China is the world’s second-largest economy and one of the world’s most attractive destinations. China’s economy mainly depends on real estates, mining cement mining, and food processing among others. However, in the recent times the demand for the real estate has reduced, and this has a negative impact on the economy. China’s economy being the second largest economy in the world, about its performance has a direct impact on economies of other countries. A lot of people have relocated to the urban center, and this is transforming Chinas economy as a consumer economy from manufacturing economy. China’s economy has tremendously grown after the introduction of economic reforms that put in place in 1979. The economic growth is associated with the presented reduction in the poverty level of the country. The official reports show that poverty level in China dropped from thirty-three percent in 1978 to less than three percent in the year two thousand and ten.
Although the past achievements of China’s economy are impressive, greater challenges still lie ahead. Despite the growth of the economy, there was also rise in income disparities. Since the beginning of the global crises that started in two thousand and eight one countries that has helped to stabilize the other country’s economy is China. Being the world’s second biggest and this can be evidenced by the balance of payment as China posted a surplus balance of payment in 2007 with 10 percent of the GDP (Eichengreen, 2012). The reason China reported a surplus balance of payment is due to the growth in exports. The other reason for a surplus balance of payment is that China has continuously interpolated currency appreciation while the rest of the world continued to experience currency depreciation. This in effect made Chinas have a more competitive edge even as the other economies continued to perform miserably. Going by these factors, we can conclude that China has been the world’s consumer of last resort role that was majored played by the United States of America and Europe (Fernald, 1999).
China’s large economic status helped stabilize the world and had it failed to perform its role it could have led to a greater economic crises. If Chinas infrastructure investment had not surged, it could be difficult for the commodity prices to recover after the financial crises. May of the economies that are emerging could have suffered a lot since they could have found themselves short of export revenues and this could have resulted into the balance of payment crises. For this reason, Chinas has been acting as a shock absorber for the global economy and has been able to hold the global economy in check. However, despite acting as a shock absorber to the global economy Chinas economy has been left vulnerable (Sinton, 2000). A good example to illustrate this is the decline in the consensus expectations for Chinas economic growth. Since the year 2010 the economic growth expectations have been too high trend that has left the economist working since this has been associated with the strengthening of the currency.
China’s sustained economic growth translates to the greater assertiveness of its role in the world’s economy. China’s agenda is facing the world’s economy on the financial and monetary matters and also on the international trade and investment policies. About thirty years ago, China came up with economic reforms that would later transform it to one of the biggest economies in the worlds. China’s economic development has been so tremendous that there is no one who could have anticipated it could happen a decade ago. China has emerged as a global economy in so many different fronts (Hughes, 1991). The fronts include the technology front, diplomat front, and tourism. The longer term economic outlook the Chinas economy appears strong, underpinned by the growing middle class and the growth of the investments in the technological sector. However, Chinas expert-led economy is not immune to the global slowdown that originated from the United States credit crunch and liquidity crises. China banking regulatory commission predicts that the GDP growth could reduce to eight percent. Despite the fall in the experts China firms will continue to benefit from the growth of china’s consumer market.
One of the china’s priorities in the recent year has been to reduce the economy of its overreliance on experts and facilitate the growth of the domestic market. The chairperson of Alibaba was quoted saying that the future of china lies in the domestic demand and consumption and, for this reason, China is trying to develop its internal demand for its products. Reliance on exports cannot be sustained in the long term hence the change in the strategy. Also, due to its large population, Chinas has a high potential to create internal demand for its product, and this will ensure that Chinas economy is not vulnerable to the global economy (Fidrmuc, 2010). The government is also working on how to transform China from for a country that best known for its the low-cost manufacturer to one that is respected for its innovative capacity. China wants to utilize the human intellectual capacity to transform it to an innovation-driven growth model. Already China has emerged as an investment destination for both foreign and domestic investors.
Due to its huge foreign reserves and the sovereign wealth funds foreigners perceive China as a potential economic savior even in times of increasing global troubles. One change that is facing China is how to manage the international expectations about how it is possible for it to help the rest of the world. Its leaders see China as a young economy that is developing and that it need more time to mature. However, there are those who have seen china’s rapid ascent up to global economic rankings, and some are people are mostly seen as impatient as they view the country as having possessed the characters of both a developed and an industrialized economy. There is no better illustration of china’s growth in clout than the recent calls urging it to be more active in the global governance institutions (Yan, 2003). China has a bigger role to play like other large economies in the world which include the Unites States of American and United Kingdom.
Towards the end of the 9th century, Japan was banned from sending trade representatives to China. The ban was lifted after many centuries later and today the two countries are good trading partners. For two countries to trade both, have to realize that there are good they require for the other countries. This means that each country has some degree of influence over the other. Japan mostly imports from China nowadays includes food stuff, industrial raw materials industrial machinery and fuel. On the other hand, Japanese main exports to China are cars since Japan is one of the biggest manufacturers of cars in the world (Haskel, 2007). In light of the growing concern about the increased trade between China and Japan, there has been increased enhancement between the two countries to facilitate exportation and importation of products. The two countries are seen as major trading partners, and they provide a market for each other. Most of the china’s products are exported and consumed in the Japan market, and this has been of significance since it has helped earn China foreign revenue despite the growing economic challenges in the recent times (Morrison, 2009).
United States of America is another trade partner of China. The two are the biggest economies in the world, and they provide investments destinations since there provide adequate market for products and good environment for businesses. In 2012 the data available shows that good worth 579 billion dollars were traded between the two countries. These include importation and exportation of goods and private services between the two countries. The import from the US totaled to 141 billion dollars, and the exports totaled to 439 billion dollars. There was a deficit in the trade of the two countries where the USA goods and services trade deficit with close to 298 billion in the year 2012 (Chow, 2013). China was US third largest export market in 2013. Top exports of US to China were seed soybean, machinery, electrical equipment, and vehicles. On the other hand, China exports to the USA were furniture and beddings, toys and sports equipment, footwear, electrical machinery making China one of the biggest exporters to the USA. US also imported agricultural products for China which included fruits and vegetable juice and snack foods (Lin, 2003).
Since the reforms were introduced in China and opening up of the China economy, there has tremendous increase in the productivity of Chinese economy. The policies helped transform China from an agriculturalist economy to an economy that is industrialized and helped accommodated millions of people who were originally in agriculture to the urban center where they joined the manufacturing sector. This has promoted growth in Chinese household consumption (Carter, 1996). China seems to be following a similar development path with Korea, Japan, and Singapore as the migration of laborers move from agriculture to urban-based industries and more labor intensive services increase household consumptions. Household consumption and investments have grown tremendously since the reforms were adopted in 1978. On average the rate of investment is growing at a higher rate compared to consumptions.
Chinas economic growth has been slowing down for the past few years, but the recent stock market has complicated the matter coupled with the devaluation of Yuan indicating that the economy is not recovering in the near future. China accounts for 15 percent of the global output, and its entire trade partner have had a negative impact resulting from this economic slowdown. China has been growing at double digits abut it seems things have changed because of various factors. However, economists believe that this phase which China is entering is more stable and sustainable compared to the previous phases (Chen, 2001). The transition has dampened the various economies of Chinas trading partners who mostly relied on China as one their trading partner either as a source of their products or market for their products. This year the government has predicted that the rate of economic growth will be seven percent which is the lowest percentage for the last 25 years.
Although the slowdown may appear to be severe at the initial stage, it was expected because the rapid economic growth of the double digit is that china was experiencing was not sustainable. Growth is dependent of various finite resources like labor, productivity, and capital. The current level of the said factories in China indicates that in the coming years the rate of growth will be slower. The reduced rate of economic growth has come around because its national domestic product has reached the highest level that any country can ever reach. The working population that has been fundamental in growing the economy has reached a peak and the technological gap between China and other developed countries like the United States of America has greatly reduced exhausting all avenues that gave it an edge over other economies in the world (Lardy, 1998). In the last three dictates china’s economy have been driven by infrastructure development that was done by credit and the growth model that mostly facilitated reports of china’s products to the rest of the world.
The slow in the economic development of China is defiantly going to have an impact on its neighbors whom they have had very close economic ties. Chain and its neighbors are interlinked together with its neighbors through value chains and the foreign direct investments. Some of the countries that have been exporting goods to China have already felt the heat as the exports have dramatically reduced (Naughton, 2007). Around 40 percent of Japans output had always been exported to China but due to the slow in the economic growth that has resulted in the reduced uptake of products in China-Japan is also forecasting that it will have a lower economic growth rate in this year. Indonesia, another strong partner of China, is suffering from the slow rate of job creation, falling prices of natural resources and several companies have had difficulties in meeting their operational costs due to reduced sales.
South Asians countries that have no strong economic ties with China are luck because they will not be-be affected. India’s forms are less integrated with those firms in China and also it does not rely much on the external demand for its products (Naughton, 2007). There are those who were used to the china’s role as an economic powerhouse; they have received this news that the china’s economy is slowing down with a lot of shocks since they are already feeling the impact.
In conclusion, China is currently undergoing the translation phase and most of its economic activities are reduced. For the last decade, China has experienced double-digit growth by of late this has been a different case. The reason for the changes in the economic growth rate is because China has almost fully exploited its potential, the population that was helping grow the economy is aging, and the technologic level of China is almost at par with other developed countries. The slow in the economic growth in China has had a negative impact on its trading partner like Japan because the demand for their products has shrunk. This has resulted in industries making losses as their products cannot find a market.
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