Economic Growth in China - Article Example

ECONOMIC GROWTH IN CHINA Economic Growth in China Name Course Institution Instructor May 17, 2011 Economic Growth in China Introduction Robert Fogel is an American economic historian and scientist born in the New York City. He is a son of Russian Jewish immigrant and he has contributed a lot in the intellectual discourse of development and in the discipline of economics. He is the winner with Douglass North of the 1993 Nobel memorial prize in Economic science and currently he is the director of the center of population Economics at the University of Chicago, school of business. Robert Fogel has written several economic analyses of various economies in the globe but in this paper, the one, which is in focus, is his forecast on the future growth rate of China’s real GDP per capita in the year 2040. His opinions regarding this aspect and the general Chinese economy have invited enormous opinions from all quarters ranging from businesspersons, students in economics, scholars, politician to citizenry. Discussion Robert Fogel in his work posted that by the year 2040 the Chinese economy will be turning at the level of 123 trillion dollars, which translates to almost thrice the global economic output of the year 2000 (Fogel, 2010). He further forecasted that the per capita income of China during this time will strike 85,000 dollars which is double the matrix that the European union have forecasted and also it will greater than that of India and Japan. Robert Fogel further asserts that by the year 2040 the Chinese mega city dweller will be having living standards, which will double the average standard of Frenchman. The China’s standard will not have overtaken per capita wealth of the United States according to his forecast in terms of the global gross domestic product. Factors may influence China’s economic growth rate Chinese economy is blossoming and it is a reality that it has high potentiality to grow even more. My confidence for China growth and affirmation of Fogel’s perspective is that, China has grown to become one of the kingpin economies of Asia, and it has become a hub for enormous business and technological activities that two decades ago no one imagined China would achieve. In the recent past, the People’s Republic gross domestic product (GDP) surpassed the levels of Britain and France and this prompted it to shoot to be ranked as the fourth largest economy in the globe. This one of the feather in the hat of Chinese leadership, confidence, and spirit that has caused shivers in the backs of greater economies in the American continent and Europe. I agree that the Chinese economy is one of emergent cases in the modern world that is skyrocketing in growth rate and characteristics due to the fact that the output from this economy is enormous and it is growing year in year out. There are some statistical reports that in the mid 2010 China had replaced the position of United States of America as the largest exporter of technological goods. This aspect tells that the Chinese technological, research and innovation segments are now upbeat and they are producing products that are technologically advanced and cheap compared to the United States that has dominated the sector for a very long time in history. World leading financial institutions like Citibank, HSBC and even the bank of America are now busy acquiring stakes in some of the strategic projects and businesses in China including the state –controlled banks. This speculation and confidence is one of the sentiments that will boost the China as the best investment option and this phenomenon is well depicted in the way the Chinese internet companies fetch what has been referred as the dot-com –era prices on the NASDAQ. Investor confidence and optimism in the Chinese market are some of the elements that pulled many investors from the American continent, Europe, fellow Asians and even from Africa to seek business opportunities with Chinese based companies or even establish their business in the soil of this country. The other perspective which insights me to concur with Robert Fogel’s optimism on the marginal revolution on the performance of the Chinese economy, lies on the fundamental behaviors and reality of the demographic system of the Chinese people. China has strong economic fundamentals notably in terms of high savings rate which is of utmost essence for any economic growth and even for personal development; there is huge pool of labor due to the huge population size and this element translate to the aspect of cheap labor which is magnet for any growth of a business. China also has a powerful work ethic and this can be traced back to the historical realities and teachings that are mostly deduced from the ideology of the chairman (Mao Tse-tung /Zedong) which emphasized the virtue of hard work and self reliance and this has passed down to the current generations. The other essential factor, which makes me to agree to some level with Robert, is emphasis of the value of education and the enormous investment that China is making in education. It is common knowledge that educated workers are much more productive workers than the uneducated counterparts are. In China today, high school and college enrollments are rising steeply because of the government initiatives and significant state investment. In the year 1998, the then-President Jiang Zemin called for a massive increase for youth enrollment in higher education. Data indicates that during that time a paltry 3.4 million students were enrolled in China's colleges and Universities, but with the president clarion call the response was swift and over the succeeding four years, enrollment in higher education increased by 165 percent, and the number of Chinese studying abroad rose to 152 percent. Between the year 2000 and 2004 statistics hold that the university enrollment continued to rise steeply, by about 50 percent. If this trend continues, there is a clear indication that China has potentiality of increasing its high school enrollment rate in neighborhoods and counties by 100 percent and that of college by over 50% over the next generation. This reality will create an atmosphere of educated populace and enlighten workforce which is a critical necessity and ingredient for economic take-off, am a believer that if this phenomenon stick to its course the Chinese economic fortune will be heading towards the Robert Fogel’s projection. Robert ascribed that the Chinese political system is likely not what many people think since China most certainly is not an open democracy and many criticism and debate in the upper echelons of policymaking than many realize. He admitted that the unchecked mandates can lead to disaster and seems to resuscitate the Great Leap Forward in recent years. Why not China can get 123 trillion Robert Fogel’s projection that by the year 2040 the Chinese economy will be turning at the level of 123 trillion dollars, which translates to almost thrice the global economic output of the year 2000, is unrealistic. This is because the Chinese economy is facing a myriad of challenges that might pull back such an astronomical growth. The Chinese government is also maintaining a tight control on most investment projects using their capricious power to issue long-term bank loans and in the aspect of general land use in China. This phenomenon is anti- development because it discourages and holds back investment spirit in people who want to venture into real estate business. Real estate is one of the business perspectives that has recognized world over as a fundamental engine for economic growth and it also a landmark for the level of economic performance of a state, region or country. It has become common knowledge that for an economy to grow the playing field in the market for all players either government or private must be level so as to encourage fair competition which is the main ingredient for economic growth. In his projection, it seems Robert overlooked these aspects as the critical tenets that influence the GDP of the Chinese economy. He worked on the idealist philosophy of liberalized and free market opinion, which I think he benchmarked the Chinese case with the structure of the western systems where he comes from. The reality is that China is yet to attain free market and western type capitalism because there is still communist strings that attach some fundamental economic decision making processes and management of resources. The state as I have ascribed above still bull doze the market and general economy and it is a huge set back and nub on the forecast and aspirations of the Chinese economic performance for optimists like Robert Fogel. This involvement by the government in the economy, from another perspective has helped in the maintenance of discipline in the operations of the economy because of the communist’s leanings, but to some degree can be an impediment to the general performance of the economy, and hurdles towards the projections of Fogel. Conclusion The Chinese economy is one that is indeed complex and it has detailed elements that intertwine it for instance the aspects of ideological history and command economy, huge population size, effects of globalization and the reshaping of new China in the modern world among other facets that makes the Chinese economy an interesting case to observe or investigate. However, much optimism, hype, and skepticism about the Chinese economy has been elicited in various forums and fronts but there are significant externalities that have come from or anticipated to be consequences of Chinese actual and projected economic growth. Pollution is a major problem in many industrialized cities of the globe and in China; the increased car ownership has led to problems of smog and worsening air quality. Pollution also occurs from the China’s vast industrial sector that is growing and in most cases because of inefficient systems regulation of pollution is very limited with untreated sewage been poured directly into the Chinese rivers. The growing demand in the Chinese economy has shoved great demands on China’s creaking power infrastructure and supply which has prompted the creation of projects like the Three Gorges Dam. This project has been criticized for creating environmental and social problems because the dam will severely impact on the natural habitats and ecology for many species living there. Other issues that have resulted from this mega growth rate include growing income inequality, unemployment, overheating economy effects like relatively loose monetary policy, escalating inflation, undervalued exchange rate, and huge balance of payment surplus. References: Consonery, Nicholas (2010) ‘A $123 Trillion China? Not Likely,’ Foreign Policy, Jan/Feb 2010. Fogel, Robert (2010) ‘$123,000,000,000,000,’ Foreign Policy, Jan/Feb 2010. Huang, Yasheng (2007) ‘Roots of China’s Miracle,’ Financial Times, 21 October 2007. Huang, Yukon (2010) ‘China’s Unbalanced Growth Has Served it Well,’ Financial Times, 7 October 2010. Keidal, Albert (2006) ‘Why China Won’t Slow Down,’ Foreign Policy, 25 April 2006. Lee, John (2009) ‘The Chinese “Economic Miracle” – What Lies Beneath,’ Chapter 3 of Will China Fail? Second Edition. Sydney: Centre for Independent Studies). Maddison, Angus (2007). Chinese Economic Performance in the Long Run: Second Edition 960-2030 AD (Paris: OECD). Pei, Minxin (2006) ‘The Dark Side of China’s Rise,’ Foreign Policy, Mar/Apr 2006. . Read More