Rapid Economic Growth of China - Term Paper Example

Running Head: China’s Economic Rapid Growth Name Institution Course Professor Date CHINA TODAY Introduction The move the Chinese government made in relation to its massive economic growth was one of the major well-structured move that played a very important role in China’s economic growth. The massive economic growth involved quite a number of factors that comprise of introduction of free trade zones and cheap labor among other aspects such as promotion of overseas investments. Factors Responsible for China’s Vast Economic Transition By the year 1978, the economy of China was the tenth biggest on the entire globe, with gross domestic product (GDP) equaling roughly 150 billion USD, which was by then equivalent to six percent of the United States gross domestic product. Some few years later, the economy of China had grown so much from six percent to seventeen percent of the United States gross domestic product by the end of 2005, hence becoming the fourth country with the largest economy on the globe. Since the beginning of China’s economic improvement in the year 1979, GDP development rate of China has been maintained at approximately nine percent per annum. According to Morrison (2006), China made a move early 1950s by municipalizing most of its industries. During the same period, Chinese government made another move to collectivize all the private and public farms into what is referred to as massive rural communes. During 1960s and part of 1970s, Chinese government embarked on a large scale venture programs in a move to make the state of china progress towards fast industrialization. Early 1978, businesses operated by the State if china, had the ability to produce about three-quarter of industrial output. At that time, private investments did not exist; the major objective of the Chinese government was to turn the economy of China into a moderately self-reliance economy. It was during this period when the imports from other countries were limited to resources that the government could not acquire domestically. Chinas government involvement made the Chinese economy inefficient and stagnant, the reason behind it was that the incentives for non-government corporations were very little. Manufacturing and price controls done by the Chinese government further ruined the Chinese economy at the time. Together with the social and political commotion of the National Revolution, over quite a number of years the net development of Chinas gross domestic product was very little. The living standard of Chinese citizens fell as compared to other rising states on the globe. Through the economic improvement that began in the year 1979, Chinese state hoped for better living standards of its citizens as this would lead to gradual improvement that would in the end lead to substantial economic growth. According to Morrison (2006), the Chinas prediction was right. Allowing the agriculturalists to possess and sell part of what they produce to the non-government corporations was the very first move that the china’s government made in its plan of economic reform. The Chinese government also launched four exceptional economic sectors alongside its shoreline regions to draw overseas investment desiring to exploit the much less labor charges in China. The Chinese government major objective when they made this move was to motivate high expertise or technology and powerful machinery imports or ingress to china and also to inspire exports, according to Morrison (2006). The development of commercial regionalization had instigated. Monetary control over countless agendas was relocated to the confined administrations that operated within the provinces of china; they were given authority to execute and participate based on the rules of the un-restricted competition. Shoreline regions and specific towns or capital cities were chosen as expansion regions, accredited to merchandize without restrictions and given economic motivations to entice overseas venture. Price regulators over a variety of products were steadily reduced (Morrison, 2006). The Chinese economic reforms is considered as the biggest move made by Chinese government in its plan to improve its economy and to enhance the lives of Chinese citizens. According to Woo (1994), the conception of private organizations in every segment of the Chinese economy and also a high investments rate was the most important move in relation to china’s economic development. Other conditions that favored the development of Chinese economic was the massive under-employed labor force that was more than prepared to work for moderately low earnings; a social custom of self-restraint, quickly acclimating to the new organization guidelines and the ancient background. Qian (2003) points out the fruitful reform as being the result of implementation of non-orthodox fiscal policies. The development of free merchandize and also introduction of government inducements were the key factors that led to the vast growth of China’s economy, according to Qian (2000). The greatest substantial economic restructurings befell at the commencement of the 1990s, where the elimination of price regulation and the liberation of the interior merchandize occurred, as well as additional of overseas investments Holz (2008). Nevertheless, if these features were the merely features or aspects clarifying the massive development of Chinese economy, then it would be very hard to clarify how China has ever maintained a very high rate of economic development even after several years have passed since the introduction of economic transition reforms. Quite a number of economists still have strong believe that contemporary China is still benefiting from the transition reforms that were introduce several years ago. They still believe that, the evolution progression is not over yet, considering the fact that the government of China is still regulating quite a number of economic features of the country and also there is still an opportunity for an un-restricted economy and probable for greater overseas investments in quite a number of areas. The Chinese economic development can be attached to 2 features: a swift development in industrial output; and a massive scale savings financed by both the local savings and overseas investment, Morrison (2006). The economic improvements have improved economic productivity and the capability to procure possessions essential for the development in agricultural or agronomic and industrial yield. The benefits to output were because of the transfer of properties in subdivisions that, earlier, were operated by the Chinese government, such as the service sector, commerce sector and the agriculture sector. Holz (2008) mentioned quite a number of factors that led to vast growth of Chinas economy and among them are: a) Structural modifications: China moved from being just an agronomic or unindustrialized nation to convert itself into an exceedingly dynamic manufacturing and engineering republic and a major exporter. b) Catching up: This actually means that the technology or the expertise invention established overseas can be achieved by introducing machinery or industrial apparatus from other countries, for instance through overseas savings in the economy. c) Price balancing: This is a theory that states that, a country where cost of labor is low as compared to the capital, the development of labor market is massively favored. The outcome of joblessness decrease increases the output or production directly. The development of necessity for highly trained and focused labor leads to increases in wage which is commonly accompanied by development in manufacturing productivity. According to Holz (2008), the above 3 aspect are very important especially in the case of massive development in Chinese economy. According to Denninghaus (2009), agronomic transformations was one of the major factors that played a major part in the economic development of china that started in the year 1979. The nation was highly in prerequisite of development after several years of calculated economy. The Chinese economic evolution established itself on investigation and practicality. The agronomic improvements and also the beginning of free merchandize of the Chinas economy to commerce and overseas investments were the foundation of an economic reorganization package which did played an important role in guiding the Chinese economy on market necessity. Even though these improvements were executed progressively, it contributed meaningfully to circumvent economic catastrophes in the 1st phases of these transformations. One other important aspect in relation to Chinese vast economic growth was the enhancement in the export sector. The advancement of exportation is seen as a crucial tool for the development of economy, especially in countries that are still developing. As seen in the case of China, the best way a developing State can stimulate its economic development is through exportation promotion and through specializing the domestic products and the human capital. Therefore, by putting into use development plans, designed to promote exports, a given nation can by far upturn its output, make use of the locally available resources more resourcefully and upturn its high-tech invention. As the unindustrialized nation’s economy magnifies, the country develops a tendency to assimilate itself more rapidly into worldwide markets, and as a result, it accelerates further economic progression (Chen, 2000). Also there were quite a number of factors that favored the development of Chinas economy. A reasonably huge aggregate of regionalization, the quantity and quality of human investment were among the features that mostly contributed to the growth of Chinas economy. According to Denninghaus (2009), Chinese nation is an extraordinary illustration of an emerging nation with a very challenging historical happenings, propelling itself amid the levels of the chief economies existing on the globe in an extremely very little period time. These aspects were further facilitated beside the rising worldwide globalization, increasing the necessity for Chinese locally produced goods. The 4 most crucial monetary capitals for all ventures existing china, in relations to secure asset venture are: overseas ventures, state finances, local bank loans and corporations’ self-fundraising. Up to this date, China is still promoting the local bank loans and corporation’s self-funding, which ever since the inception of economic reforms have remained the greatest crucial birthplaces of capital. Bank mortgages have proved to provide a huge number of capitals for corporates and make-up a huge portion of company’s total funding. For instance, the businesses operated by the government owe twenty five percent of its financing through bank finances. Allen (2004), examined the connection concerning china’s economic development and the financial system. Even though china is seen as part of the countries that have a rapid economic growth, China is quite different from the other developed nations. Even though China’s financial and judicial systems grew moderately slow, the economy developed meaningfully. Chinese administration is presently facing a challenge in motivating interior consumption. Consumption grew at the time when the economic reforms were first introduced but begun declining few years later. Encouraging local demand as a way of economic development suggests that interior consumption must develop alongside investments and exports. Strategies to encourage consumption may centered themselves on changes and tax reduction and allowing the conversation rate grow so as to ensure imports are cheaper, therefore, profiting the citizens. In most of the countries, the administrations make use of economic rule to develop local consumption which is not the case in china because Chinese economic procedures are not operative because fiscal policy is really small (Lardy, 2007). In the present world recession, the chief trading partners of China are facing challenges of financial which have made them to decrease the amount of imports. Conclusion The factors that led to the massive development of china’s economy were massively stimulated by the economic reforms. These factors comprise of agricultural reforms which was actually stimulated by allowing the overseas investors to invest within the Chinese territories and promoting free trade zones. Other factors were cheap labor, administration policy, and overseas venture in technology and investments in schooling and principally industrial approaches of teaching. The other aspects are that played a major role were privatization of government operated businesses, domestic demand and globally demand for Chinese products. Bibliography Baizhu, Chen and Feng (2000). Determinants of Economic development in China: Private enterprise, education, and openness. Carsten, A., Holz. (2008). What We Know Today About China’s Economic Growth Tomorrow. World Development. Franklin, Allen and Qian (2004). Law, finances and Economic growth in China Gary,H., Jefferson, Abert, G.Z., Jian, Su. (2007). The sources and Sustainability of China’s Economic Growth. Lardy, Nicholas, R., (2007). Rebalancing Econimic Growth. Washington D.C.: Peterson Institute for Internal Economics. Marie, Denninghaus, (2008). The Factors responsible for China’s rapid economic growth over the past quarter of a century. Wayne, Morrison. (2006). China’s Economic Conditions Woo, W.T. (1994). The Art of Reforming Centrally Planned Economies: Comparing China, Poland, and Russia. Yingyi, Qian (2000). How Reform Worked in China. Princeton, NJ: Princeton University Press. Yudong, Yao, Yan, Wang. (2003). Sources of China’s Economic Growth: Incorporating Human Capital Accumulation. Read More