In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. International trade is a major source of economic revenue for any nation that is considered a world power. Without international trade, nations would be limited to the goods and services produced within their own borders.

International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade does not change fundamentally depending on whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or a different culture.

Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production. Then trade in good and services can serve as a substitute for trade in factors of production. Instead of importing the factor of production a country can import goods that make intensive use of the factor of production and are thus embodying the respective factor. An example is the import of labor-intensive goods by the United States from China. Instead of importing Chinese labor the United States is importing goods from China that were produced with Chinese labor. International trade is also a branch of economics, which, together with international finance, forms the larger branch of international economics.

Models

Several different models have been proposed to predict patterns of trade and to analyze the effects of trade policies such as tariffs.

Ricardian model

The Panama Canal is important for international sea trade between the Atlantic Ocean and the Pacific Ocean.

The Ricardian model focuses on comparative advantage and is perhaps the most important concept in international trade theory. In a Ricardian model, countries specialize in producing what they produce best. Unlike other models, the Ricardian framework predicts that countries will fully specialize instead of producing a broad array of goods. Also, the Ricardian model does not directly consider factor endowments, such as the relative amounts of labor and capital within a country.

Assumptions of the Ricardian model (1) Labor is the only primary input to production (labor is considered to be the ultimate source of value). (2) Constant Marginal Product of Labor (MPL) (Labor productivity is constant, constant returns to scale, and simple technology. (3) Limited amount of labor in the economy (4) Labor is perfectly mobile among sectors but not internationally. (5) Perfect competition (price-takers).

The Ricardian model measures in the short-run, therefore technology differs internationally. This supports the fact that countries follow their comparative advantage and allows for specialization.

Heckscher-Ohlin model

The Heckscher-Ohlin model was produced as an alternative to the Ricardian model of basic comparative advantage. Despite its greater complexity it did not prove much more accurate in its predictions. However from a theoretical point of view it did provide an elegant solution by incorporating the neoclassical price mechanism into international trade theory.

The theory argues that the pattern of international trade is determined by differences in factor endowments. It predicts that countries will export those goods that make intensive use of locally abundant factors and will import goods that make intensive use of factors that are locally scarce. Empirical problems with the H-O model, known as the Leontief paradox, were exposed in empirical tests by Wassily Leontief who found that the United States tended to export labor intensive goods despite having a capital abundance.

Core assumptions of the H-O model: (1) Labor and capital flow freely between sectors (2) The production of shoes is labor intensive and computers is capital intensive (3) The amount of labor and capital in two countries differ (difference in endowments) (4) free trade (5) technology is the same across countries (long-term) (6) Tastes are the same.

Specific factors model

Current members of the World Trade Organisation.
Global Competitiveness Index (2006-2007): competitiveness is an important determinant for the well-being of states in an international trade environment.

In this model, labour mobility between industries is possible while capital is immobile between industries in the short-run. Thus, this model can be interpreted as a 'short run' version of the Heckscher-Ohlin model. The specific factors name refers to the given that in the short-run, specific factors of production such as physical capital are not easily transferable between industries. The theory suggests that if there is an increase in the price of a good, the owners of the factor of production specific to that good will profit in real terms. Additionally, owners of opposing specific factors of production (i.e. labour and capital) are likely to have opposing agendas when lobbying for controls over immigration of labour. Conversely, both owners of capital and labour profit in real terms from an increase in the capital endowment. This model is ideal for particular industries. This model is ideal for understanding income distribution but awkward for discussing the pattern of trade.

New Trade Theory

New Trade theory tries to explain several facts about trade, which the two main models above have difficulty with. These include the fact that most trade is between countries with similar factor endowment and productivity levels, and the large amount of multinational production(i.e.foreign direct investment) which exists. In one example of this framework, the economy exhibits monopolistic competition and increasing returns to scale.

Gravity model

The Gravity model of trade presents a more empirical analysis of trading patterns rather than the more theoretical models discussed above. The gravity model, in its basic form, predicts trade based on the distance between countries and the interaction of the countries' economic sizes. The model mimics the Newtonian law of gravity which also considers distance and physical size between two objects. The model has been proven to be empirically strong through econometric analysis. Other factors such as income level, diplomatic relationships between countries, and trade policies are also included in expanded versions of the model.