given the chinese demand for raw goods and the american demand for anything remotely exotic

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INDEX

S.NO CONTENTS PAGE NUMBER

INTRODUCTION 1

1 TENSIONS IN SINO-US RELATIONSy Old China Trade

y Treaties

y The Burlingame Treaty and Chinese

Exclusion Act

2

2 Korean War

Vietnam War

For better relations

3

3 MODERN TIMES

y Entry of China in WTO

y Piracy

y Google in China

4

4 EBay in China 5

5 UNCERTAINTY IN FUTURE LEADERSHIP

OF NORTH KOREA AND ITS POLITICAL

INSTABILITY

6

6 INFLATION AND ECONOMIC INSTABILITY 6-8

7 ENERGY AND ENVIRONMENTAL ISSUES

AND INCREASE IN OIL & GAS PRICES

9-10

8 REFERENCES 11



TENSIONS IN SINO-US RELATIONS

OLD CHINA TRADE

The Chinese demand for raw goods was increasing as well as the American demand for exotic

things thus began the lucrative Sino-American relationship known as the Old China Trade. g in

America exported ginseng and furs to China as the craze for the exported products increased

and started importing tea, cotton, silk, porcelain , furniture etc.. This enhanced the trade

relations between America and China. The merchants, who facilitated trade between the Chinese

and American consumers, became wealthy from this trade eventually becoming America's first

generation of millionaires. TREATIES

A treaty i.e. the treaty of Nanking (Anglo- Chinese) was signed after the end of the first Opium

war in which Chinese were forced to open ports for foreign trade to the British which threatened

the American business in China. This insecurity led to signing of Treaty Of Wangxia (1844) in

between China and America which brought the Americans at par with the other foreign powers

trading with Chinese like British and the Americans also secured right of extraterritoriality1

.

THE BURLINGAME TREATY AND CHINESE EXCLUSION ACT

America¶s congress passed the Chinese Exclusion Act on May 6, 1882, following revisions made

in 1880 to the Burlingame Treaty which was the first significant restriction on free immigration

in US history. Those revisions allowed the United States to suspend immigration, and Congress

acted quickly to implement the suspension of Chinese immigration and exclude Chinese "skilled

and unskilled laborers and Chinese employed in mining" 2from entering the country for ten

years, under penalty of imprisonment and deportation. The ban was renewed a number of times,

lasting for over 60 years. This led to hatred in Chinese people of China for America which also

affected the relations in a negative way

KOREAN WAR

1 www.wikipedia.com

2

www.wikipedia.com

2



A column of troops move through communist Chinese lines during breakout from the

Chosin Reservoir in North Korea.

The hope of better relations ended when US and China fought against each other in the Korean

War on November 1, 1950. Both sides sustained heavy casualties before the UN forces pushed

the PRC back

VIETNAM WAR

The relations further severed when between 1965 and 1970, over 320,000 Chinese soldiers

fought the Americans alongside the North Vietnamese Army3.

FOR BETTER RELATIONS

Both the PRC and the US made efforts to try to improve relations between them.

American President Richard Nixon thought that the relations with China were important as the

boost from a successful relations with PRC could help him in the American presidential

election(1972).

Richard Nixon met with Mao Zedong in 1972

3

www.wikipedia.com

3



This benefited the PRC immensely and greatly increased its security but Relations between the

US and the PRC were severely strained for a time by the NATO Bombing of the Chinese

embassy in Belgrade in May 1999, which occurred due to an intelligence error but according to

china it was deliberately done by America.

MODERN TIMES

ENTRY OF CHINA IN WTO

After the joining of Chinese in the WTO, the trade of Chinese good fastened in world market,

also US which has hit the domestic market of US in a way that people prefer cheaper products

PIRACY

The foreign company products are easily copied by the Chinese as a result the pirated products

be it clothes, watches etc have lowered the trust of the people in the actual product

manufacturing companies because the Chinese made watches look the same as the original

watches but are of low quality as a result they dent the image of a company.US has at many

times brought this issue with the Chinese government and Chinese government made stronger

IPR laws but still has not been able to uproot the piracy from china

GOOGLE IN CHINA

In September 2000, Google began operating a search engine in Chinese by offering 24

million web pages in Chinese language. By 2002, Google had gained lot of popularity in China

owing to its simplicity and ability to carry out searches effectively. However the Chinese

government objected to some of the websites shown on Google saying that they were showing

some of the scenes which were against the social norms of the Chinese culture and hence the

Google contents were to be censored before showing in China.4The Chinese government was

blocking several websites through their IP filters and this blocking increased during times of

heightened security like the anniversary of Tiananmen Square events, the national party

congress, etc. which led to the slow speed of Google because of the censorship and filtering of

information on Google by Chinese government But users of Google could circumvent the

government censorship through cached pages so they switched over to the Chinese search

engine Baidu which being Chinese was favored by the Chinese government and Chinese people

found it to be more convenient .All this after Google even Google's launched Chinese website

www.google.cn which would be censored by the company itself on the basis of the instructions

4http://www.icmrindia.org/casestudies/catalogue/Business%20Environment/Google%20Problems%20in

%20China.htm

4



of the government for which the company had to take wrath from many experts especially

Americans.

This also led to souring of the relations of China and America

EBay IN CHINA

EBay launched in China in order to flourish with the future most economically efficient country

but not before it had its share of troubles in China. The Chinese do not prefer the idea of their

capital going out of the country which is why non-Chinese companies had tough time as well as

eBay. So eBay ventured with Chinese company TOM online, a cell phone service company.

Political connections that remain crucial in China of TOM online saved eBay in china. Li Ka-

shing,

5Hong Kong¶s wealthiest tycoon and a man, who cultivated close relationships with topmost

Communist leaders on the mainland for decades, controlled the company. Wang Lei , the chief

executive of TOM Online and now the chief executive of the joint venture, is the grandson of a

People¶s Liberation Army general and is known for the political connections he has in China

TOM Online had tremendous expertise in wireless and reach in China which also helped eBay

The behavior of china with US companies soured China¶s relations with the US.

US preposition of 6 million dollar arms package to Taiwan further strained the relations

President Barack Obama said that One of the challenges to be addressed internationally are

currency rates and how they match up ± to make sure that american goods are not artificially

inflated in price and their goods are not artificially deflated in price. That puts us at a huge

disadvantage,´6.

This after the anger amongst the US citizens over Chinese censorship of Google and its alleged

attacks on US-run websites

5 http://www.nytimes.com/2006/12/22/technology/22ebay.html

http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/eBay%20Problems%20in%20China.html

6 http://www.euronews.net/2010/02/04/tension-over-trade-as-us-sino-relations-turn-chilly



UNCERTAINITY IN FUTURE LEADERSHIP OF NORTH KOREA AND ITS

POLITICAL INSTABILITY.

Kim Jong Li, North Korea¶s supreme leader promoted his youngest son Kim Jong-un to

military general and thus positioned him as the new future leader of the country

Kim elevated his sister as well as his close friend to have a high military rank and also became a

member of central committee of ruling worker¶s party

In the view of the experts due to the inexperience of Kim junior he needs to be given time to

take control of the government

Kim Jong-il ensured that other Kim clan members would exercise the power behind the scenes in

a type of communist regency. In ensuring this the economic reforms have been kept aside and

abandoning of negotiations to the SIX PARTY TALKS (SPT) on Denuclearization issue.

This has sent alarm bells ringing in Japan and South Korea7

For stabilizing his own position in the country junior Kim may keep his interest in enhancing

the military power rather than steering the resources towards economic development

This has become a cause of worry for the American government as well as that of Japan and

South Korea because this time around the junior Kim may look for an alibi to consolidate his

powerbase which is the main cause of worry8

The sinking of the South Korean warship,Cheonan on 26th

March 2010 is suspected to be done

under the orders of junior Kim and this action is seen as a deliberate move by him to ensure that

he gets respect from the military. The Chinese government is also helping north Korea which

may avert possibilities of north Korea¶s collapse .This is because the collapse of north Korea

would lead to refugee problem for which china is unprepared therefore it supports with food,

fertilizers etc.

INFLATION AND ECONOMIC INSTABILITY Inflation rate is general rise in prices

measured against a standard level of purchasing power. One of the t well known measures of

Inflation is the CPI which measures consumer prices9

7 http://www.eurasiareview.com/power-transition-in-north-korea-creates-more-uncertainty-for-future-17102010/

8 : http://www.digitaljournal.com/article/298720#ixzz1IRFZlZO6

6



Country 2002 2003 2004 2005 2006 2007 2008 2009 2010

China -0.8 1.2 3.9 1.8 1.5 1.8 2.2 -2 5

Hong

Kong

-3.0 -2.6 -0.4 1.0 2.0 1.6 2.3 3 4

India 3.4 5.4 6.4 4.4 5.5 5.0 5.0 -1 8.2

Indonesia 11.9 6.8 6.1 10.5 13.1 6.2 6.1 3 5.4

Korea 2.8 3.4 3.6 2.8 2.2 2.4 2.6 2.8 3.5

Singapore -0.4 0.5 1.7 0.5 1.0 1.6 1.0 0.6 2.8

Thailand 0.6 1.8 2.8 4.5 4.6 2.5 2.5 -4 3

Vietnam 3.8 3.1 7.8 8.3 7.5 6.8 6.3 6.4 7

Some foodstuff inflation is inevitable as big emerging markets push up the economic curve, with

higher standards of living increasing demand on a wider variety of commodities.

2009 100.0 0.6

2010 102.8 2.8

SINGAPORE INFLATION RATE10

With increase in trade and foreign direct investments, the money inflow in Asian countries has

been appreciable which has led to increase in the income of the consumers.

More money means more disposable income of the consumers, which means the demand of a

commodity also increases which is much more than the supply of that particular commodity

10Asian Development Outlook 2007, www.businessinasia.com

http://www.business-in-asia.com/asia/asia_inflation.html

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=INR

10 http://www.singstat.gov.sg/stats/themes/economy/hist/cpi.html

Table of Comparison: Asian Countries' Inflation Rate (% per year)10

7



Once the demand increases as compared to supply, the price of the commodity increases,

ultimately leading to inflation which is precisely the case of Asian countries

CHINA INFLATION RATE12

COMPARISON OF INFLATION IN ASIA, INDONESIA, THAILAND & CHINA11

8



When the inflation increases, the disposable income of the consumers increases ultimately

leading to less buying and hence less demand by which the industries suffer as their profits lower

and hence the ECONOMIC INSTABILITY occurs.

ENERGY AND ENVIRONMENTAL ISSUES AND INCREASE IN OIL & GAS PRICES Fossil fuels

The forest cover has been decreasing not only in the Asian countries but also the whole world.

The oil and gas are produced by fossil fuels which takes thousands of years for conversion. Since

the crude oil and gas are used at a much faster pace than their natural production, their prices

have increased at a considerable rate

11http://blogs.reuters.com/eric-burroughs/2011/01/24/asia-inflation-vexation/

12http://www.forexblog.org/category/news

9



Because of more demand and less supply and increase in oil and gas prices, the commodities

have also become expensive especially the food products which need to be transported from one

place to another via ships, trucks, vans etc all of which need oil and gas for running

NUCLEAR ENERGY

Nuclear energy is also very efficient source for producing electricity, but the recent earthquake in

Japan has produced more threat to the humans and environment due to nuclear plants. The

radiation reached 1000 times more than the allowed limit due to blasts in the plant

The Plutonium which entered the atmosphere after the blasts could cause diseases like cancer,

lung damage , skin diseases and death.

The nuclear water was thrown into the sea by Japan authorities which can become huge

environment issue

Due to radiation leak, the commodities in japan cost more due to less supply

BUSINESS

Moreover the business also suffered as many companies like Toyota , Nissan etc closed hence

the exports decreased.

Many countries also banned Japanese goods import including India which banned the import of

Japanese goods for 3 months

10



REFERENCES:

www.wikipedia.com

http://blogs.reuters.com/eric-burroughs/2011/01/24/asia-inflation-vexation/

http://www.forexblog.org/category/news

http://www.singstat.gov.sg/stats/themes/economy/hist/cpi.html

http://www.eurasiareview.com/power-transition-in-north-korea-creates-more-uncertainty-for-

future-17102010/

http://www.digitaljournal.com/article/298720#ixzz1IRFZlZO6

Asian Development Outlook 2007, www.businessinasia.com

http://www.nytimes.com/2006/12/22/technology/22ebay.html

http://www.euronews.net/2010/02/04/tension-over-trade-as-us-sino-relations-turn-chilly

http://www.business-in-asia.com/asia/asia_inflation.html

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=INR

11

given the chinese demand for raw goods and the american demand for anything remotely exotic

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