Economic Growth of China - Essay Example

The national government of China too had acted out in a similar way to prove its worth over time, as the present discussion would reveal.

Economic Growth of China
The graphical depiction underneath is indicative of the economic fluctuations that the nation underwent during the last 10 years. It clearly shows how the nation had gone through fluctuations over time even though it had maintained a continued upward stride. However, the growth rate of GDP dipped down to its lowest during 2009-10, primarily due to the global financial shock which had hindered economic activities in many parts of the world.

The primary cause behind China’s fast increase in growth rate had been its foreign trade policy of maintaining a positive current account balance. In other words, the nation complied with the export-led growth strategy which is why it managed to accumulate a large volume of foreign exchange reserves. This factor alone led to a gradual appreciation in the rate of exchange of the Renminbi against US dollars. The economic fluctuations that the nation underwent over time had hence, been the result of economic shocks arising in foreign nations, or to be precise, the Western economies which count for the highest demand for Chinese goods.

Remedial measures and consequences
GDP growth in China dipped down to its lowest between 2009 and 2010 when the Western economies had been affected badly by the financial crisis. The prime reason behind this had been the high dependence of China upon its export revenues derived from the US and European economies. However, the national government of China soon framed policies that could recoup the nation from the looming crisis. The administration injected a sum of Renminbi 4 trillion within the nation to bail its various sectors out of the crisis.
This infusion helped the nation’s industrial production to gain momentum once again and so did the rate of profit of the manufacturers. Furthermore, the national government also decided to raise its total investment in fixed assets; to be precise, the growth in fixed asset investment during the first half of 2009 rose by 7.2 percentage points against that exactly a year before. The government also took measures to accelerate the aggregate domestic demand to save the indigenous industrial houses. The sale of consumer products in the nation reached the level of 5,871.1 billion Yuan, which is found to be a growth of 16.6 percent after adjustment for price factors.

However, though the national government framed policies to save the domestic economic environment, it had no hold over foreign operations, which is why it could not get over its deflating current account position. This resulted in a depleting foreign reserve position and thus, a depreciating rate of exchange. But, irrespective of its trade position, both the rural and urban populations of the nation experienced a slight increase in their per capita levels of income. Moreover, the national government’s objective had been to bail out the nation out of any hints of recession. Thus, it implemented ways through which the flow of money within the nation could be maintained. The financial houses within the nation thus, invented ways to instigate people towards demanding more loans to keep the velocity of money within the nation high. The higher the money supply in an economy, the higher will be the domestic consumption demand within the nation, and hence, the weaker will be the chances of recession (Davies, ‘China first half of 2009 economic report’).

Conclusion
China is one of those nations that pin up its hopes of economic growth on the economic proceedings in other nations. This is the story common with most of the transition market economies around the world today. This was the reason behind the large dip that the nation’s GDP growth rate went through between 2009 and 2010.