The Major Challenges for China - Essay Example

The Major Challenges for China al Affiliation China has enjoyed being one of the most successful economies in the recent past; it is among the fast growing nations whose economy has risen beyond borders. China, a country that was once an underdeveloped state has undergone impressive achievements. However, there have been peculiar events and situations that have been faced by China in recent times, threatening the established economy. This essay discusses the various reasons that have led to stagnation of what has been smooth economic growth. Through various researches and observations, there is evidence showing what have become stumbling blocks for China. Despite all these down turns, there is hope for the resurgence of this economy; the Chinese government has re-embarked on strategic plans that would enable resurrection of its previously steadily growing economy. A country with settled political situations, democracy and that is well equipped in terms of technology has all the privileges to kick start the road to an impressive economy. Keywords: China, Economy, Challenges Introduction The Chinese economy has been one of the most consistent and swiftly growing with a sustainability growth rate of 10% (Naughton, 2007). China has portrayed a dynamic and unrivaled density; however, it is still transforming from two transitions as first, it “is still completing its transition away from bureaucratic socialism and toward a market economy” (Naughton, 2007, p. 4). Naughton further explains the second transformation with which China is transforming, which is the fact that “China is in the middle of the industrialization process, the protracted transformation from a rural to an urban society” (2007, p. 4). These two transitions are still far from completion and therefore China still has challenges. The Chinese economy can now be compared to those of developing nations. While this economic similarity exists, so do the challenges. One of the crucial challenges that have been faced recently due to the transition is the shift from the socialist type economy to the market based economy. This challenge was however fixed but again, it led to the rise of another challenge related to development. According to Naughton, these challenges are “the need to invest in human skills and physical infrastructure, the need to create effective institutions, and the need to protect underprivileged and vulnerable sections of the population” (2007, p. 5). Although there are many positives related to the growth such as improved living standards, many Chinese have fallen in the hands of uncertainties marred with risks. Majority of China citizens are now encountering increased rates of unemployment and worrying health situations. The society has faced unfair and deteriorating income distributions. It is also reported that there are increased government regulations, corruption, imperfect institutions and increased unfair market competitions (Naughton, 2007). China is still haunted by inadequacy of human and physical capital. Education as well as infrastructure remains to be erected and established. As observed from the experiences of other developed and developing nations, as a nation approaches the medium development stage, new challenges usually crop up. For example the Chinese need to contribute to the world welfare. Japan was once a victim of this challenge; when it had reached this stage of development, there was emergence of new technological awareness in the manufacturing sector, as well as influences from traditions and cultures. Even though china’s national income is ranked as one of the largest in the world, report has it that “its per capita income is among the lowest, ranked 136th in 2002” (Fung, Pei and Zhang 2005, p. 104). There are growing concerns relating to China’s membership in the World Trade Organization and its economic and trade related impacts. It has been observed that its approach to distribution of welfare and workers protection has caused probable economic impact. Whereas most of the Chinese have benefited from the economic progress, there has been the creation of a class system whereby the rich continue to acquire more wealth, while the poor continually fall under a group of displaced peasants; they are not employed and for the few lucky employees, their salary scales are far below the standard, with amounts that can barely sustain their lives. China has a challenge in integrating into the global economy. Many workers left their farms and went to the cities or towns; by doing so, they left behind what they had in the act of trying to find opportunities in urban areas. This has also caused a downfall in the percentage of agricultural production value and a decline in total income. The government was forced to create a category of laid-off workers, who receive a minimal stipend and are not separated from their work unit (Hughes, 2002). The government, especially the local governments over-involve themselves and become interested parties in many issues; they seek profit and therefore they are tempted to start big projects. For this reason, they end up establishing blind investments. Furthermore, built projects are alike. According to Hu, “the supply of public goods is inadequate, public services are not in place, and services are beyond the reach of most people and low in quality” (2006, p. 27). Since the public services are not equally distributed, the cities are more favored, which leads to inefficiency. There have been increased conflicts between labor and management and also between labor and enterprises. There is a tremendous growth in insecurity, destabilizing the social order. Also on the rise are industry related accidents, road accidents, fire accidents and various types of crimes that have increased rapidly. Chinese Economic Reform China is undergoing major economic transformations. It has improved its dependence on agriculture to reliance on the industrial economy. This massive transformation began from simple grounds; as stated by Xioaping (as cited in Fernandez, n.d.), “poverty is not socialism…to get rich is glorious”. This statement meant to expand the understanding of Socialism to mean common prosperity. The strategic situation in China offers an opportunity for great relationships across the economic, institutional and political forces; this provides a good platform for economic transformation. Recently, China launched long term economic reform plans after a meeting by its top leaders. This major move will enable China transform from an investment driven economy to a consumption type of economy. The main reforms were identified to emphasize on: One child policy. Reformation of the welfare system. Greater rights for farmers. Financial reforms. Stepping up on state owned enterprises (SOEs). One child policy This policy was enacted in 1979 and has led to a decline in birth rates (Holliday, 2013). The policy was regulated to allow those parents who were born as lone children to have two children. The reason for the change of this policy is to counter the aging population pattern. It would be a major boost to the country’s economy; the more the population, the better the economy. At present, according to the United Nations data, close to 8.5% of the Chinese population is over 65 years, this figure is expected to rise to around 23.9% by the year 2050 (Holliday, 2013). Chinese economic analysts have argued that the demographic dividend will transform to a major liability to economic progress. The one child policy will increase China’s growth and reduce the pressure on the pension system. Reformation of the welfare system China holds a household registration system called hukou system (Ranasinghe, 2013). This system requires the migrants to surrender public services rendered to them once they move to urban areas. Adopting this strategy would encourage the use of a liberal labor market, which allows unrestricted movement of labor and promotes urbanization. “The urbanization policy change with the relaxation of the hukou policy is, according to some China watchers, the biggest reform since 1958” (Evan Lucas, as cited in Ranasinghe, 2013). Although some cities still have strict rules applied to this policy, once they embrace the changes, they will experience a mobile labor force and an additional number of laborers in industries which have struggled with work force demand. Greater rights for farmers Farmers have been granted more rights concerning the use and ownership of their lands. As at present, farmers do not own land as is a government property. The only right that farmers have is to use the land but not to own it. This policy would encourage urbanization since the farmers would have the right to cash in on the land and relocate to cities for new adventures. Granting these rights to farmers promotes the shift in economy to a consumer base. Financial reforms Stepping up financial reforms would see the realization of an insurance scheme. This is a major boost to private investors to come up with banking systems and review prices on major services provided to people such as water, electricity and natural resources. Ranasinghe observes that “analysts say the insurance scheme would protect depositors as China is worried that some smaller lenders are at risk of going under, as banks compete for deposits in a more open regime” (2013). Stepping up on state owned enterprises (SOEs) Under this policy, state owned enterprises would be required to pay more dividends to the government, a move that would improve government earnings. Furthermore, private firms would be encouraged to participate more in building the economy. The government shall do all it can, for example, passing the bills to ensure that these organs are fully supported. Reference List Fernandez, J. A. (n.d.). The Chinese Economic Reform. Retrieved from http://www.ceibs.edu/ase/Documents/reform.htm. Fung, H., Pei C. and Zhang, K. H. (2005). China and the Challenge of Economic Globalization: The Impact of WTO Membership. Armonk: M.E. Sharpe. Holliday, K. (2013). Economics behind China Relaxing its One-Child Policy. Retrieved from http://www.cnbc.com/id/101201784. Hu, A. (2006). Economic and Social Transformation in China: Challenges and Opportunities. London: Routledge. Hughes, N. C. (2002). China’s Economic Challenge: Smashing the Iron Rice Bowl. Armonk: M.E. Sharpe. Naughton, B. (2007). The Chinese Economy: Transition and Growth. Cambridge: MIT Press. Ranasinghe, D. (2013). China’s Economic Reforms: What you need to know. Retrieved from http://www.cnbc.com/id/101205322. Read More