Opinion / From the Readers

Change economic outlook

(China Daily) Updated: 2014-11-19 07:58

Comment on "Surprise as Mexico rail contract withdrawn" (China Daily, Nov 10)

That China's high-speed trains are among the best in the world prompted Mexico to sign a deal with China to build a high-speed railway. But within days, Mexico annulled the contract because no other company or country had bid for the project. Now, the Mexican president is under political pressure to reopen the bid.

Some people believe that China has been taking advantage of being a G20 member to strike commercial deals with other countries, something which other leading economic powers will not allow.

Of course, Mexico has agreed to pay the "cancellation fee", but China has learned an expensive lesson on how contract agreements should be structured in global business. Also, China can submit another bid in future if Mexico really wants to build a high-speed railway.

Perhaps China should adopt the "export pricing mechanism" widely used by Western countries to avoid being accused of using non-regular means to strike a business deal. For example, it should impose "export tariffs or country markups" for exports, because like G7 members, China provides government subsidies to boost strategic industries for domestic growth and higher exports.

In general, prices of goods for exports are higher than those in the domestic market (prices are fixed, among other things, according to a country's business volume and profit margin, tax revenue and foreign exchange reserves), because exporters have to pay the export-related costs and post-sale support expenses.

China has long been the "factory of the world". As a result, it has paid a heavy price in terms of environmental pollution. The sad part is that it has neither been appreciated nor compensated for this by the international community.

Therefore, China should take measures to ensure that its economic development does not cause further damage to its environment. To do so, it should promote more green energy projects such as solar and wind power. The more green energy projects China invests in the more jobs will be created. For example, such projects will need an increasing number of engineers and technicians.

And once China becomes a leader in green industries, the West will realize it's not beneficial to resort to protectionism. The added benefit of green projects is that it will boost the tourism industry, because more foreign tourists will visit China if it becomes an environmentally friendly place.

Coming back to high-speed railway, it would be interesting to see how the Mexican government reacts to a higher bid from Chinese companies after six months if it applies the export tariffs.

A READER, from China Daily website

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