Indicators of Chinese Current Economic Strength - Coursework Example

Indicators of Chinese current economic strength Growth in GDP- the reason for choosing GDP is because it has grown by a great margin when comparing 1978 and 2010. “In the year 1978, it was US$230 only and in the year 2010 it had grown to US$4000” (Tong & Wong, 2012) this is a very wide margin. Increasing exports-, this is a major indicator of China’s improved economy. The country itself has a large internal market and given that its produce is becoming more export oriented, it is a good indicator of economic growth. Growth in inward FDI indicates economic development in China. A country with a poor economy will no attract foreign investment. The share of China of total accumulated FDI stock in Asia almost tripled within 20 years i.e. from 6% in 1990 – 15% in 2010. Currency strengthening against the US dollar- the Chinese RMB has continuously appreciated against US dollar from8.27 in 2005 to 6.41 in 2011. The country still continues to run trade surplus as well as accumulating foreign reserves. Its pressure to appreciate the currency still remains strong (Tong & Wong, 2012). 2. China’s traditional mixed economy Large landowners controlled much land. Little surplus produced enriched higher officials, land owners and paid taxes. During the sing dynasty, franchises were issued by the state to brokers. The brokers were empowered to observe agricultural products, silk and cotton wholesale transactions to regulate prices. The reason as to why there was no industrial revolution in China is that the brokers as well as tax collectors created a market only for luxurious consumer goods instead of investing in new technologies. “They could use their surplus capital to extend credit at high interest rates or to run pawnshops, but they failed to invest in new technologies that would spur industrial revolution” (133). When Europe built modern infrastructure within Chinese treaty ports, it did not spark industrial revolution since industries were few (Tong & Wong, 2012). The baojia system was introduced to enhance development as well as control crime. 3. from revolution to reform The FYP was an important advance for china made towards Chinese economic development because the ecomy of the country grew by 8.5 at the time of the plan period. Cultural Revolution was a major drawback since it did cost China economic problems. “Though it resulted to long term economic damage to government administration and factory management as well as the country’s education system” (Tong & Wong, 2012). Great leap forward was a major drawback since it collapsed in the year 1959 creating catastrophic consequences particularly in agricultural produce as well as food shortages. The Cultural Revolution was a significant advancement to the country it made understand that stable economy is crucial for economic development. 4. China adopted an open-ended approach towards its economic reform process because it did not have any books to help them learn the way of un-planning, hence they needed something with no blueprint or detailed plans. China chose to begin with Agriculture reform step taken by china to start economic reform, which they did through instituting household responsibility system. The reason they chose agriculture was that despite the trial and error reform strategy having work well during the first phases, critical microeconomic measures of reforms failed to lend themselves effectively to the gradualist method through experimentation. Some of these reform measures included taxation, banking, foreign exchange, as well as finance. China chose to adopt the model, “economic growth first, political changes later because of the fact that it realized that it could interface political changes better with economic reform. “in putting economic liberalization a head of political liberation and phasing the reform changes gradually, china was better able to interface political changes with economic reform” (Tong & Wong, 2012) 5. One of the strategies employed by china to strengthen its economy was the credit squeeze as well as imposing control over control over specific essential commodities as a way of reducing inflation. This strategy saw reduction of inflation by 1.1%by November 1997, with a slight reduction in the growth of the economy. “In common economic parlance, the Chinese economy achieved a soft landing.” (Tong & Wong, 2012). During the Asian financial crisis that affected China in the 1990s, the growth of China fell to 7.6% in 1999 from its peak of 14.2% in the year 1992. The government encountered sluggish domestic consumption demand through priming the economy artificially with some energetic program for domestic fixed asset investment. The growth in economy gradually recovered to reach 9.1% in the year 2002. From that time, supported by post WTO surge within external demand and continued fixed asset investment growth, growth of the economy stayed above 10% per year for five good years. Fixed investment has as well become a significant source of growth since 2000s, and this is evidenced by 2008, the time Chinese government instituted some strong stimulus package for averting the sharp slowdown in global economic crisis. The first strategy of credit squeeze as well as imposing control over control over specific essential commodities, as a way of reducing inflation is the most important when one looks at the difference in economic growth it created. 6. The reason for the huge income disparity in China is unemployment. This affects people greatly as many people are competing for jobs causing low wages hence not easy to expand domestic consumption. People lack enough money to be able to buy services as well as goods especially housing and automobile. Bankruptcy has led to many people becoming unemployed, agricultural products face great completion from the international community, these all contribute to economic disparity, and the effect on people is poverty. Water shortage and pollution are major challenge for china with the country become a major emitter internationally of CO2 something that makes the country face more pressure to reduce greenhouse emissions. Rivers in China are over used hence dry up, the country relies on underground water, and as a result, the water table has been dropping significantly. “Its water table is dropping at a rate of a miter per year” (Tong & Wong, 2012). This has led to almost 1500 small and large towns as well as 400 cities face water shortages. China is increasing domestic consumption to be a source of growth for the country, this is aimed at small towns, and rural areas within which millions of people need house hold commodities like TVs, cell phones, refrigerators among other things. Reference Tong, Y. S. & Wong, J., 2012. Chinas Economy. Understanding Contemporary, pp. 123-170. Read More