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On January 29 in the Wall Street Journal staff writer, Kathy Chen, in the article “China pulls in reins loosened by Reform” tells about a new trend in China government policy toward western companies. China is going to restrict foreign companies in a service sector of the economy such as Ford Foundation in sponsorship of social and academic projects, media companies, law firms, and some non profit organizations. According to the Communist Party the main reason for it is the protection of Chinese citizens from bad foreign influence. On the other hand, foreign companies claim that the true hidden reason for it is protection of domestic companies and communist propaganda. The following events are some results from tightening policies. Foreign news services should distribute info through the official Xinhua Agency. Also Mrs. Chen writes, “Huang Hu says newspapers can benefit from achieving economies of scale, but adds that the policy will keep them on the socialist road. . . . Authorities issued a directive exhorting journals not to advocate sex, violence, and superstition.” There are more limitations of local hiring by foreign law firms. The non governmental organizations which deal with environmental and women’s rights issues are now more under government control.

I think that it is possible to separate technology from ideology, and these policies will give benefits to Chinese producers, to the Communist Party, and to Chinese people. These restrictions are only to companies which deal with ideology, and the restrictions do not affect manufactural industry where trade is allowed. Therefore, western technologies such as computers continue to appear on Chinese market, and cloth, toys made in China still will be on the American market. China will still use its main resource, highly educated and hard working labor to compete and to trade with the consumer oriented western countries such as U.S.. Western journals, which advocate violence, drug abuse, crime, and superstition, lead to the social problems in China such as crime, drug addiction, and mental disorders. The result of these will be low productive Chinese people. Therefore, economy will be more capital oriented, and only few rich people receive benefits from this economy.

As was mentioned before these restrictions do not affect trade between manufacture, the main part of the modern economy. Given that China has labor endowment in labor and U.S. endow in capital, China should continue to import products from the labor intensive industries such cloth to the capital intensive United States. America will export steel to China. Since both countries use their abundant factor intensively, they will gain from trade. In spite of this beneficial evidence from normative comparative advantage from the economic theory, the real trade may not occur or will be little due to political influence in economics.