The Rapid Economic Rise in China - Report Example

What Key Fасtоrs Eхрlаin Сhinа’s ехtrаоrdinаry Eсоnоmiс Risе? Name Institution Introduction Rapid economic rise in China has been noted and spotted by economic analysts as a major economic power of the 21 century. Chinese economy has been described to be the most rocketing economic growth of the modern world. Whether it has negatively or positively impacted economy of other countries or not, it is empirical that an economic rise rate of 10 percent forms a firm platforms for other economic developments and it has been associated with social reforms, readjustment of developmental policies and attaining transparency in monetary management affairs. Currently, China republic is ranked the best performing economy in the entire world (Morrison, 2013). Pedagogy still exists because many economists have not been able to determine exactly what factors and strategies have been employed by the Chinese government (Qian, 2000). History outlines that Chinese sea trade grew to higher levels between 1517- 1800s during which china was considered to serve as a central place for civilizations. Other nations and states were demanded to obey and recognize China as superior before they could be allowed to trade freely with the Chinese government (Bolesta, 2007). Economic history reveals that China was recognized as economically stable because of its huge population. The major problem was that, the Chinese government had gained full control of all business productive areas (Tisdel, 2009). The situation remained the same till 1978 when some of the key government stakeholders called for reforms and implementation of new policies to be made. Before 1978 was performing effectively with an annual economic development or rise of six percent. Even though this percentage seems big for a country, it was not sustainable for china because they constantly experienced challenges that arose from undeterministic increase in populations (Morrison, 2013). In addition, population increases led to piling of social problems that could not be addressed by allocating resources from the central place, government. The original approaches that were used before 1978 led to unfair and non uniform distribution of resources and random control of prices for goods and products Qian, Y. (2000). Traditional price control strategies, which were used before 1978, distorted prices of products which eventually led to misallocation of resources. During that time, it was difficult for western economists to determine the future of Chinese because the Chinese have adopted a totally different financial accounting approach (Derek, Kanbur, & Zhang 2008). Economic rise Deng Xiaoping has been noted by many scholars to be the Chinese reformists who started the journey that has seen China develop to the present status (Tisdel, 2009). He become a powerful man in 1978 and only after serving as the president for one year, he managed to change policies and made some adjustments which allowed some recognizable freedom to the Chinese people. One of his first reforms was to pave and or create way for farmers so that they could sell a fraction of their harvest or products to the private sector (Morrison, 2013). Chinese economic rise started some two years after 1978 and during this time, it was rated as the tenth most powerful economy in the world. This was after Zedong Mao had died and according to economic analysts, the Chinese economy was equated to six percent of the United States GDP. However when evaluations were done in 2005, it was realized that Chinese GDP was equivalent to 17.6 percent of the United States accumulated GDP. By the year 2005, China was ranked fourth in the whole world after the US, Japan and Germany. Since 1978, economic status of the Chinese government has greatly changed and rocketed to higher levels beyond what had been forecasted by different economists and scholars from different nations. Major challenges to economic growth during the early days During the early times, Chinese industries were nationally managed by the state government which had no concrete platform that provided or encouraged innovation among stakeholders. It is widely and empirically true that in addition, the Chinese government acquired full control of lands and agricultural farms (Derek, Kanbur, & Zhang 2008). This approach and strategy was regarded fake and could no contribute to sustainable development of its people. State owned facilities or capital investments does not accurately provide a competitive environment through which ideas can be exchanged or shared because the whole responsibilities rests on the head of the state government. A lot of people remained in need for quality products from other nations but they could not get them because local production was encouraged by the government against imports Qian, Y. (2000). Even though this was a government’s economic development goal, it failed to address problems that its people faced because the local manufacturing firms and industries had no capability of producing enough goods to meet the rising demand that was evident among its people (Derek, Kanbur, & Zhang 2008). Cultural revolutions, political, and social adjustments are among the main challenges that hindered development of Chinese economy and as a result, many Chinese livelihoods were destabilized. It is true for acceptance that a larger percentage of Chinese people started living under constrained and strenuous environments than poor citizens living in third world countries (Tisdel, 2009). Trends Between years 1953 and 1978, the Chinese GDP accumulation was estimated at 6.7% but there were questionable inquiries from economists allover the world (Derek, Kanbur, & Zhang 2008). Many economists including Economist Madison Agnus argued that the Chinese government exaggerated the figures for social and political reason. In addition, Madison argued that the figures were an estimation to favor the government but in really scenario, the GDP growth rate was estimated at 4.4%. Accordingly, this is the period when lots of deaths that resulted from enormous famine (Tisdel, 2009). Even though the government exaggerated figures, people’s livelihoods were destroyed due to cultural revolutions that combined with impacts from famine. According to the current figures, china has been able to maintain almost a constant GDP growth among most known big economies. During the 2008 global financial crisis, the Chinese government stimulated and implemented a larger economic package for development (Morrison, 2013). They managed to encounter this by adjusting the monetary policy which encouraged people to domestically invest and export their products (Tisdel, 2009). Among all big economies of the world, China has been ranked among the most performing economies in the whole world. The second highly catapulting nation is India which is a neighboring nation next to China. Till today, developed economies have not clearly forecasted what would be the GDP growth rate of China in the coming one decade (Allen, Gian, & Gian 2005). However, comparing all statistics of the transition economic period of China indicates that, its economy will rocket even further under the leadership of the current government administration. Capital investment has been looked at as the most important thing that the Chinese government has managed to focus on and it is the reason why China republic is becoming an economically stable nation (Morrison, 2013). Factors that have led to China’s extraordinary growth First, most economists and scholars have looked keenly at the economic status of China and have identified some key factors that might have led to a plummeting economic growth (Ravallion, M. & Shaohua, C., 2007). The extraordinary growth of the Chinese economy is linked to many factors which have been integrated together to form a strong economic base on which economic standards are compared and related to the internal changes in livelihoods (Allen, Gian, & Gian 2005). Economic reforms that were initiated by reformist Xiaoping and till today, the Chinese government has been recording a positive rise in GDP (Bolesta, 2007). Economic reforms that happened during the 1979 allowed people to practice free trade and encourage foreign investment. The reforms allowed decentralization of agricultural farms, industries to the private sector. Before, the government had all the mandate of controlling the entire production sector, a fact that had caused more harm than good to the people of China. Out of decentralization and privatization of many sectors, people saw need to work extremely hard because all benefits gained would serve their livelihoods (Morrison, 2013). Farmers were allowed to sell part apportion of their farm produce to the private investors in order to sustain their lives (Tisdel, 2009). The reform by Xiaoping led to recognition of four specific regions that were identified for tourist attraction. The four points allowed people from different parts of the world to come and explore potentialities of investing in China (Derek, Kanbur, & Zhang 2008). Out of this, the Chinese government started to make huge amounts of revenue from tourists and within a short time, the number of tourist attraction facilities had been increased. Privatization of the industrial sector is also one of the factors that contributed to the Chinese economic growth. Before 1979, all industries were managed from the central government (Tisdel, 2009). However, after the reforms, Xiaoping called for faster changes to be made so that the industrial production and management could be left to the local government (Bolesta, 2007). Sure, after sometime and after the reforms were documented, industrial management was left to the local government (Morrison, 2013).Domestic savings from the people and investors promoted the Chinese government from adopting new business strategy which ended up encouraging foreign investment. A combination of privatization, foreign development, and domestic savings led to a rapid and systematic economic development from the local governments to the state government (Ravallion, M. & Shaohua, C., 2007). Structural changes that were adopted during the reforms have also been identified as some of the factors that have sustained economic growth of the Chinese government (Allen, Gian, & Gian 2005). China republic shifted from practicing and depending on agriculture and instead, they started the journey to become an industrial nation and because of that, a significant global exporter (Tisdel, 2009). The Chinese government also outlined allowed catching up mechanisms after realizing that they had been technologically left far by other developed nations (Bolesta, 2007). To pick up, china allowed enormous importations from developed nations and through this, it managed to acquire and compare relevant technologies (Derek, Kanbur, & Zhang 2008). Out of it all, they started the journey of developing their new technologies as a modification of the existing technologies and as a new innovation of the current technologies (Morrison, 2013). Generation of factories and industries was hatched after foreign investors were allowed to invest freely because they were allowed to choose regions of their interest. This allowance and freedom to choose gave the Chinese people a lot of jobs and an analysis shows that the Chinese reformist Xiaoping allowed foreign investors so that his many people could get jobs by proving the necessary labor force (Ravallion, M. & Shaohua, C., 2007). Lastly, price equalization strategies were adopted by the Chinese government so that purchases and sales could be streamlined to pave way for investors and locals to budget effectively for their expenditures (Woo, 1994). Large scale oriented investment in China is an important factor because it led to a significant reduction in levels of unemployment and since that time, the rate at which the unemployment is been felt has reduced to manageable levels (Woo, 1994). Quite for sometime, China was noted to be a catapulting nation whose recoil has seen it reduce levels of unemployment. Human capital is an asset to any country such that it increases quality and quantity of products and services being produced by any company (Morrison, 2013). It should also be noted that China republic has a different banking system from other nations. All budgets are foreseen and evaluated by the state government. In addition, Chinese government has devised ways through which they domestically give loans to investors at manageable interest rates (Ravallion, M. & Shaohua, C., 2007). This is a mechanism that has been applied by the Chinese government to ensure that all investors operating in china have an access to funds (Morrison, 2013). Conclusion China is currently ranked among the most economically performing nations in the whole world. It has been noted from data that it its GDP is constantly increasing to greater levels and that if the trend continues at the current rate, then it stands a higher chance of becoming the world’s most powerful economic country. However, it has positively and negatively impacted the world economy because of the exports and imports it is currently handling annually. Philosophically, China is catapulting itself so fast that within a very short time interval, it has made greater developmental and technological advancements. The current Chinese economic data reveals that the country has many industries and companies in the Middle East, a fact that has stimulated competition among other neighboring nations. The future of China is great because reforms for development have become the order of their day in the administration and because it has increased its exports beyond the region to other areas where they have managed to penetrate international markets. References Allen, F. , Gian, J. & Gian, M. (2005). Law, finance and economic growth in China. Journal of Financial Economics, 77(1): 57- 116. Bolesta, A. (2007). China as a Development State. Montenegrin Journal of Economics, 5: 105-11 Derek, H., Kanbur, R. & Zhang, X. (2008). China’s growth strategies. Retrieved from http://www.arts.cornell.edu/poverty/kanbur/China%27sGrowthStrategies.pdf Morrison, W.M. (2013). China’s economic rise: History, trends, Challenges, and Implications for the United States. Congressional Research Services. Retrieved from http://www.fas.org/sgp/crs/row/RL33534.pdf Qian, Y. (2000). The process of China’s market transition (1978-1998): The evolution, historical, and comparative perspectives. Journal of Institutional and Theoretical Economics, 156(1): 151- 171. Ravallion, M. & Shaohua C. (2007). China’s (Uneven) Progress against Poverty. Journal of Development Economics, 82 (1): 1‐42. Tisdel, C. (2009).Economic reform and openness in China: China’s development policies in the last 30 years. Economic Analysis & Policy, 39(2): 271-295. Retrieved from http://www.eap-journal.com/archive/v39_i2_05-tisdell.pdf Woo, W.T. (1994). The art of reforming centrally planned economies: Comparing China, Poland, and Russia. Journal of Comparative Economics, 18(3): 276-308. Read More