Economic Comparison of China and USA Performance - Research Paper Example

? Economic Comparative Research Paper: China vs. USA Economic Comparative Research Paper: China vs. USA Economists and market analysts often monitor the economic growth patterns of various countries and advise potential investors on best approaches to make. The economic performance of a country is a concern of both governmental institutions and independent organization. Normally, investment patterns observed in a country depend on the economic environment of that country. A comparative study of the economic performance of USA and China tend to reveal both similar and varied trends of various economic factors. The economic factors identified for comparison include labor force, household income, poverty line, unemployment, currency exchange rates, GDP per capita, exports, GDP, imports, military expenditures, demography, cost of health, and cost of education. The result of economic comparison is essential in identify the right country for investing. The behavior of the economic factors tends to predict political, social, and economic environment in this countries. China The National Bureau of Statistics of China report indicates that from 2011 to 2013 the GDP growth rate averaged at 2 percent. This trend was higher in June 2011 at 2.50% and recorded low in March 2012 at 1.5%. Further, the report indicates that the Chinese economy is the second largest in the world after United States. The economic trends in China have changed in the past thirty years from market-oriented economy to a private sector economy (The World Bank, 2013). The Chinese GDP per capita is USD 5201; the inflation rate is 2.5% while report about the Chinese labor force indicates that it has 795.5 million. By occupation, agricultural industry comprises of 36.7%, industry takes 28.7% and services take 34.6%, and unemployment rate is 4.1 %. China’s economic growth stems from its revised economic policies, which changed export and import businesses. The country export and import are worth USD 2.021trillion and USD 1.78 trillion respectively. The main export partners of this country are United States 17.2%, Hong Kong 15.8%, Japan 7.4%, and South Korea 4.3%. On the other hand, the main import partners are Japan 9.8%, South Korea 9.2%, United States 7.1%, Germany 5.1%, and Australia 4.3%. Other factors which illustrate Chinese economic performance includes people living people the poverty line 13.1%, and average gross salary USD 457. USA The Bureau of Economic Analysis report shows that United States is world largest national economy. It has a GDP of USD 16.66trillion, GDP per Capita of USD49, 601. The US A population living below the poverty line 14.8% and has workforce of 155.6 million out of which 11.26 million are unemployed. The GDP growth per sector shows that service industry is leading 79% whereas agriculture and industry trail at 1.2% and 19% respectively (The World Bank, 2013). The average annual gross salary is USD 45, 790. In the year 2012, US spent USD 2.3trillion. The major import partners are China 19%, Canada 14%, Mexico 12%, Japan 6.4%, and Germany 4.7%. Largely, the consumer goods top the list of the US imports. On the other hand, US exports USD 1.56 trillion with the major export partners being Canada 19%, Mexico 14%, China 7%, and Japan 4.5%. Other economic factors defining the economic growth of United States are Education Cost whose GDP is 1%, health or social care 8%, and Federal Government including military spending 5%. Analysis of the Economic Performance The World Bank report indicates that the China’s economy is $10.1 trillion compared to $14.6 trillion for the U.S. based on the purchasing power parity. It appears that China is narrowing the gap fast and it might overtake U.S in the near future. In the past 10years, the China’s GDP averaged at 10.5% compared to the U.S 1.7% (The World Bank, 2013). This trend seems to suggest that China has many emerging opportunities that contribute to its fast economic growth as opposed to United States. A comparison between the US workforce and the China’s workforce reveals that China enjoys cheap labor, which is essential for the rapid economic growth as opposed to United States. Impact of Cost of Labor Economic critics contend that the cost of labor tends to influence the industrial development consequently affecting economic growth. In the past few years, China has become a hub of international companies because of the availability of cheap labor. Moreover, the economic environment seems to sustain the interest of the international firms. Unlike US, establishing an industry in China does not cost a high as in the US (CSIS, 2013). Probably, this is one of the factors, which has influenced the present overwhelming industrial growth in China as well as the economic performance in general. Impact on Education A comparison between the cost of education in China and United States tend to show that Chinese education is cheaper than US education. As one of the factors that influence economic growth, the Chinese government tends to support basic education to all. Available literature shows that that economic power and education are synonymous (Scissors, 2011). The advancement of technology dictates that the citizens must pursue higher education and integrate their skills to improve the economic growth. Historically, United States, China and other developed worlds encouraged mass education as a means of building instruments for economic growth. Comparison of Standard of Living A comparative analysis tends to illustrate that the cost of living in China is lower than that in the US. Many consumers are cheaper in China compared to their prices in the United States, despite the large population in China. This means that a poor person in the United States can comfortably live in the in the Chinese cities. Further, a critical look at the unemployment rate in the United States and that of China reveals that the rate is higher in China. This could explain the cost of cheap labor in China. Economically, when the supply is in excess, the prices of the product tend to fall. Similarly, the large population of the unemployed tends to provide an opportunity for rapid industrial growth because the human capita is cheaply available. Unlike, the US where the labor force is not very large, unemployed tends to settle for odd jobs in an attempt to raise income. Threat Analysis of China vs. USA Economy Although USA and China are the world’s economic giants, their economic prowess are susceptible to changes. Critics tend to monitor external factor that influence economic stability (Kenny, 2011). The information about the economic performance of these countries is essential to businesses because it defines the entry behavior of a company into this market. For example, if the China register a change in its workforce, a business is likely to feel the brunt of such changes. As observed economic stability of China, majorly rely on international trade. It follows therefore, that it has to establish good political as well economic relationship with its partners. If the relationship fails, businesses that depend on this relationship would fail. The major threat of businesses in United States is the high cost of operations (Scissors, 2011). This factor tends limit investor’s interest in the country. Evidently, many investors tend to consider the stability of the economy alongside other factors such as operation cost before starting a business in a given country. Moreover, economic policies, which define local and international trade, are some of the factors that dictate investment trends. As it stands, China is a good destination for international investment because it has favorable policies that have influenced its stable economic growth. The inflation trend is another threat that investors should consider. When the inflation levels increase beyond a healthy limit, doing business in the affected country ceases to be economical. Arguably, the United States suffered inflation that had a direct impact on its economic power. In contrast, China was able to control the extent of the biting inflation. This tends to illustrate the viability of its economy during the past recession. In conclusion, a comparison between United States and China reveals that the two countries are the economic giants. While this tends to be the fact, the economic performance of United States tends to be higher than that of China. However, in the last ten years China has posted an impressive economic growth. A number of critics tend to suggest that Chinese economic growth is largely dependant of its large work force that drives industrial development as well export business. On the hand, both international trade as well as the industrial activities drives United State economic viability. References CSIS. (2013). US China Comparison: GDP Growth. Retrieved on 4 Nov, 2013 from http://csis.org/blog/us-china-comparison-gdp-growth Kenny, C. (2011). China vs. the U.S.: The Case for Second Place. Retrieved on 4 Nov, 2013 from http://www.businessweek.com/magazine/china-vs-the-us-the-case-for-second-place-10132011.html Scissors, D. (2011). The United States vs. China—Which Economy Is Bigger, Which Is Better. Retrieved on 4 Oct, 2013 from http://www.heritage.org/research/reports/2011/04/the-united-states-vs-china-which-economy-is-bigger-which-is-better The World Bank. (2013). GDP Growth. Retrieved on 4 Nov, 2013 from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG Read More