Trade patterns in China and Hong Kong Research Paper

Trade patterns in china and Hong Kong - Research Paper Example(National Council on scotch Education) But some countries like Hong Kong plays an intermediation role for the trade of land lock countries such as chinaw are. 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 tarry of the world. In transmute, 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 benefit and comparative advantage. unquestioning advantage believes that a plain should only produce those things which it can by victimisation least possible resources. The absolute advantage China has in comparison to Hong Kong is Chinas low-paid workers who are very beneficial in production of labor-intensive goods. Hong Kong comparatively have high cost of aliveness due to which people of Hong Kong are hardwo rking. 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(prenominal) country have an absolute advantage. Hong Kong does have a major comparative advantage oer Mainland China in print Industry, Demonstration Industry, Cultural Experience tourism industry and Child rearing industry. (Liu) China, macrocosm the leader of low-priced manufactured goods obviously does have a comparative advantage over Hong Kong because of its forte labor. These labor-intensive processed goods allow China to produce almost anything from house hold products to occasional practice session 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 develo pment of those industries in which they 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 attract people from thither 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 human 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 children they want in Hong Kon g as there is no restriction as such one-child-policy of China in Hong Kong. The Government of Hong Kong will take handle 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. Thus both the countries could benefit by focusing on their comparative advantages (Xanga. 2012). The Government