The selected country for this essay is China. whose growth rate has been phenomenal and its transition from an erstwhile Communist country to a major global market economy has yielded excellent results for the country as a whole and the future of its economy.
Communist China had a closed economy but the end of communism in the country brought China into the mainstream of international commerce and Industry. China’s main asset is the large population which is the highest in the world. It is however, expected that Indian population could surpass that of China by year 2035. (India vs. China The Race for the Future. 2008).
China’s economy is growing at a fast rate of 10% (Qi 2007).
This has also given rise to factors like corruption, inequality between the neo-rich and poorer classes, high crime rate and social malaises.
But the redeeming factor about China has been its powerful leaders who have ensured that public savings are well channelized into high infra-structural developmental activities like building roads, housing and other public activities. The savings are also used for maintaining large-scale public utilities and for sustaining export industries.
One of the finest aspects of the Chinese economy is that it has felt the need for modernizing the country by providing the necessary impetus to high-tech and software development. China watchers believe that by the second decade of the 21st century, it would become the world leader in technology surpassing other countries like the USA, Japan, etc.
But there are concerns about how the markets would react to such growth. It is seen that today, China is indulging in excessive production capacities which are far in excess of its demand. The dangers of excess capacity production would lead to overproduction with its concomitant dangers of dumping and deflation, conditions which are not unfamiliar to the Asian people.
Moreover, the banking system in China is not well developed and the money flow is chiefly regulated by bureaucratic leaders. Hence the lending of funds, etc, does not always follow judicious money market dictates but the commands of the political hierarchy and leaders. There is need for better management of the banking systems in order to streamline the economy.
“China leads the way at nearly 10 percent, India at 8 percent, Russia at around 7 percent, and even Brazil at a respectable 3-4 percent.” (Ramady 2007).
However, it is seen that China’s position could have been stronger if it had entered the WTO earlier on and it had entered the phase of opening up its closed economy to the world through the process of global entry and liberalization of its economy. However, although a late entrant in the world global community, China’s growth rate has been phenomenal, and it is on the top of the table. It has a sustained economic development of 10% aided by cheap and hardworking labor and a strong and committed workforce. Chinese destinations had become hotspots for European manufacturing units who had vied each other in setting up plants in this country, taking advantage of lowered costs and enhanced quality products.
Again, it is seen that although there was a need for devaluation of the Chinese currency in order that they do not fact the similar situations faced by Thailand and other countries during the currency meltdown, it was not done which had contributed immensely to the fact that their currency also impacted during that period. However, it should be seen that the inherent resilience of its economy has been proved time and again, during the course of the Chinese economic history and this has been demonstrated even in the current trends of its economy.
There is need for further structural reforms in the Chinese economy and to make further inroads into the competitive global markets. This could be done by drawing up strategies for boosting further exports and also protecting the local markets and creating consumption avenues for the local markets also
China is the second-largest recipient of total Foreign Direct Investments in world. (Directorate for Financial Fiscal and Enterprise Affairs. 2000).
It allows investment through joint ventures, cooperatives, and wholly-owned foreign companies and almost 34 percent of total investment in China are in the last category. But almost 85% of investment is in the manufacturing sector because China has strict laws on investing in the service sector.
Although China’s pace of development is quite encouraging, it needs to consider the impact this would have not only on its own economy, but also on a larger global scale. It needs to sustain its growth efforts and consolidate its domestic economy by providing the necessary encouragement and impetus to its people in the fields of education, health care, development of all-round skills, and also address issues like poverty, unemployment and a distinct inequality between the rich and poor classes which could be a serious matter in the future years.
Bibliography
India vs. China The Race for the Future. (2008). Global Strategy Watch. Web.
Qi, Wu (2007). Cooling the Fires of China’s Fast-growing Economy. Embassy of the People’s Republic of China in the Republic of Mauritius. Web.
Ramady, A. Mohamed (2007). The BRIC Economies will Sustain Economic Growth in 2007. Arab News. Web.
Directorate for Financial Fiscal and Enterprise Affairs. (2000). Main Determinants and Impacts of Foreign Direct Investments in China’s Economy. Organization for Economic Co-operation and Development. Web.