Chinese Economic Growth: Problems and Perspectives - Research Paper Example

Assignment: US and China Economic Growth: Introduction Economic growth is defined as an increment of the total value of goods and services in a given economy over a certain period of time. It increases the gross domestic product of a particular country, making almost to operate at the full employment level. The increase in gross domestic product increases the wealth of a particular country. Economic dominance can be defined as those countries that have grown or developed in terms of output, industrialization, telecommunication, technology and infrastructure among others. This has made them to dominate in the world, both politically and economically. They have a big share in global markets. Most of the economies that dominate the market are characterized with high growth rate in production, skilled personnel’s and the right technology in placei. China as a nation is one of the fast growing economy in the world, it is one of those, which may overlap United States economy in the coming future. Rapid growth of china economy is facilitated by the following factors as illustrated below, which are likely to enable it threaten US global economic dominance. Macroeconomic stabilization- China macroeconomic stability is almost firm and in the future, it is projected to be more strengthened. Long-term economic growth of any nation can only be realized where strong macroeconomics stability exists. Due to this factor, china strengthens its economic stability to boost developments institutions and infrastructure which are very important for sustainable growth and development.iiiii Spending on research and development- China is working to strengthen research and development by investing more in them. The country has allocated more revenue in education and technology to foster research, which will lead to the invention of improved means of production. This enables it to grow fast due to appropriate technology. Cheap labor force- China economic growth has greatly facilitated by cheap surplus labor. Cheap labor has also aided in structural changes. There exist many laborers in rural areas who are looking for non-farm jobs; this has lead to deviating labor to the industries leading to labor-intensive industries, which are accelerating fast. Acceleration of labor extensive industries increases production output, making their products to be sold globally, earning a bigger share than before.iv Trade liberization-The gains the china is getting from trade liberization and globalization is increasing, this play a role in accelerating the economy at a faster rate, making its products spread all over the world. Export opportunities have increased, growing more than the past, this helps the nation to have high net factor from abroad than before.v Foreign direct investment -China is one of the most attractive countries for foreign direct investment now and the coming future. This has been facilitated by its development plan and increased investment in infrastructure in the regions that are less developed. The expectations of china economic growth and its market size make it to be the most favored nation on the globe.vi Role of government in market development -The markets are emerging and the existing ones are modernizing, this prepares the country for a growth rate that is sustainable. Labor market, agricultural commodities and inputs are increasing and flourishing. The Chinese government is planning to change its system of administration by concentrating on the provision of public goods, providing services privates sector cannot be in a position to provide and overcoming market failure. This makes the government to be left with fewer burdens making it to concentrate on strategic plans implementation.vii Physical capital increment-The increase in the saving rate domestically is one of the factors that have favored china to compete in the world and threatening global dominant countries like US. The growth is estimated to increase in the coming future, according to analyst reports. Due to this increment investment will also increase, raising aggregate demand. Regional development programs-The Chinese government has put in place policies that accelerate economic growth in less developed regions, which will enable the overall realization of country development. These programs are meant to ensure equality in growth and equal distribution of income.viii Openness to international trade- Open market plays a vital role in foreign direct investment. China strategic position gives an advantage over other nations, this is because it is able to sell both its products and services to local and foreign markets than even developed countries. It is also favored by less trade barrier and friendly export policies which encourages investments.ix Setting up of an investment bank-China is threatening the dominance of US through introduction of Chinese-led Asian Infrastructure Investment Bank. This threatens the dominance of World Bank and International Monetary Fund. America reacts by not signing to be a member, although other states have joined. US oppose that idea of the Bank because just like the World Bank and International Monetary Fund, Chinese bank will be able to provide credit throughout the world.x China population-As compared to US population, this gives it an advantage. China economy has four times the population of America; it only needs to produce a quarter of US per head output to exceed the total output of America. Compared to America, China is the biggest economy in the world that exports its products and services.xi Military modernization-The current military the china has threatened the US military as a super power and having global leadership. The China has modernized its military with the new weapons; this makes united Stated not in a position to operate and dominate in the Asian land mass as before. Despite China being considered the most rapidly growing economy, the economy faces the following challenges that may hinder it to threaten and attain United States status of global dominance. The following are the challenges facing the economy. Long-term inflation-Inflation is one of the challenges that face China economy. Inflation hinders the achievement of long term goals of the economy. For a country to win inflation, war it needs to be resilient and tolerant. This may make it not emerge as a global domain in the near future. Inflation hinders economic growth and development. Lagged economic growth-There is a decrease in economic growth and this tends not to be temporally. Slow economic growth has a reflection to market direction. This lead to companies making losses, this can make them to enter into bankruptcy and liquidation. Rebalancing challenges- the economy of china faces challenges which are, shift in external demand and internal demand, shift from government investment in private investment and investment driven growth to consumer led growth. China needs to ensure balance between shifts for transformation to take place.xii Resource constraint and environmental challenge- China is in high demand of raw materials and energy. This is brought by massive production in their industries. They need to exploit new ways of getting the raw materials. Overproduction in their industries leads to air pollution. A great concern and policies need to be put in place for a sustainable environment to be realized. This pollution is brought by overproduction. Weakening of international environment is also a challenge that may hinder China to be a global domain. The world economic slowdown is expected to persist for few coming years and this will have a negative impact on the Chinese exports. Their investments abroad are deteriorating because the Chinese are suspected to copy others nation technology. Increased reform resistance - the officials in the government who have their vested interest, may oppose reform need to transform the economy to be a world domain. Individual interest should not override the needs of the majority. Reforms needed are hindered by a few rich people creating disparities; this can also hinder China to be at par with the US. Conclusion China economic growth is promising to give US as global economic domain competition. This will only be realized if planning, organizing, coordinating and controlling are well put in place. Many challenges it experiences may enable US to continue being a global dominance, unless they address their challenges effectively. Read More