Essay on Economic Development (China)

Introduction

Since 2010, China has been one of the world’s largest economies, actually the second largest in terms of normal GDP, which is expected to equal around $15.55 trillion by 2020, and China has been the largest in terms of purchasing power parity since 2014, according to the World Bank. Nearly four centuries ago, China was a developing country that could not be compared to western countries such as the United Kingdom, France, and the United States of America. This occurred prior to the country’s economic and trade reforms. The country’s policies that kept it poor and stagnant were maintained. Because the economic system was centrally managed, the strategy was extremely inefficient, effectively isolating the country from the world economy. China’s economic growth can be traced back to 1978, and it is currently anticipated that China’s economic growth may be estimated at an average of 9% every year through 2011, making it the most exceptional economic growth in history. According to Trading Economics global macro models and analysts, the country’s income per capita was eight times higher in 2012 than it was in 1978, and GDP per capita is anticipated to reach $8,840 by the end of this year. While many economic experts refer to the emergence of the Chinese economy as a miracle, some researchers argue that the rise of the Chinese economy is mainly due to abundant, inexpensive labor, which has been identified as the central mechanism for its success. This paper will primarily cover the Chinese economy in a broader sense, including its growth, factors that aided its rise, and the Chinese economy’s future.

China’s economic growth has been constant, with studies estimating that it has maintained growth of 6% or higher since the Great Reform in 1978. The country has expanded about four times faster than the US in terms of per capita output. This has enabled China to close the relative disparity in citizen living standards, as evidenced by historical statistics and facts. For example, in 1980, the country’s per capita income was around 2% of that of the United States, but by 2012, the figure had risen to more than 15%. For all of this to happen, China needs to generate significant revenue from its worldwide trade. Between 2010 and 2019, the country is the top exporter and the second-largest importer of products, contributing to global GDP growth ranging from 25 to 39 percent. Since the country’s economic reform in 1978, it has grown in economic diversification, making it a significant player in international trade. According to the first paragraph, the country’s primary competitive advantages are retail, manufacturing, textiles, mining, automobiles, and energy generation. With these industrial expansions, the government has alleviated poverty, which the World Bank estimates to be 12 percent of the Chinese population living on less than $1.25 per day, and 27 percent living on less than $2 per day. This means that hundreds of millions fewer people live in poverty in China. Yet, the country’s poverty eradication is greater and faster than that of any other country in the world. However, the expansion of China’s economy cannot be entirely attributed to the country, but we can say that China has learned a lot from other countries throughout the world, particularly those in the region that have adopted industrial liberalization. According to Todaro and Smith (2014), these countries include Hong Kong, Taiwan, South Korea, and Japan. During a period of significant growth in global trade, these countries primarily relied on export-oriented industrialization policies. But, aside from regional demonstrations, other elements have contributed to this far-east populous country’s tremendous and remarkable expansion. With the world’s largest population, most investors saw a large market in China, prompting them to invest in the country. This was also aided by the cheap labor provided by rural Chinese citizens.

Furthermore, when investors rushed to the Chinese market, the government played an essential role in ensuring that China grew economically and entered the global market. The Chinese government enacted a policy requiring potential investors to cooperate with public and private Chinese businesses, make significant technological transfers, use local content, and make several other concessions to operate in the Chinese. The Chinese government enacted a policy requiring potential investors to cooperate with public and private Chinese businesses, make significant technological transfers, use local content, and make several other concessions to operate in the Chinese.

China has learned from its mistakes, and one of the historical mistakes China made after the Communist revolution in 1949 was the centralization of production and distribution of agricultural inputs, which resulted in the deaths of over 20 million Chinese during the mid-twentieth-century great famine. This also shone a light on the effects of planned economies and the centralization of the country’s produce because the government could have poor planning for the storage and distribution of the produce. However, that was not the only reason that could have led to the government’s historical failure; Todaro and Smith (2014) provide a brief overview of the relationship between hunger and democracy. Because the country did not accept free speech during Mao’s reign, the government might commit mistakes that were not corrected. All of these blunders served as a reminder to the Chinese that it was critical to invest in education and, in particular, to improve the higher educational skills of manufacturing workers.

Despite China’s tremendous economic progress, the country still faces issues that, if not addressed, may cause its expectations to fail. Japan is one example of a country that had the same impetus as China but failed to fulfill its ambitions. Japan was the fastest expanding economy in the postwar era, popularly known as the Japanese economic miracle. This is the period of economic growth during which Japan surpassed the United States as the world’s second-largest economy. Even though worker productivity remained high, the economy began to suffer in the early 1990s due to a low labor force. According to Cui et al. (2018), China’s booming economy has been aided by an endless supply of workers, even though labor wages and skills remain low. The Chinese workforce is also characterized by low pay; nonetheless, it has been suggested that if China’s economy begins to crumble, it will lack a labor supply. The working-age population in China has decreased, as illustrated by Cui et al. (2018), who show that the working-age population dropped from 937 million to 911 million between 2012 and 2015, and to 907 million in 2016. However, this is not news, since the same situation occurred in 2004, when China had a labor shortage in both manufacturing and industrial centers of the Pearl River Delta, Yangtze, and River Delta, which later spread to many provinces throughout the country (Banister et al., 2005).

Conclusion

Since the economic reform, China has worked harder than any other country to reduce the rate of poverty, with a bigger percentage of its citizens living below the poverty line. However, as in other developing countries, the remaining impoverished people, who number in the millions, face extreme poverty, which leads to additional issues such as loss of security, corruption such as land grabbing by strong government officials, and average salary disparities. China’s inequality has now reached the same level as that of the United States.

Reference

Banister, J., & Zhang, X. (2005). China, economic development and mortality decline. World development, 33(1), 21-41.

Cui, Y., Meng, J. and Lu, C., 2018. Recent developments in China’s labor market: Labor shortage, rising wages and their implications. Review of Development Economics, 22(3), pp.1217-1238.