Why Is China Growing So Fast - Term Paper Example

? Why is China growing so fast? December 23, Why is China growing so fast? Economies play a vital role in the prosperity and development of any country. It refers to a system or network of manufacture and consumption of resources by the labor in any country. The exchange of goods between supplier, consumer, and services provided to the people make basic infrastructure of a country’s economy. Any country is said to be developed if the demand and supply chain of a country shows that there is more supply of goods or anything than demand by the market. Many factors count in these regards: the natural resources and their extractions according to the geography, manufacturing, distribution, consumption, exchange medium etc. All these factors set the constraints and parameters in which the economy of any country works and may or may not flourish. All activities happening in a country also account for its economic growth. The occupations, education, business and investments are the basic pillars upon which the economy stands. The greater amount of people a country produce as literates or skilled workers, the more productivity will increase, and the economy will grow. More the resources are being used by the government for its people, the less will be the demand, and ultimately the economy will boost. Overall, the size of economy of any country is determined by the gross domestic product GDP and GDP per capita of the country, which only includes such economic activities in which the money is exchanged. The living standards in a particular state are measured through GDP per capita, and every change in GDP indicates a change in the living standards. Economic growth is defined as the “increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs including labor, capital, material, energy, etc. for a given amount of output” (Kendrick, John W.1961). Economic growth is often related to Economic Freedom—the process in which citizens are allowed to make their own economic policies without the interference of government. China, India and Japan are considered the fastest developing countries amongst all nations. There has been a pre-1978 era of capitalization during which the Chinese government has applied strict central industrialization rules of its own which resulted in constrained economic growth and misallocation of resources. Ever since then having realized the effectiveness of providing economic freedom to its industrialists and decreasing the intervention on the part of government by shunning the policy of taking over the control of industries, China has witnessed rapid economic growth and has improved its business environment for local and foreign investors. In addition to that there were some other reasons of China’s economic boom apart from economic freedom? Economists carefully studied the Chinese economic system and revealed the following astonishing facts: 1. They said that no doubt the Chinese government highly focused upon capital investment like manufacturing and communication and put in an extra effort to increase the productivity of a huge skilled and efficient work force, which is considered to be the most significant factor and the actual dynamic force behind the rapid growth of Chinese economy. The combination of large scale capital investment and efficient work force together have work wonders for the Chinese economy which can never be obtained by any of the factor alone. 2. The government of china encouraged private investors and businessmen to come forward to mutually put in place wide-scale economic reforms. Foreign investors were welcomed and they were provided with ideal conditions for business, with limited or no control of the state government. These strategies on the part of Chinese government proved to be successful and gave impetus to immense economic growth and prosperity, which in turn created so many job opportunities for the local Chinese population. The economic growth of China along with increasing Foreign Direct Investment helped Chinese business entities to cross International borders to cater to the needs of International customers, across the world. The post-1978 reforms managed to attract a huge foreign investment and foreign investment brought with it cutting-edge technology to China, which further facilitated the economic activities in China. (Zuliu Hu, Khan. IMF. 1997). 3. Agriculture sector plays a huge role in a country’s economy, prior to the economic boom and introduction and implementation of Agricultural reforms a large share of Chinese population was indulged in agriculture or farm activities. After the implementation, it has been estimated in the year 1994 that this population has been decreased by more than half in the agriculture sector without adversely affecting the Agricultural output. Agricultural reforms expanded the property rights particularly in rural areas and as a result the prices of Agricultural products improved, allowing Chinese farmers to earn the same level of income by employing half of the family members, this allowed the remaining family members to perform labor and to do such work, which help them to run their house more effectively. As a result of these reforms many Chinese farmers started to work in industries and with an increase in the supply of work force, brought the wages down and as an ultimate result China became the center of attraction for multi-national companies, which transferred their full-fledged operations to China owing to easy availability of raw-material and less expensive work force. This resulted in increasing the productivity of the country to heights never touched before (Zuliu Hu, Khan, IMF. 1997). As a result of above mentioned policies of China, the income per capita in China grew at almost 6% to 9% per year from the year 1975 to 2000, which means that after every 12 years the income becomes double. The per capita income has nearly increased by 4 times from 1978 to 1994. During some peak years it increased up to 13% a year. China also produced efficient skilled workers who started working in foreign countries and thus, making money for themselves and for their country. In result, the quality of life andthe economical growth from 1975 to 2000 was driven to a very large extent by foreign investment by multinational firms (Economic Growth by Paul M. Romer). China is now considered the second largest economy and the fastest-growing major economy in the world since past 30 years, having a consistent growth rate of about 10%. In 2010, its per capita GDP was $7,544, and the average gross salary is $4,260 yearly (IMF, 2011). Analysts are predicting that in the coming 20 years China will lead the world and would become the largest economy in the world. In conclusion, all of the factors combined together and worked for the Chinese economy for the last 30 years and had made China more stronger economy since ever. It has been growing on a very fast rate due to the government friendly policies and its own limitations in the public sector. All together, the better equipment, better technology, foreign investment in the country’s infrastructure, more productivity rates worked like a magic for china and its people. No doubt the people themselves are hard working and eligible enough to deserve all this. China has come a long way to meet its economic boom, and it is on its way to become the largest economy in the world. Bibliography Madrick, J. G. (2002). Why economies grow: The forces that shape prosperity and how we can get them working again. New York, NY: Basic Books. Why Economies Grow:Economic Freedom Offers Hope to Countries Struggling with Poverty, November 2001 • Volume: 51 • Issue: 11 < http://www.thefreemanonline.org/featured/why-economies-grow> Paul M. Romer. Economic Growth International Monetary Fund: World Economic Outlook Database, April 2011 Zuliu Hu, Mohsin S. Khan. Why is China growing so fast? International Monetary Fund. 1997 Read More