Development And Policies:an Assessment On China’s Office And Telecom Equipment Industry Through A CGE Model

It is the mainstrean in media that China should abandon the export-oriented growth path and switch to the domestic-led one, especially since subprime crisis broke out in2008and a dramatic drop happened on export of the world and China. But author does not think so and suggests that China have no need to change its previous way of development. Because on the expection of the world economy recovering, the processing trade sectors like office and telecom equipment industry, will come back soon and continue to be the growth-engine if China’s government tries to stabilize its nominal exchange rate and carry out open-trade policies.Firstly the author thinks it suit the trational economic and industrial theories that China’s main export switched from the textile and wearings to mechanical and electrical products, which took advantage of China’s human capital and the late-mover.Then the history proved such process. China’s office and telecom industry has a good competitive power and its world market ratio was24.6%in2008and competitive index is0.25. Now China has been vital part of world processing trade, importing integrated circuits and electronic components from other Asian nations, processing and then sending to the final consumers in North America or Europe, by which a special technology upgrading,"tech-import-absorb-market expand barrier-tech-import", formed in office and telecom industry.The author studies on the industrial product function and finds that the industry is more and more capital intensive while less and less labor required. This result eliminates the policy effect like tariff, subsidy, exchange rate, wage, and is based on a computable general equilibriumn model (CGE).Meanwhile the author also finds that lowing tariff and export subsidy promoted office and telecom industry heavily. RMB appreciation did great harm to firms’profit, but the increasing wage would do little.The China’s office and telecom industry suffered in this subprime crisis and the model finds this suffering led China’s real GDP growth lower down by3%dut to big proportion of office and telecom export to totall one and export to China’s GDP.Fortunately the office and telecom export will recover soon based on better expectation of world economy and China’a economic stimulation plan. So the author suggests that China’s government may keep market liberal to enhance the office and telecom industry’s position in world processing trade pattern and some policies are good in short-term:①Continue eliminating the trade barrier, which will benefit China’s export industries and the recovery of the whole world economy.②Sustain the export subsidy at a high level because it is the most powerful policy to stimulate export to help firms through the crisis.③Stabilize the exchange rate due to its big negtive influence on firm’s profit.④Raise the wage level, which will be good to expand domestic demand but little harmful to processing industries.