China’s Economy

Overt the past several years, China’s economy has grown substantially, to an extent that it now acts as a threat to the principal economic superpowers in the world. It is the second largest economy, and it holds the world largest current account surplus and foreign exchange reserves (Bergsten et al. 9). Several factors are responsible for this growth. Top among them is China’s effort to concentrate on, and develop its manufacturing sector. In the seventies, changes in the government led to economic reforms. These changes were gradual, and made it possible for the government to overcome any crisis. The government encouraged people to form and run enterprises and private businesses. There was an increase in private owned businesses, which seemed to perform better because of their enhanced efficiency. This increased the number of job opportunities for the people. Previously, the government controlled all businesses in the country, and it decided the terms of trade. There was minimal freedom of trade and investment. Since the economic reforms began in the late seventies, China has continued to realize more economic growth over the years, and it does not seem to be taking a break in the near future.

China is recognized as a top producer of manufactured goods. In the eighties, the government focused on improving and developing agriculture. This improved the rural economy for some time, and it was the main drive for china’s economy. The government then moved its focus to manufacturing. This changed the government’s focus from the rural areas to the urban areas (Wong and Liu 12). The government has supported the manufacturing sector by supporting tax-free manufacturing zones. This has encouraged many companies towards the sector, as it has reduced manufacturing costs. The increase in the number of factories has led to increased competition, which has in turn led to the manufacture of high quality products. It has also led to innovation and increased creativity. There are more innovations in China, as people look for ways of creating marketable products. People look for a way of creating goods that are relevant to the market. This ensures that the goods do not lack a market, whether domestically or internationally.

Another factor that has contributed to the economic growth in the region is the continual emphasis on education and training. Furthermore, there is a lot of emphasis on the development of technology. Since the economic reforms began, the government has encouraged education efforts. The increase in education and the adoption and development of information and technology has increased the level of innovation in the country (Wong and Liu 152). China has increased trade with different countries around the world, and this has resulted to increase in foreign direct investment. For a long time, the country chose to segregate itself from the rest of the world. This gave it a chance to become self-sufficient. In recent times, China has opened up to the western countries, and this has increased its trading and investment opportunities. Many countries and individuals are free to invest in China. This increase in investment has led to the development of the economy.

China is a vast land, and all the different regions have their advantages. While some regions concentrate on manufacture, other regions concentrate on agriculture, and others choose to focus on the service industries. This means that China can export most of the goods that it manufactures, while importing remarkably few goods since it has maintained self-sufficiency. This has increased the trade surplus for the country. Having a trade surplus is advantageous since the country can finance it developmental efforts. The development of infrastructure provides more jobs for the people, and this helps in growing the economy. China manipulates its currency by keeping it low, making its exports cheap and more favorable. Since China’s economy largely depends on its exports, having an undervalued currency works to the country’s advantage, as it ensures that the demand for the country’s demands keeps growing.

Many companies establish their factories in China because of the relatively low costs of doing business in the region. China has the highest populace globally, and this provides a ready supply of human capital. Human capital not only refers to the qualifications that someone has received in school, but it also refers to the people’s work ethics and ingenuity (Chow 44). Ingenuity is part of the Chinese culture, and this is evident in the things they produce. This makes it an attractive alternative for organizations that are seeking places to establish their factories. This has provided a ready supply of labor, most of which is cheap. There are many unskilled people in the country, and they are willing to work for low wages. This is because of the high population that makes it impossible for everyone to have a job. There is a lot of urbanization, as people move from the farming regions to the urban regions, where the manufacturing sector is highly concentrated. This has encouraged many companies to take their businesses there, especially western countries, where the costs of running factories are high.

China’s high population also provides a ready market for its goods. The high population has increased its demand of consumable goods. People are in demand for housing and cars as more people move to the urban areas (Wong and Liu 142). The demand for these goods has increased their production, and the production of other related goods. The increased production translates to more jobs for the people, which in turns means more economic growth realized. However, the government knows the negative effects of having a high population. It has instilled several measures to ensure that it stabilizes the population. One such policy is the one child policy, where the government encourages people to have one child only. Because of these measures the rates of abortion in the country continue to rise. Many people want to have male children, and since couples are only allowed to have one child, they abort the pregnancy when they learn that they are expecting a girl. China remains one of the few countries where the male population is relatively higher than the female.

There is more growth potential as the country’s services sector continues to grow. Some of these sectors such as government services and banking and other financial services are driven primarily by the domestic market. Other services, such as the tourism sector are driven by both the domestic and international markets. Support from the government has enabled China’s economy to grow. China is not a democracy, and the government controls most of the resources. It determines how these resources are allocated. The Chinese do not have a strong consumerism culture, compared to many countries. This can have a negative effect on the economy. The government chooses to spend money on private business, by such efforts as developing infrastructure, as an investment option. This pays off well for the country, as it ensures that the country’s economy remains stable.

The rise in the country’s economy has come with several costs. This is especially the case with the environment, which has continued to degrade as the country grows its manufacturing sector. The country uses a lot of energy in its factories. Most of this energy is not renewable, and it has disastrous effects on the environment. Two thirds of the country’s energy comes from coal, and this has increased the level of greenhouse gases (Bergsten et al. 111). It has led to one of the highest income inequalities in the world. There is an enormous gap between the rich and the poor. This is because of the high number of unskilled workforce in the country, who are willing to work for low wages. Rural to urban migration has enhanced these inequalities. More people from the rural areas, where the focus is agriculture, are opting to move to the urban areas, where they think they will get better revenue. Agriculture is not as developed as the manufacturing sector, and the farmers have to contend with low wages.

China’s dependence on exports puts it at an economic risk, especially because of the financial crisis facing many countries. Soon, some countries will find ways of being self-sufficient, and they might not be able to import as much as they used to do. Already, America is encouraging consumers to buy American. This can reduce the market for China’s exports, considering that America makes up its largest market. China uses a fixed rate foreign exchange system, and this has allowed it to devalue its currency. This is not favorable for other nations, as it means having an unfair trading ground. The country is under pressure, especially from America, to appreciate its currency. The environmental degradation poses another threat for the country, as it has negative consequences. There are high emissions, and there is a high pollution rate in the country. This will affect the health of individuals, and it might lessen productivity. Such challenges pose a risk to the rising economic growth in the country. The country has to find ways of dealing with these challenges so that it can continue experiencing economic growth.

Works Cited

Bergsten, C. Fred et al. China‘s Rise: Challenges and Opportunities. Washington, DC: Peterson Institute, 2009. Print

Chow, C. Gregory. Interpreting China’s Economy. Singapore: World Scientific, 2010. Print

Wong, John and Wei Liu. China‘s Surging Economy: Adjusting for More Balanced Development. Singapore: World Scientific, 2007. Print