Trade patterns in China and Hong Kong Research Paper

Trade patterns in china and Hong Kong - Research Paper Example(National Council on Economic Education) But around countries like Hong Kong plays an intermediation share for the portion out of land lock countries such as China. Hong Kong acts as an entrepot for China. Hong Kong supplies semi-manufacturing goods as well as raw materials to Mainland China by importing from rest of the world. In exchange, it re-exports the manufactured goods from China to rest of the countries of the world. (Schoen, 2010) The two basic theories of trade flows atomic number 18 the absolute advantage and comparative advantage. controlling advantage believes that a country should only produce those things which it can by using least possible resources. The absolute advantage China has in proportion to Hong Kong is Chinas low-paid workers who are very beneficial in production of labor-intensive goods. Hong Kong comparatively start high cost of living due to which nation of Hong Kong are hardworking. However, sometimes the effects of comparative advantage theory outweigh Absolute advantage as countries focus on goods with least opportunity goods as mentioned above. In this situation, a country with a comparative advantage can export same goods to a country in which the later country have an absolute advantage. Hong Kong does have a major comparative advantage over Mainland China in Publishing Industry, Demonstration Industry, Cultural Experience tourism intentness and Child rearing industry. (Liu) China, being the leader of low-priced manufactured goods obviously does have a comparative advantage over Hong Kong because of its cheap labor. These labor-intensive touch goods allow China to produce almost anything from house hold products to daily usage goods, and clothing, electronic items etc. Almost all day to day products are manufactured by China today. (Oblad, 2009) Both the governments of Hong Kong and China should encourage the development of those industries in which the y have a comparative advantage so that their exports should flourish and trade among them would increase. China should rely on its clothing industry, low cost electronic items and daily products from battery cells to laptops to sell them at a cheap rate to Hong Kong and perpetrate people from there as Hong Kong relatively has a high cost of living as compared to Mainland China. (China Global Trade). The Government of Hong should play a proactive role in development of Demonstration Industry as Hong Kong does have an advantage over China in this sector. People from China can visit Hong Kong for Demonstrations for valet de chambre rights, etc. and in exchange Hong Kong can take rent from Chinese people for these demonstrations. There are a lot of books which are not allowed to be published in Mainland China and thus Hong Kong can produce these books with its growing Publishing Industry. Also, the people of China can have as many barbarianren they indirect request in Hong Kong as t here is no restriction as such one-child-policy of China in Hong Kong. The Government of Hong Kong will take care of raising the child but Chinese do have to pay fees obviously. The cultural experience tourism industry also offers to Chinese the books, newspapers, movies, and websites that are banned in China. so both the countries could benefit by focusing on their comparative advantages (Xanga. 2012). The Government