China as an Economic Power in the World - Assignment Example

China as an Economic Power in the World al Affiliation) Before 1979, China maintained policies that made the economy poor, inefficient, and highly isolated from the global economy. Since the introduction to foreign trade and the investment and implementation of the free market reforms in 1979, China is one of the fastest growing economies and trade power in the world. Today, China is the largest merchandise economy in terms of trade; it is the biggest holder of foreign exchange reserves, and the second largest holder of foreign direct investment (Berger, 2002). Research shows that China will overtake the U.S economy within a few years. For this to happen, the Chinese government needs to implement policies that fasten China’s transition to an economy that is a free market. In addition, it should address issues to do with growing income disparities, enhance innovation and production, as well as boost the protection of the environment. The country’s gross domestic product has grown at an annual rate of about 10%. China has risen rapidly as a major economic power within a span of about three decades. The rapid economic growth has led to an increase in commercial ties with the United States. As compared to the U.S, China is less developed but analysts predict that China will become the largest in the next five years. Many U.S companies have operations in China and the main reason is to have the ability to sell their products in the flourishing Chinese market and to take advantage of cheap labor for the exporting goods. These operations have made some U.S firms more competitive internationally and have managed to supply the U.S consumers with a range of goods at a low cost. However, the rise of China as a major economic power has brought challenges among the U.S policy makers. There have been claims that China uses practices that amount to unfair trade to flood the U.S market with goods that are of low cost. In addition, the growing use of industrial policies to protect the indigenous Chinese industries and the widespread failure to take action against the infringement of the U.S intellectual property rights pose as a threat to the U.S intensive industries (Jacques, 2009). Others contend that the country has a growing demand for energy and raw materials and its surfacing to be the country that emits the most greenhouse gases. China faces a number of challenges as much as the Chinese government supports the maintenance of social stability as one of the ways of growing the economy. The challenges may dampen the growth of the county’s future by distorting economic policies, having a banking system that is weak, the lack of rule of law in the country as well as the ever-growing population. The Chinese government is aware of all these challenges and promises to address them by implementing policies that boost consumer planning and spending. In addition, it intends to expand the coverage of social safety and encourage the growth of industries that promote less pollution. During the leadership of Mao Zedong, the economy was well planned and maintained. The state controlled a large share of the country’s economic output. The state set the goals of production, controlled the prices of products, and distributed resources throughout the economy. After the death of Mao in 1978, the Chinese government decided to get rid of the soviet style economic policies by gradually embracing new reforms that had a relation to the free markets. By 1979, there were new economic reforms and farmers got permission to sell their crops on the free market. Since the introduction of these reforms, the economy of China has grown at a faster rate as compared to the pre –reform period. Economists attribute to the rapid growth of China in large-scale capital investment as well as the rapid productivity growth. In addition, the economic reforms increased the efficiency in the economy that led to higher output and increased resources that would aid in developing the investment in the economy. Moreover, people and nations recognize China for maintaining a high rate of savings. The decentralization of economic production led to an increase in the household savings and the corporate savings. Due to the high level of savings, China has been able to invest domestically. Likewise, China is the largest global lender and this is due to the gross domestic savings levels that exceed the domestic investment levels. The productivity gain is another factor that has led to the rapid economic growth of China. The central government led to the improvements in productivity, controlled reallocation of resources to various sectors like agriculture and trade. The rise of private firms that were more productive and the exposure of the export sector to the competitive forces increased a greater share of the economy. According to the United Nations, China is the world’s biggest manufacturer. By 2012, the value of China’s manufacturing on a basis of gross value was 28.2% higher than the U.S (Kee, 2010). Manufacturing plays an important role in China as a policy environment that is conducive and boosts competitiveness. It encourages investments in technology and science, education of employees as well as the development of infrastructure. In addition, the trade patterns have led to the growth of Chinese exports as well as the import. The availability of low cost labor has led to a significant share of China’s trade. Most imports are composed of parts that have been assembled into finished products for example, the computers, and electronic products that are then exported. The rapid growth of China’s economy has led to a huge demand for energy products like petroleum and coal. The demand is one factor that determines the global energy prices. Research shows that in 2009, China overtook the U.S in using energy. It is the second largest consumer of oil products in the world. Moreover, the Chinese government has maintained the policy of doing business with different countries around the world. It is for this reason that China is into a number of regional and bilateral trade agreements that are free. These trade agreements enable businesspersons to interact and find new opportunities globally. China’s information technology is growing at a fast rate. Twenty Percent of the products exported are said to be high tech. Examples of the top exporters include Dell and Motorola. China has invested in pursuing developments in both the national champions as well as integration with other countries. For example, the Chinese giant in communications, Huawei Technologies is doing business in more than 40 countries and has employees working as sales representatives who work and research in more that the forty countries. Moreover, some new sectors like the green technology are also important for the growth of economy in China. China has a government that is corrupt and practices poor allocation of investment funds this is mainly due to the lack of rule of law. In addition, competition is limited and the allocation of goods and services is not fair. Most firms are successful due to the government connections and not forces in the market. In many cases, the U.S firms have a difficult time to do business in China because their rules are not consistent. The intellectual property rights lack protection mainly because of the lack of a judicial system that is independent, and contracts are not easily enforced. A State news article reported that Wen Jiabao a former Chinese premier and his family managed and controlled assets that were worth $ 2.7 billion (Hutton, 2006). One case estimates that between 2001 and 2010, China was leading source of illicit capital outflows. In 2012, report shows that 50% of the respondents agreed that there was a big problem with the corrupt officials. The government’s watchdog reported that more than 106,000 officials were guilty of corruption. Analysts agree that progress against government corruption cannot occur without the government being transparent, a press that is free, a well-managed system of checks and balances, and a judiciary that is independent. One of the case laws is Centaline property agencies limited Shanghai, China Vs Tao Dehua. The dispute involved brokerage in a contract that arose in the selling of second hand properties. The judgment was that a contract for the sale of a property is not valid if the person buying commits to a brokerage contract tries get rid of the agent who organizes the deal so that they can purchase directly from the seller. Therefore, the buying person has the capability to deal with the person who is selling at a competitive price. The court aimed at protecting the interests and the rights of the brokering agency. Additionally, the court aimed to protect and promote the brokering service market development, enhancing the service quality and encouraging fair competition (Moore, 2002). Another case is that of the Pan Yumei and CHEN Ning that concerns corruption. This includes expanding the offense to include new situations. The civil servant is in a position to receive bribes indirectly by registering as one of the co-founders of a company without contributing to its establishment. It involves one who receives bribes directly, but does not act on those bribes or returns the money. Indirect means does not affect the verdict of corruption (Hutton, 2006).  The model of China’s economic growth emphasizes heavy industries to grow, they use a lot of energy, and pollution is very high. In 2013, report shows that an estimate of about 90% of the cities in China had polluted the ground water. The World Health Organization had an estimate that air pollution caused the death of many in 2008. In addition, since 2006, most of the policies that China has introduced seems to have an ambitious plan to make the structure of Chinas economy modern by changing it from a global center of low tech manufacturing to a center that centered by innovation. By the year 2020, China will progress in science and technology that will contribute to Chinas development (Iriye, 2006). The reliance on foreign technology will go down and the gross expenditure for research and development would go up. China should strengthen innovation, restructuring of the economy as well as enhance national competitiveness. An innovation-oriented country is a strategic goal for future development of China. The government formulating and coming up with policies that encourage and protects innovation can achieve this. In addition, the country should establish a mechanism for procuring innovative products that are indigenous. The Chinese government shows its desire to work hard to move away from its current economic state which is fast growth at cheap or any cost to a smart economic development. The government seeks to reduce the dependence of energy intensity and industries that are highly polluting and depend more on an economic growth that is balanced. Several economies that are developing mostly in Asia and Latin America experienced rapid growth in the economy especially during the 1970s. Some of the policies that those countries implemented are the same ones China is utilizing to date to develop its economy. Such measures include to protect, to promote, and to boost exports of certain industries. In conclusion, China’s economic growth has grown fast because of the measures and policies the government has put in place to aid in its development. Today, it is the second largest country in the world that has tremendous economic growth after the U.S. However, research shows that in the next 5 to 10 years, China will lead in economic development. However, for this to happen the government should be ready to support industries grow and implement procedures that will help in the economic growth. The government should also be willing to reduce the pollution of air, as it is dangerous and not safe for the citizens. We live in a world that is changing rapidly due to technology; therefore, China should embrace new technologies that will help fasten the economic development. The use of modernized machines in the industries will be helpful for the employees as it eases workload and encourages rapid production, thus making the economy to be effective and efficient. Through these strategies, China will develop so fast in terms of economies and be the leading country in the world that is developed. References Americans see China as top economic power. (2011, January 14). The Washington Post. Retrieved February 15, 2015, from http://www.highbeam.com/doc/1P2-27700626.html? Berger, P. (2002). Many globalizations: Cultural diversity in the contemporary world. Oxford: Oxford University Press. China Predicted to Overtake Us as Economic Power by 2030. (2012, December 10). States News Service. Retrieved February 15, 2015, from http://www.highbeam.com/doc/1G1-311683049.html? Hutton, W. (2006). The writing on the wall: Why we must embrace China as a partner or face it as an enemy. New York: Free Press. Iriye, A. (2006). China and Japan in the global setting. Cambridge, Mass.: Harvard University Press. Jacques, M. (2009). When China rules the world: The end of the western world and the birth of a new global order. New York: Penguin Press. Kee, P. (2010). Global movements in the Asia Pacific. Singapore: World Scientific. Moore, T. (2002). China in the world market Chinese industry and international sources of reform in the post-Mao era. Cambridge, UK: Cambridge University Press. Read More