Reasons for the Rise of China's Economy - Essay Example

The Economy of China and Its Impacts on the U.S China’s economy is one of the fast-rising economies in the whole world. For instance, china’s economy is the biggest according to the purchasing power parity. In addition, china’s’ economy remains the second largest economy regarding the nominal GDP (Kazer). In this regard, therefore, China remains one of the countries that affect most economies of other nations. A country’s economy is said to be developing depending on a number of factors. Development of infrastructure, trade, and the purchasing parity help determine the economy of a nation. China, therefore, regarding all these factors remains one of the fastest growing economies in the world today. China remains one of the economies with the greatest impact on other economies. This is attributed to the rapid growth rate growth rate of almost ten percent for the last ten years. The objective of this paper is to give a detailed analysis concerning the rise of china’s economy. In addition, the paper provides an in-depth analysis of the impacts of china’s economy on the United States. Reasons for the rise of china’s economy The economy of China grows because of a number of reasons. For instance, china’s substantial investment in infrastructure plays a key role in the growth of its economy. The many forms of transportation make trade easy hence improved local and international trade. For instance, the availability of railway transport system in China and other forms of transport help improve the economy of China. The rail network in China is now more than many countries in the world. The most important thing about this is that China keeps investing in infrastructure on a yearly basis. By the year 2006, China had overtaken India by eleven thousand kilometers that were the leading by then with sixty-four thousand kilometers. In addition, availability of water, power, drinking water, and irrigation in China surpasses many countries in the whole world. For instance, the development of China concerning these dimensions is three times that of India. Therefore, infrastructure development in China plays a significant role regarding its economy growth. China’s economy remains growing at a faster rate because of the increasing number of manufacturing industries. For this reason, therefore, China is the greatest exporter of goods in the entire world. In addition, China is also the second largest importer of goods. The growth in the export and import of goods in China shows its improved purchasing power. Furthermore, China being the least importer of services products gives a sneak preview of its independence concerning labor. The high number of industries in China contributes to its economic development. The number of people working in the industries remains high leading to high taxes that help in running the government of China. In addition, the high taxes paid by the many manufacturers help in improving the economy of China. For instance, the regions in the southeast of China remain wealthy because of the high number of industries. The favorable government Chinese policy is also one of the reasons behind the rise of the economy in China. The procedure helps reduce the number of obstacles in the trade and other sectors hence the accelerated growth in China. In addition, the presence of a favorable exchange rate policy that is designed to encourage competition helps in the rise of china’s economy. The presence of these favorable conditions makes it attractive for both the local and the international traders to invest in China. Furthermore, the need to make the renminbi an international currency will mean that business transactions will be easy thus favorability. For instance, the maintenance of the renminbi at 8.27 per dollar from the year 1997 to 2005 is a good show for investors. Therefore, all these favorable conditions put together attract investors into china’s soil leading to rising in the economy. Impacts of china’s economy to U.S It is true that the rise in the economy of China will have an impact on the economy of the United States. The impact will not only be to the United States but to all other nations that China trades with. For instance, China being one of the biggest bankers in the United States means that its economy will stand impacting the economy of the United States. China holds a number of Treasury bills, bonds, and notes of the United States; therefore, any disagreement or change in the Chinese banking system remains to affect the United States. In addition, China continues to buy the United States debt with the intentions of supporting the value of the dollar. Therefore, in cases of failing to buy, the economy of the United States stands at the risk of losing. Furthermore, it is evident that the economy of the United States remains to suffer because of the frequent threats by China. The threats are a result of China wanting to gain competitive prices concerning their exports. China pegs its currency lower than the dollar of America. Therefore, the threat by China rises when the United States demands to raise the Yuan’s value. Increasing the Yuan’s value means lower prices for china’s exports hence reduced economy. However, China counters this by threatening to sell part of its holdings leading to a bad relationship between the two countries. The rise of the value of the Chinese yuan remains the greatest challenge for the economy of the United States. According to Alix-partners, there is a possibility of the international market having only Chinese manufactured goods. In addition, these goods are seen to be of a higher number as compared to the Mexican products. The large numbers, therefore, mean that China will stand controlling the international market. Furthermore, the increase in the value of the yuan against the dollar places the United States at risk of losing grasp of the international market. On the other hand, the rise of the labor costs in China threatens the economy of the United States. The increase in the wage rate translates to the availability of workers hence increased production. Increases production also means a controlled market hence the effects of the already existing competitor. The increased shipping costs for the exports remains affecting the United States. Given that China is the greatest manufacturer and exporter, the increased shipping costs will lead to high costs for the purchase of the products. Furthermore, the increased cost leads to the search for better inventory records. All these waste a lot of time to the delivery of the products leading to higher prices. The delays experienced may lead to some goods going bad in cases where they were perishables. When this is the case, the United States suffers significant losses leading to wastage of resources a staggering economy. The unfair trade practices by China remain affecting the economy of the United States. The United States believes that China lays down unfavorable conditions for their trade (Kazer). The adverse conditions hinder the United States from improving their economy. For instance, the numerous complaints by America concern tires, steel, and other materials. The United States believes that China dumps its paper exports in America. Furthermore, China giving subsidies of ten to twenty percent to its manufactures places America at a disadvantageous point. The subsidies concern the glossy paper used in magazines and books. In this regard, therefore, America stands getting low-quality products at higher prices. The trend of untrustworthiness threatens trade between the two countries and so are their economies. For instance, the government of the United States taking an anti-dumping case to commerce department against China shows their untrustworthiness hence the effect on the economy of the United States. In conclusion, china’s economy remains one of the largest in the world today. The continuous rise in the economy of China depends on the policy of the government, infrastructure development, and the high number of industries. China’s growth in the economy has a number of effects on the economy of the United States. The effects result from the close trade links that exist between the two countries. Any country has the potential of growing its economy depending on its inputs in infrastructure and policies. Politics and security remain the greatest impediments towards the improvement of a countries economy. A country should know its strengths, weaknesses, available opportunities and the best time to make a policy. Work Cited Kazer, William. China Economy Shows Small Gains but Worries Remain. WSJ. N.p., 2015. Web. 3 May 2015. Read More