China Fragile State Analysis - Essay Example

China Fragile Analysis China Fragile Analysis Introduction Fragility defines a that is not in a position to provide security, social and economic development to its citizens. The definition places China in the limelight and the need to identify the source of its economic problem arises. Fragile states are mostly vulnerable to issues such as economic crisis and other natural disasters. A fragile state also experiences slow growth as compared to other low-income states and the progress on tackling chronic poverty is low (Brown & Langer, 2012). China still faces major challenges on social, economic and political international development status. Lack of a continuous economic growth in China poses a big threat worldwide as many observers point out. A Chinese specialist Susan Shirk asserts that China’s internal fragility status presents a big danger more than the economy and the strength of its military. General Information China exists as a sovereign country located in East Asia. A recent report compiled by World Bank (2014) shows a rapid increase in China’s population. The survey shows that the population is currently at 1,369,811,000. The Chinese government recognizes 56 ethnic groups (CIA, 2010). A survey conducted by Central Intelligence Agency US (2010) shows that the Han Chinese is the largest ethnic group in china occupying 91.6 percent of the total population. The second largest ethnic group is Zhuang occupying 1.3 percent. Other ethnicity groups that occupy the rest 1.7% include the Hui, Miiao, Yi, Tujia, Tibetan, Manchu, Mongol, Buyei, Bai, Kazakh, Yao and other small ethnic groups. An Overview of the Economic Position of China China has been experiencing increased growth in economy in the past two decades. In the year 2012, China overtook Japan which was the world second largest economy making it the state with the second largest economy globally. However, after several research conducted by World Bank in 2013 China’s annual per capita GDP is at 7.7%. Such per capita indicates that the country remains as a developing country. China’s share in the world trade has increased rapidly in the recent years but the growth is moderately low compared to that of the US. According to a report by IMF (2009), the GDP in China at the current exchange rate is a fifth of that of the US and that of private consumption is an eighth of that of the US. Additionally, China accounts for only 3% of global imports of consumer goods and 4% of world import growth. This makes US the ‘global consumer’ in the short run (International Monetary Fund, 2009). The rise of China’s economy is the factor that has been raising its foreign and diplomacy policy (D’ Hooghe, 2014). Its transition from a centralized to market economy and subsequent integration within the international economy has resulted into a tremendous growth making it the economic powerhouse. There are expectations that China will soon overtake the United States and take the position of the state with the largest economy. A forecast by the Organization of Economic Cooperation and Development (OECD), measuring the PPP (Purchasing Power Parity), that adjusts the price differences in China and other states, the economy of China will surpass that of the US come the year 2016. The growth and development of China domestic economy has made the country so admirable and attractive to other states such as Beijing. Its rapid recovery after the 2008 global financial crisis and the willingness to support the US and the Europe in dealing with the crisis further strengthened the image of China. The recent World Bank survey conducted in year 2007 reported that the population of people in rural areas in china living in poverty to be 14.79 million which is less than 2% of the rural population. Another survey conducted in 2009 shows a rise in china share in outputs globally from 1.6% in 1990 to 8.9% in 2009 at market exchange rates. Currently, 28 percent of the global population is middle class meaning that 1.8 billion people in the world belong to the middle class. The percentage of people in the high class is low being at 2 percent of the total world population. This shows that that the world largest number of all people belongs to the low class being 70% of the total global population. China have been experiencing an increase in the number of middle class people as most people from across the globe have been moving toward the East and especially in the Asian continent (Homi & Geoffrey, 2010). An Overview of China’s History China’s history stretches back from 2200 BC to the present. It has the largest population and is currently the country with the second largest economy globally. It is one of four ancient civilizations in the world. The history of China dates back to 1600 BC during the Shang Empire. In the 21st century, Shang founded the first Dynasty and he unified the country in 221 BC. The revolution of the 1911 is of great importance to the Chinese history as it marked the end of monarchical system and the led to the founding of the government of China. After establishment of the People’s Republic of China in 1949, the country ushered an epoch of stability and with the opening of reforms and policies in 1978 the country started experiencing growth in its economy. Source of Economic Problems in China China has since been experiencing a stable economic growth of nearly 8 percent since 1978, which is quite remarkable. However, this has led to many economic problems associated with economic growth. The first problem relates to rapid increase in population as compared to rate of economic growth. Currently, there are many problems facing the Chinese economy and especially the industrial sector. Most of China’s industrial outputs came from enterprises that were state owned most of these industries were inefficient and could survived only after getting subsidies from the government. The withdraw of the support in the 1980s led to closure of many industries some firms went to an extent of being bankrupt and the workers were left jobless. Problems of Growth in Chinese Economy China has been experiencing rapid increase in population despite the implementation of strict family planning measures put in place by the government (Xie, & World Bank. 2009). It is obvious that certain problems come with the increase in population. Some of the main problems facing China include the environmental pollution, boom in property, regional disparities among others as discussed below. Environmental Pollution Currently, China has a population that exceeds 1.3 billion citizens and as the economy grows the demands for automobiles increase. Air pollution in China is a result of industrialization and the increase in the rate of car ownership. China has become one of the fastest growing automobile markets globally second after the US (Scott, & Janet, 2012). Furthermore, economists at IMF noted that the China would have more cars than the US come year 2030. Because of the increase in automobile, sellers compromise the quality of fuel consumed. Rapid growth in economy in China and the increase in the consumption of automobile have led to a significant increase in air pollution especially in the major cities (Callan & Thomas, 2012). Income Inequalities The growth in economy has created a big disparity between the south and the north. People living in the urban regions are enjoying the benefits of economic growth while those in rural areas are dying in poverty. China has experienced a gap between the agricultural Norths making it hard for farmers to earn a living. This has led to migration of workforce from North to South. Boom in Property Due to the increase in population, China has experienced a rise in the house prices. This is experienced mostly in Beijing and Southeast. This has led concerns on the property bubble bursting leading to negative equity. Power Shortage The demand increase in the economy of China has led to stipulation in power and infrastructure. Economic increase has contributed to the creation of various projects including the Three Gorges Dam projects. The creation of the project has faced so much criticism in China for the cause of problems socially and environmentally. The fear of many environmentalists is that the creation of dam will have a great impact on natural habitats in a number of species. Ineffective Banking Sectors The reputation of China’s banking sector has had a bad reputation in terms of bad loans. This has been because of intervention of a Communist in the sector where banks offered loans to government based businesses with little 2Wregard to the principles of free market. Concerning the increased number of non-performing loans in China, the government has injected fund to major banking institution and has implemented measures to sweep the non-performing loans. However, the proportion of non-performing loans in the major China banks is still at a high level being an indicator that the problem of non-performing loan will be a long-term concern in China. High Rates of Unemployment Despite the high growth of the Chinese economy, unemployment is still a major issue in China. This has been because of privatization of the previous state owned enterprises that led to closure of those industries that could not stand on themselves. The halting on government subsidies led to bankruptcy of many industries in China leaving a number of citizens jobless. Low Valuation of China’s Currency The movement of Yuan to a system of flowing rate in 1994 led to the implementation of liberated transactions for imports as well as exports. Consequently, there has existed a link between the China’s Yuan and the dollar. Dollar devaluation has contributed to significant devaluation on the Yuan. Many researchers argue on the devaluation of Yuan by up to 40% in the US. Devaluation leads to increase in inflation in China. This makes it hard for Chinese to import foreign goods. This gives an advantage to the Chinese local manufacturers. Overheating of China’s Economy Chinese economy’s rapid growth has led resulted to many concerns that this could lead to the pressures of inflation. This is a challenge especially because the country faces a relatively loose monetary policy, the low valuation in the exchange rates and the boom in property the t has been witnesses in the country. According to Currie, D. M. (2011), the rate of inflation in year 2006 in China was at 3.6% and its economic growth was at 10.7 percent. Governance of China To address the emergence of strains relating to rising income inequalities and the deteriorating China environment, it is indispensable to examine the governance path of People’s Republic of China. Examining diverse policy sectors including agriculture, education, banking foreign investment, labor market and environmental protections helps in examining the nature of governance in china (OCED, 2014). Currently, China is undergoing a foremost revolution in its system of governance by adapting some institutions and changing the functioning of the state to be a market oriented economy. To improve in its public sector management, the government has undertaken reforms in its civil service system through training, selection, appraisal, compensation, reward and punishment among others. The government has also worked hard to fight corruption in the country. Looking at the public finance, the Chinese government has tried to implement measures such as unifying tax laws, equalizing the tax burdens. However, much effort is still necessary to improve the taxation system in china to ensure transparency and to make rule of law the guiding principle (OECD 2014). Chinese Culture Malinowski (1931) defines culture as the integration of artifacts, goods, technical processes, values and social organization (Jha, 2009). It is there necessary to analyze the possibility of rapid growth in economy because of the reviving the culture of Chinese with benevolence being its core value. Some emerging economies like India, South Africa and Indonesia, Russia and Brazil have unique cultural heritage. In the 21st century, these countries might end up with their own core values like the western modern industrialized nations like Japan and Korea. The civilization of China remains as the oldest in history and globally. Before the revolution of industrialization, the culture of the Chinese was the most prominent worldwide. However, after the industrial revolution China started to experience a drop in the economy lowering its status internationally with western nations enjoying substantial gains in their social and economic growth. According to Guo, R. (2011), Taoism and Confucianism have greatly influenced China’s political and economic behaviors. The Confucianism ethical beliefs in China have remained consistent with set principles governing the relations in China. As a result, China has developed a different economic development culture with the rest of the world in regard to its response to environmental and social conditions. Looking at the entire history of the Chinese, it is evident that Chinese culture have been reconstructed as a result of external influences the first and the most influential being the importation of Buddhism from the India in the first century. Assessing the Future of China As discussed earlier the major problems in China economy include imbalance in consumption and investment, unemployment as well as regional disparities. These problems not purely economy related but governing issues is also a major challenge in China .China’s potential to succeed lies behind the government addressing such issues (Ying, 2013). The country can adopt a number of measures to help the state come to its previous position of economic growth and development. It is the role of the Chinese government as well as the citizens to help the country in achieving the lost fame. Therefore, measures to help China become stable and have an efficient government can fall into three categories including central role of government, citizens, and other affiliated countries and humanitarian aid groups (Yueh, 2013). Role of the Government Transparency and accountability of the government The success and reform of China’s future growth in the long run and its development will depend greatly on its capability of building government institutions that are transparent accountable and efficient and support of a legal system. (Song, & Woo, 2008). According to the ongoing reforms in China economy from being, a solely dependent on agriculture and heavy industrialization to a more balanced economy with light manufacturing and support of the service sectors. Economists are also very optimistic on the economy of China despite the economic problems it faces. (Veeck, 2011). Due to rise in concerns about the agricultural produce the organic and green food market in China have grown rapidly recently and CAD programs have been developed to help farmers in producing high quality of products for their market. Rise of the currency exchange rate According to OECD 2009 forecast, China need to run a continued budget deficit to raise the exchange rate is in order to balance its economy with the high demand and in turn sustain its growth in the recent years successfully. The IMF and the word bank have long advised China on increasing its social spending so that the Chinese have less need to save to increase its consumption. (Ian J 2010) (IMF, 2009). The imbalances in China’s financial and real sector relates to each other as far as the growth in the exports is concerned. This has led to recent account surplus that have resulted to increase in foreign currency inflows. To reduce exports, China could allow its currency to appreciate. However, the appreciation could lead to unemployment by weakening the exporting firms (Barth, Tatom, & Yago, 2009). Government financial support In an effort to deal with regional disparities experienced in China, the government has established a transitional policy aimed at developing western and the central regions. The policy aims at balancing economic developing across the regions. To achieve this government is required to provide financial support to those regions over the short term. Adjustment of the Yuan to the actual realities of the economy is a recommended in future if China with its expectation to progress in liberalizing its financial transactions. State involvement in market economy Active involvement of state in market economy plays a major role in ensuring sustained economic growth. States need to remain actively involved in fostering economic activities that would ensure maintenance of the economy. Role of Citizens Citizen’s participation in their state’s aid is important in ensuring the growth of their economy. Due to the speedy population increase, it is the role of each citizen to establish measures of regulating its subsequent expansion. This can involve the voluntary participation in family planning program. Dealing with environmental pollution remains as the role of citizens by ensuring cleanliness and disposal of waste in the right places. With the citizens’ effort as well as that of the government, China will become a good and attractive country as it was before. The Role of Other Countries and Humanitarian Aid Groups Many states like the United States and Europe benefit from China’s economy. Therefore, it is the fundamental role of the aforementioned dependant countries to assist China in becoming a stable nation .The states can accomplish the task by supporting international economic development through capacity building and ensuring global food security. References Barth, J. R., Tatom, J. A., & Yago, G. (2009). Chinas emerging financial markets: Challenges and opportunities. New York: Springer. Brown, G. K., & Langer, A. (2012). Elgar handbook of civil war and fragile states. Cheltenham: Edward Elgar. Callan, S., & Thomas, J. (2012). Environmental Economics and Management: Theory, Policy, and Applications. London: Cengage Learning. Currie, D. M. (2011). Country analysis: Understanding economic and political performance. Farnham Surrey: Gower Pub D’ Hooghe, I. (2014). China’s Public Diplomacy. Boston: Martinus Nijhoff Publishers. Guo, R. (2011). An Introduction to the Chinese economy: the driving forces behind modern day China. Hoboken: John Wiley & Sons. Homi, K. & Geoffrey., G. (2010).The New Global Middle Class: A Cross Over From West to East.In Cheng Li. Chinas Emerging Middle Class: Beyond Economic Transformation. Washington D.C: Brookings Institutional Press 2010 Intelligence Agency US (CIA). (2010).The World Facts Book: Ethnic groups. Web January 24, 2015. Retrieved from. https://www.cia.gov/library/publications/the-world-factbook/fields/2075.html International Monetary Fund (IMF). (2009), “Global Shifts in Demand: Making Up for Weaker Consumption in the United States,” Box 1.8 in October 2009 Asia and Pacific Regional Economic Outlook, pp. 36–37. Jha, M. (2009). An Introduction To Anthropological Thought, 2E. New Delhi: Vikas Publishing House Pvt Ltd. Organization for Economic Co-operation and .Development (OCED). (2013). Web. January 24, 2015. Retrieved from. http://www.oecd.org/eco/surveys/Overview%20China%202013-Eng%20modified.pdf Organization for Economic Co-operation and Development (OCED). (2014). Direction de la Gouvernance publique et du développement territorial: Governance in China. Web. January 24, 2015. Retrieved from http://www.oecd.org/fr/gov/governanceinchina.htm Scott, C., & Janet, T., (2012). Environmental Economics and Management: Theory, Policy, and Applications. Mason, OH: South-Western College Publishing Song, L., & Woo, W. T. (2008). Chinas dilemma: Economic growth, the environment and climate change. Canberra: Anu E Press. Veeck, G. (2011). Chinas geography: Globalization and the dynamics of political, economic, and social change. Lanham, Md: Rowman & Littlefield Publishers. Xie, J., & World Bank. (2009). Addressing Chinas water scarcity: Recommendations for selected water resource management issues. Washington, D.C: World Bank Ying, X. (2013). A study of the stability of contemporary rural Chinese society. Berlin: Springer. Yueh, L. (2013). China’s Growth: The Making of an Economic Superpower. New York: Oxford University Press. Read More