Development of Economics of Asia - Essay Example

This form of capitalism was advocated by the higher Chinese elites who did not want to lose but perhaps wanted to expand their shares in the wealth of the country. It is explained that the move towards capitalism was driven more by greed although it monetarily benefitted the elites far more than before. The socialist economic policies of Mao’s era were characterized by centralized decision-making, no private ownership of the means of production, large industries, and political control over the people through parties. Dissatisfaction with the ongoing political, social, and economic trends, the people demonstrated their anger and frustration as their social and economic life declined. Mao’s era of government played a vital role in paving the way for socialist reformation. The period saw increased production despite several large unrests in the country. Production output plunged dramatically although the agricultural relatively lagged in terms of its pace of development. Despite growth in production outputs and the overall economy, China still faced a lot of economic problems by the end of Mao’s era. Since the economic decision-making was extremely centralized, the market could not efficiently and productively respond to the needs and wants of the people. While some goods were produced in large quantities, others were under-produced.

As Hart-Landberg argues, while China has experienced rapid and a remarkably high growth rate while maintaining its growth, its success cannot be considered in isolation from the wider aspects of its economic transformation process (35). While many countries may view the Chinese economic policies as a model for successful economic growth, the economic strategy of China should not be accounted for in a vacuum. China’s rapid economic growth reflects capitalism and that inhibits other regional development in possibilities and opportunities. Increased FDI is another central driver of China’s regional success. The high FDI achieved by China is causing a reduction in the FDIs received by other neighboring countries. China’s dominance in the global market has reflected, to a great extent, the capitalistic inclinations of the economy that is symbolized by the market response to consumer needs. Hence the economic reforms in China from an explicitly socialist reform to a subtle capitalistic transformation have been the result of an adjustment to the market forces that operate in the economic environment. This is characterized by a capitalist economy that responds to market forces.

The expenditure approach focuses on the sources of growth or primarily the sources of demand that shape the economic structure. Output growth equals the sum of the differences or changes in the three different variables: consumption, investment, and net exports. Investments are significant drivers of the economy, which is quite high in China according to statistical figures. However, China is experiencing declining household consumption although government consumption has increased rapidly. As a result, the importance of the total consumption variable as a driver of growth has reduced, which implies that it does not contribute as significantly to the growth of the Chinese economy. Similarly, net exports also contributed a significant amount to China’s economic growth however the decline in global trade during recent years reduced the positive impact of growing net exports on the overall economic success. As a result, China’s economy is imbalanced.

The imbalances in the Chinese economy are also apparent in its production structure, which is characterized by the transformation of agricultural, industrial, and service-related shares contributing to China’s GDP (Lardy, 53). Although the 1980s saw an increase in production output, soon it saw a decline in the levels of output. Two distortions can explain China’s uneven patterns of production outputs including the undervaluation of China’s exchange rates and its pegging as the US Dollar which grew during the first half of the period but China’s account trend saw no account surplus (Lardy, 54).

The income approach looks at the imbalances occurring as a result of the shares of national income that are accrued to households, corporations, and governments (Lardy, 57). Trends in labor compensation, which represents the share of output accrued to the labor force, show that the variable was constant at 50 percent but dropped later. Similar patterns are visible in the shares accrued to corporations and the government indicating a decline in consumption leading to an imbalance.

A similar trend is observed in the savings and investments approach that sees the difference between national savings and investments. A surplus indicates that the national savings is greater than investments while a deficit indicates that the national savings is less than investments. The data showing national savings and investments reveal great imbalances in the economy.