Comparison of China and USA Harvard Case Solution & Analysis


This topic will be discussing the government regulations of China and USA as well as how their policies help business to grow. In addition it will give insights about monetary policy, fiscal policy and trade regulation which were used by USA and China in order to boost the local business. These policies will help in maintaining positive balance of payment of their economies; while making their export competitive in the world trade. This paper will be discussing that how both the countries are recovering from global recession and what they are doing to decrease unemployment rate and increase the social prosperity of their citizens.  How both countries are going to minimize social misbalance in their societies? Firstly, the discussion will help in understanding how these policies are going to help both China and USA’s economy, and then it will analyze the situation on the basis of social, environmental and behavioral changes which they will go underway.  China has a discount rate of 3.3% and US has a discount rate of 0.75%. Then we will be having an in depth review of policies and regulations of USA and China.


China’s monetary regulation that has low interest will help businesses to grow. China’s discount rate is 3.3% which is helping businesses to invest in and open new businesses. As a result it is helping the economy of China to grow, which is causing a reduction in prices and increase in demand of goods and services. This is increasing the employment rate which will cause an increase in the national income of the country and its GDP will increase. In the end it will cause an increase in the value of YAN (Paul Conway, 2010).

Moreover, China needs to lower the reserve ratio so that banks will be able to provide more loans. This will eventually increase the business activities and the employment rate in China. Further, more people in China will be able to move towards industrialization; which will help to develop all the undeveloped areas of the countries.

However, the monetary policy of USA is still affected from sub-prime mortgage crisis. The economy of USA went into deficit which caused an increase in prices of goods and services due to which demand for such goods and services decreased; hence people started losing their jobs which led to an increase in the unemployment rate. Additionally, an increase in the price of commodities also caused devaluation of US Dollar against other currencies. At this moment, the Federal Bank of USA is starting to invest in future and forward contract of assets based securities; which is believed to lower down the discount rates of the USA’s economy that will help the economy to grow.

US should tighten its monetary policy of the country, which is badly affected from the recession. They need to increase the discount rates so that people take loan on higher cost; as a result investors will move away from real estates. USA should provide fiscal benefits in the business income in order to make investors move towards the business side. US government also needs to take control of increase in price so that businesses can use cheap raw materials without importing raw materials from other countries. Furthermore, US government needs to control the wage/ salary of the people in US so that businesses will able to employ them on a cheap rate. US government also needs to control the immigration so that lesser number of Asian and African gets employment.  USA is also increasing reserve ratio so that banks can lend out lesser amount of loan to the customer; which reduce in investors’ trust.

Looking towards the import regulations of China, it can be found that China is providing 15 free zone areas in the country where importers will have to pay lesser amount of tariff on their imports. China will have different tax treatment for those companies; which are outside free zone areas. Therefore, companies that are outside free zone areas will be subjected to normal tax procedures that apply to imports in China. It also helps importers who import in the free zone area; they will have to face  fewer amounts of custom procedures. This particular regulation will restrict the importer to import in the specified free zone area, which will encourage development in that particular area and will bring prosperity in that region. China is also charging Tariff Rate Quota which will apply to the quantity of certain goods like wheat, rice, sugar and so on. If the prescribed quantity is exceeded then higher tax rate will apply on the importer (Canada, 2014). Those who want to avail Tariff Rate Quota program will need to apply to the Ministry of Commerce for allocation from October 15 to October 30 each year. In China, any person or entity can import goods and services but they need to apply to the Ministry of Commerce in order to do that (Canada, 2014).

This policy of China is clearly giving signals to investors that in order to take advantage from the Chinese economy; they need to make sure that their business will benefit the citizens of China either directly or indirectly. Investors will have to utilize their local resources in order to stay competitive in the Chinese market..........................

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