Overview of The Economy of China

Overview of The Economy of China

The thriving economy of China is dictated by the People’s Republic of China. This has been the dominate force driving the economy since 1978. Currently China economy ranks it #4 in the world so there is no doubt the regulations of the People’s Republic of China are working well for the people of China. However, the biggest criticized of the Chinese economy is that it appears the rich people keep on getting richer and the poor people never escape from poverty.

To help with the growing gap in the different social classes China underwent a political balancing act to help rectify the situation. This process was introduced in the 1990’s. The government worked hard to instill market reform. China really seemed to do well with the changed until the energy crisis that occurred in the late 1990’s.

One issue that many countries must contend with is unemployment. China appears to have the opposite problem. Since 2005 they have had a shortage of workers in the labor force to keep up with the continuous growth.

Skilled workers are needed for the corporations and technology while unskilled laborers are needed for tending to the farms. China is the 3rd worldwide in the amount of production annually in their factories. Agriculture is a huge part of the Chinese economy with more than 300 million people working in that area. The foods grown in China are highly exported. It is estimated that their food exports feed up to 20% of the world’s population.

The growth of China has some of the leaders in the country worried though. They are continually increasing the amount of natural resources they consume on an annual basis. The pollution and other environmental problems that come from the high number of factories are a concern. China’s economy is certainly growing, but it has a long way to go, which means there are lots of opportunities available.

China will become the world’s safest and largest investment economy in times to come given the following factors: huge market potential, rich labor resources, comparative advantage in labor cost, sound corporate governance and stable government and society. All these factors will further attract the inflow of foreign capital into China. In short, China’s economy will grow even faster in the future.

In the next ten years, China’s economy will still increase at a rate 7% – 8%. In 2020 years, should price index remains the same as today, GDP will amount to 38 trillion, per capita GDP will reach 26,000 yuan. 

However, the level of per capita GDP is still very low in China now, GDP per capital growth is still at a slow rate. GDP per capita will have to be further increased in order to raise China’s standard of living to bridge the present income gap between the rich and poor.   Satisfaction of consumers needs can be the main driver in raising China’s living standards. Domestic demand will increase as the economy grows. Therefore, extensive production of goods and services can further push and sustain the economy’s growth.

Moreover, there are abundant human resources in China, and labor cost in China is much lower than the other industrialized countries. China’s education system is also being fast developed; thus, more people will achieve higher level of education than in the past. With comparative advantage in cheap labor cost and increase of human capital brought about by education, future for China’s economy can be only even brighter.  

China’s labor force will get even bigger as the China is urbanizing at a fast pace, changing from a rural and agricultural society to an urban and industrialized society. Through this transition, more manpower can be utilized. Urban infrastructure will be further enhanced and an increase in urban population will bring about higher consumption level, thus driving the economy further.

The presence of such a big market, coupled by the increase in consumption power of the population brought about by urbanization, will create greater prospects for almost every industry. Market will become more efficient and industries will grow even faster than before. Domestic demand for goods and services will grow, creating better opportunities for production and investment.

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