Economics and Business of the Asia-Pacific Region and Emerging Markets - Essay Example

Economics and Business of the Asia-Pacific Region and Emerging Markets Table of Contents Table of Contents 2 Introduction 3 Assessment of Chinese Post Mao Economic Development 3 Gross Domestic Product 4 Employment 6 GDP Per Capita 8 Purchasing Power 10 Inflation 11 Standard of Living 13 Infrastructure Development 14 International Business 14 Technological Development 17 Interest Rates 18 Currency Strength 20 Government Intervention 21 Environmental Impact 21 Conclusion 22 References 23 Introduction Mao Zedong is recognised to be one of the most powerful leaders that the world has ever witnessed, who appeared as the founder of the People’s Republic of China. Mao was a principal Marxist theorist in China, who led communist revolution in the nation. It has been claimed by varied reports such as those published by the World Bank that the Chinese post Mao economic development of China resembled the experience of high performing Asian economies. This signifies that little development was made in China during the rule of the communist leader Mao (Meisner, 1999). Contextually, the essay intends to highlight the ways and also the extent of economic development in China, which took place during post Mao period. While elaborating the discussion, varied financial parameters or indicators would be discussed in the essay with the aim of supporting the report published by the World Bank that the post Mao economic development represented the experience of high performing Asian economies (HPAEs). Assessment of Chinese Post Mao Economic Development There are certain parameters based on which the measurement of economic development is generally performed. Similarly, the following financial parameters have been taken into concern for determining the ways and the extent to which the economic development of China resembled the experience of high performing Asian economies in post Mao period: Gross Domestic Product The measurement of Gross Domestic Product (GDP) is principally viewed to be one of the decisive parameters in determining the economy of a nation. In this regard, it is observed that the economy of China has developed significantly during the post Mao period in terms of GDP. This has been more prominent after the economic liberation witnessed by the nation in the 1990s. Further development in the economy of the nation occurred during 21st century, wherein the rate of GDP is mostly found to be in double-digits (World Bank Group, 2014; Lin, 2012). The GDP rate of China in post Mao period can be better understood from the below depicted graphical representation. Source: (1Trading Economics, 2014) However, there are certain nations in Asia that have grown extensively during the same period. These nations include Japan, South Korea and India among others. It is important to note that Japan and South Korea are the nations that have shown constant growth in GDP rates during the post Mao period. Moreover, it is worth mentioning that China has also grown extensively after liberation and more prominently in the 21st century. However, these countries i.e. South Korea and Japan could not grow in higher rates as compared to China. One of the prime reasons for China to experience higher GDP is the liberation in the economy. The open economy in the region has led to the creation of equal and fair opportunities to the traders (World Bank Group, 2014; Lin, 2012). The GDP of Japan, South Korea and India have been depicted below in the form of graphical representations. Source: (2Trading Economics, 2014) Source: (3Trading Economics, 2014) Source: (4Trading Economics, 2014) Employment Another parameter, which denotes the resemblance of Chinese post Mao economic development towards experiencing of the HPAEs, is employment. It will be vital to mention in this similar concern that after the post Mao period, there has been reduction in the unemployment rate in China. The unemployment rate in the region was observed to be around 4% to 5% during the post Mao period. The prime reason for having reduction in unemployment rate in China during such period was the increased level of industrialisation in the nation due to the prevalence of open economy. The strategy of open economy greatly resembled with the other HPAEs as mentioned in the World Bank report “The East Asian Miracle: Economic Growth and Public Policy”. Moreover, it is also important to note that the resemblance of China’s employment to other HPAEs reached into a significant extent, which is quite favourable as compared to other nations. It is strongly believed that with the increase in the industrialisation level, greater improvements can be witnessed in the employment rate. China, on the other hand, during the Mao period, was not having a liberalised open economy. It is during the post Mao period that the People’s Republic of China (PRC) undertook the strategies of liberalising the economy. The resemblance of China to other HPAEs in such aspect has led towards higher employment rate at par to certain other nations like Japan, South Korea and Singapore among others (World Bank Group, 2014; Lin, 2012). In order to acquire a comprehensive understanding regarding the resemblance of China’s employment with other HPAEs, the graphical representations of the unemployment rate of China, Japan and India during the post Mao period have been depicted below. Source: (The Global Economy, 2014) Source: (5Trading Economics, 2014) Source: (6Trading Economics, 2014) GDP Per Capita GDP per capita is also a major parameter in resembling the development of China’s economy to other HPAEs during the post Mao period. In this regard, it is important to note that that with the increase in the industrialisation through the prevalence of open economy in China, the nation has been able to reduce its unemployment rate by a significant level. Specially mentioning, the reduction in unemployment and the increase in GDP rates eventually raised per capita income in post Mao period. China is one of such nations, which possessed higher GDP a well as GDP per capita after being liberalised in post Mao period. Moreover, it is also important to note that the GDP per capita of China resembles the GDP per capita of Japan and several other HPAEs. The GDP per capita of China and Japan is almost similar at present. However, it is also important to note that the growth rate of GDP per capita is extremely high in China in comparison with Japan and other HPAEs (World Bank Group, 2014; Lin, 2012). Moreover, it also observed that the GDP per capita of China has reached to an extent, which is extremely high as compared to other HPAEs like South Korea. In order to have an in-depth understanding regarding the resemblance of GDP per capita of China to the other HPAEs, graphical representations of the similar financial parameter specifically of China, Japan and South Korea have been framed below. Source: (7Trading Economics, 2014) Source: (8Trading Economics, 2014) Source: (9Trading Economics, 2014) Purchasing Power Another most important parameter in resembling the economic development of China to other HPAEs during post Mao period is the purchasing power of the government as well as the citizens. In this regard, it is observed that China, on account of higher GDP per capita as well as GDP rate, holds greater purchasing power of the government as well as the people. This high purchasing power of China resembles with the nations constituting under HPAEs including Japan and South Korea among others. It has been witnessed that Japan and South Korea are the nations possessing higher purchasing power from the previous few years. However, China during the beginning of 20th century does not possessed high purchasing power. As per the belief of several economists, the prime reason for underdeveloped economy during the pre-Chinese Mao period in the form of low purchasing power of the people was the persistence of communist form of governance in the nation. This communist form of governance was more dominant during the period of Mao, who was recognised as a true communist leader. However, in the last part of the century, the nation witnessed liberalisation of economy, which certainly changed the entire scenario discussed above. This higher purchasing power of PRC greatly resembles to the higher purchasing power of the other HPAEs as mentioned in the report of World Bank (World Bank Group, 2014; Lin, 2012). Inflation Inflation is also regarded as a decisive parameter, which determines the economic development of a nation. This parameter is equally applicable in assessing the resemblance of China’s economic development during post Mao period to other HPAEs. In this regard, it is observed that during this period with the rise of open economy, the GDP along with the GDP per capita rate and purchasing power of government as well as the citizens of China has increased substantially. These signs of economic development are due to the result of industrialisation. Moreover, it is also important to note that as per the theory of economics, the increase in the industrialisation and per capita income lead towards simultaneous increase in inflation. It has been witnessed that during the years 1989 and 1995, there was a devastating inflation rate of nearly 30% in China. However, it can be ascertained in this regard that there has been high reduction in the inflation rate due to the initiatives taken by the government of PRC in the form of introducing certain effective economic policies. It is observed that from the year 1997, there has been reduction in the inflation within the nation. The inflation rate since then has been in extreme control, which rarely went beyond 5%. This is an extreme good sign from the perspective of the overall economic development of the nation. This control of inflation greatly resembles to other HPAEs including Japan, Singapore and Thailand, wherein controlled inflation rate with mostly less than 5% can be witnessed. However, there also been certain rise in inflation during the post Mao period in the HPAEs, but these are for a very short period of time (World Bank Group, 2014; Huang, & Yu, 2013). Moreover, for depicting the resemblance of inflation rate in China with other HPAEs, graphical representations of the inflation rate of China along with Japan, Singapore and Thailand have been provided underneath. Source: (10Trading Economics, 2014) Source: (11Trading Economics, 2014) Source: (12Trading Economics, 2014) Source: (13Trading Economics, 2014) Standard of Living Notably, there has been significant improvement in the living standards of people belonging to China during the post Mao period. This may be owing to the reasons of increase in their per capita income and purchasing power. Additionally, the inflation rate of the nation is also identified to remain under control for more than a decade. Apart from these, the employment rate of the nation remained much higher as compared to others because of gaining momentum of industrialisation. However, it also cannot be denied that in the rural areas of the nation, the above stated developments cannot be witnessed at par with that of the urban areas. This underdevelopment in the rural areas eventually contributed in making the living standards of the populaces below as compared to other HPAEs constituting the nations like Japan and South Korea. However, considering the standard of living in urban China, this strongly resembles with the other nations constituting within HPAEs (World Bank Group, 2014; Huang, & Yu, 2013). Infrastructure Development Infrastructure development is also considered as a parameter for assessing the economic performances of a particular region or a nation. The reason behind this is that the infrastructure development of a nation encourages the investors to make substantial investments, which subsequently leads towards wider economic progression. In this regard, during the post Mao period, it can be noticed that the respective government of PRC remained much focused on making the infrastructure of the nation quite standardised. It is evident that the development in the infrastructure in the nation has certainly led towards encouraging the investors of Japan, South Korea and other nations incorporated within HPAEs to invest in China. This is because infrastructure development greatly reduced the operational costs of the organisations at large. Additionally, it also encouraged in the development of the products. Thus, the infrastructure development of China strongly resembles with the similar approach of other HPAEs, as mentioned in the report of the World Bank (World Bank Group, 2014; Huang, & Yu, 2013). International Business Another most important parameter to determine the resemblance of economic development of China to that of the other HPAEs is the development in its industrial business. In this regard, it is observed that through the rise of industrialisation in the nation, international business has greatly progressed. This is evident from the rise in export and import related functionalities in varied regions of the nation. However, it is also observed that the quantity of import and export in China is not completely at par with the other HPAEs like Japan and South Korea. These two nations have more export and import value than that of China (World Bank Group, 2014; Huang, & Yu, 2013). This can be better understood with the help of the below portrayed graphical representations. Source: (14Trading Economics, 2014) Source: (15Trading Economics, 2014) Source: (16Trading Economics, 2014) Source: (17Trading Economics, 2014) Source: (18Trading Economics, 2014) Source: (19Trading Economics, 2014) Technological Development The factor concerning technological development also leads towards broader economic development of a nation. Thus, it can be duly considered as an important parameter for determining the economic development of China with other HPAEs during the post Mao period. It can be apparently observed in this similar context that the respective government of PRC has significantly contributed in making wider technological development within the nation. The technological development in the nation has lead towards encouraging the investors in the form of developing internet medium and also making larger progression in energy production (World Bank Group, 2014; Huang, & Yu, 2013). Interest Rates Interest rates also play a major role in determining the economic development of a nation. Thus, interest rates are also highly important in determining the resemblance of economic development of China to other HPAEs. It is important to note that with the gradual reduction of interest rates in an economy, the affordability of availing loans for industrial development increases at large. It is evident that there has been gradual decrease in the interest rates in the post Mao period in China. This greatly contributed in promoting industrialisation in the nation. However, it is also important to note that the interest rates in China are not low as compared to other HPAEs like Japan, South Korea and Singapore (World Bank Group, 2014; Huang, & Yu, 2013). The below graphical representations depict the interest rates of these nations along with China in the post Mao period. Source: (20Trading Economics, 2014) Source: (21Trading Economics, 2014) Source: (22Trading Economics, 2014) Source: (23Trading Economics, 2014) Currency Strength The valuation of currency also plays a key role in the economic development of a nation. Currency strength is the only aspect that strongly does not resemblance with other HPAEs. Unlike other nations, it is observed that China highly focuses on devaluating its currency. The devaluation of currency by China results into the encouragement to the foreign investors to invest extensively in varied regions of the nation. The reason behind the encouragement of the foreign investors is the cheap currency rate on account of the currency exchange advantage. Moreover, it is also important to note that on account of several effective economic policies formulated by the government of PRC, the nation has been able to reduce its currency value at large with utmost efficiency (World Bank Group, 2014; Huang, & Yu, 2013). Government Intervention Another important factor, which strongly contributes to the economic development of a nation, is government interventions. It is observed that the government of PRC has greatly contributed in making China to resemble its experience with that of HPAEs during the post Mao period in terms of devising effective land laws that proved to be highly favourable for the investors. This aspect of government intervention contributing to the economic development is also observed in other HPAEs like Japan, South Korea, Malaysia and Singapore (World Bank Group, 2014; Huang, & Yu, 2013). Environmental Impact Environment of a nation also play a key role in developing its economy. This is because of the favourable working environment, high production capacity and larger land mass among others. In this regard, it is observed that China possesses a favourable geographical environment, which strongly encourages the investors unlike in some of the HPAEs like Japan, South Korea, Singapore and Malaysia. The reason behind this is that these countries do not have higher landmasses. It will be vital to mention in this regard that unlike other HPAEs, China possess abundant land mass and natural resources with favourable climatic conditions (World Bank Group, 2014; Huang, & Yu, 2013). Conclusion Based on the above analysis and discussion, it can be ascertained that China during the post Mao period has grown extensively. One of the prime reasons for this development is the liberalisation of its economy. Besides, the respective government of PRC in this period has undertaken several economic policies and strategies that favour in making overall development of the nation. Thus, from the course of the study regarding the topic, it is evident that during the post Mao period, the economic development of China highly resembles with the experience of HPAEs. In this regard, it is evident that the inflation, purchasing power, GDP, standard of living, government intervention, technological development and infrastructure development are regarded as certain ways based on which the economic development of China during post Mao period resembles the experience with that of HPAEs. References Huang, Y. & Yu, M., 2013. China’s New Role in the World Economy. Routledge. Lin, J. Y., 2012. Demystifying the Chinese Economy. Cambridge University Press. Meisner, M., 1999. Maos China and After: A History of the Peoples Republic, Third Edition. Simon and Schuster. 1Trading Economics. 2014. China GDP. Data. 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