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Executive summary
Economic growth is a positive concept that every country would be proud of. It entails an increase in the level of production in goods and services from one season to the other. Economic growth is attributed to various factors like technological development and adaptation of appropriate strategies in carrying out different activities in different sectors of the economy. The economy of China has experienced incredible growth following the economic reform that started in 1979.
The rapid economic growth has been linked with a lot of positive progress especially when it comes to alleviation of poverty among the citizens. This is evident from the statistics showing the reduction of the poverty levels between 1978 and 2004. The decrease in poverty level was from 30 per cent to less than three per cent, according to China’s official poverty line (National Bureau of Statistics (NBS) 2007).
Some of the sectors that are touched by the rapid economic growth include agriculture, industry, and services sector as well as government finances among others. Although the accomplishment associated with the rapid economic growth in China is attractive, there exist some challenges and negative effects that need to be looked at.
They include income disparity as well as other implications of the rapid growth upon the rest of the world. This study will clarify on the various issues associated with the rapid economic growth in China especially the key factors that contributed to the rapid economic growth and the impacts of China’s rapid economic growth on other parts of the world, such as Australia and other countries.
Introduction
Economic growth can be defined as a positive change in the level of production in a given country over a certain period of time or rather an increase in the capacity of an economy in regard to producing goods and services as compared to past years. Economic growth is a concept that could be gauged in nominal terms as well as real time terms. Nominal terms take account of inflation whereas real terms are adjusted for inflation.
Economic growth is attributed to many factors, for instance, technological advancement. China is a country that is well known for its rapid economic growth towards the end of 1970s. There are various factors that are associated with the rapid economic growth in China in the last three decades all having some implications to the global economy.
Some of them include technological innovation and positive external forces that lead to progress (Barro and Sala-i-Martin 2004). This piece of work gives a critical discussion of the various factors that are associated with the rapid economic growth in China in the last three decades and their implications in the country as well as to the global economy
The Key Factors That Contributed To the Rapid Economic Growth in China since the Implementation of Its Economic Reforms in Late 1970s
The economic reforms in China in the late 1970s are known for economic developments that were experienced in the country and other parts of the world. Some of the factors that can be pin pointed in regards to the rapid economic growth in China will be discussed.
Economic reform is one factor that has been credited by many to be the leading contributing factor towards China’s rapid economic growth. The creation of private enterprises in different sectors of the economy as well as the encouragement of a high saving rate has played a great role in the rapid economic growth in the country (Woo 1994).
Another factor that is linked to the rapid economic growth in China is the availability of a large pool of under-employed workforce in the country with the will to work for relatively low pay while at the same time working hard to uplift the production of goods and services.
Availability of favourable economic policies is also a contributing factor towards the success experienced in the country (Qian 2003). This can, for example, be seen through the involvement of the government in providing incentives as well as the growth that was seen in free trade.
The removal of price controls and freeing of internal trade and foreign investment also contributed a significant percentage to the rapid economic growth (Aghion and Durlauf 2005).
Morrison (2006) asserts that China’s economic growth can be linked to large-scale investments that are financed by domestic savings and foreign investments as well as a rapid growth in productivity. There has been enhanced efficiency and capacity to obtain resources that are required to facilitate growth in industrial and agricultural output.
A structural change from an agricultural country to a highly productive industrial nation and exports has also played a significant role in the growth. Adoption of advanced technology in various activities is another key positive factor. Price equalization is also a factor that can not be left out.
Reduction of unemployment in the country increases productivity. Increase in wages in turn allows for growth in industrial output. Growth in the export sector is also crucial and helped China’s integration into international markets, an aspect that enhances economic growth (Golley and Song, not dated).
Great level of decentralization and the quality and quantity of human capital can also not be under-emphasized. The economic growth has been favoured by both internal as well as external factors and situations. Internally, there were positive legacies that were inherited from the planning system, for instance, a good industrial base, favourable infrastructure, a relatively well established education system.
In regard to external conditions, the reforms in China corresponded with the growth in globalization where there were more open global trading opportunities due to reductions of tariffs and other forms of trade protection (Chen and FENG 2000). A combination of all the above factors played a significant role in enhancing the process of globalization around the world which in one way or the other has increased the demand for products and services from China greatly (Holz 2008).
The Impacts of China’s Rapid Economic Growth on Other Parts of the World, Such As Australia
The rapid economic growth in China was not without some impacts. Effects were realized both in the country as well other parts of the world. In other words, it is a global phenomenon. The country is taken to be an economic growth instrument in both regional and global levels. Some of the countries that can be mentioned to have been affected by China’s rapid economic growth include Hong Kong, Taiwan, Japan, India and Australia among others.
In order to have a better understanding of the international implications of China’s rapid economic growth, we ought to look at its domestic implications. Some of the notable impacts include; enhancement of not only its food supply and security but also that of the world due to its commitments to agricultural and rural development (Lewis 1955).
There are also chances of growing as a renowned importer as well as exporter in the in the world in the near future through the consistent search of a conducive external trade and political environment which will in turn promote a sustainable economic growth. Restructuring of the agricultural sector and globalization are also aspects that developed as a result of the economic reform in China and thus the rapid economic growth (Brandt and Rawski 2008).
On a global arena, China’s speedy economic growth grants openings as well as challenges for the rest of the globe. All in all, the openings far much more outweigh the challenges. For instance, the increase of China’s imports both the labour-intensive products as well as the land-intensive agricultural commodities (Lei and Yao 2009).
This has a positive impact on other countries as it provides opportunities to expand production for most developing countries located in Central as well as South America. Some developed countries such as Australia, Canada and the United States of America are also in a better position of increasing their levels of production (Wang and Yao 2003).
Another positive impact of China’s rapid economic growth is that it will not be related to an increase in the imports of wheat and rice but only that of maize. This, therefore, follows that the rapid growth in China will not threaten the overall world staple food supply which could lead to a rise in the prices of staple foods in the world market, an aspect that is not good (Valdes1999). Export is another area of concern.
With time, it is likely that there will be an increase in export of many horticultural products as well as the processed foods from his nation. This development is clearly a negative move in the eyes of other nations that sell the same commodities to the global market. This is because China posses a comparative advantage and other countries may be required to put more efforts, which could cost them a lot in terms of time as well as money (Wu 2004).
Being more competitive in the textile and other sectors, China will pose a threat to most developing countries which export the products for instance India and other Asian countries (Tisdell and Chai 1997). Apart from the agricultural sector, impacts of the China’s rapid economic growth also affected the industry sector, trade and foreign investment sector; services sector like finance and banking as well as government finances among others (Garnaut 2007).
Although the economic reforms have been associated with a lot of positive aspects in regard to economic growth, there exist some criticisms. For instance, the economic stability of the country is threatened by the monopolies retained by the government in different sectors of the economy such as banking. There is, therefore, a need for reduction of State intervention for there to be a sustained growth in the country.
Another issue is the fact that despite reducing poverty in the country, the reforms have in a way increased the level of inequality through privatization. This is not a good aspect since it widens the gap between the poor and the rich an issue that is not desirable and hence should be avoided (Huang and Rozelle 2009)
Conclusion
It is evident that China experienced a rapid economic growth towards the end of the 20th century. This is attributed to various factors such as liberalization, price regulation as well as decentralization and ownership transformation, each contributing a certain percentage of the economic growth.
The rapid economic growth in China was not without some impacts. Effects were realized both in the country as well other parts of the world for instance Australia. For this reason, it is a global phenomenon worth discussion. This is through affecting various sectors of the economy for instance government finances, industry, agriculture and services sector among others. All these affect China and some other countries in one way or the other through international and foreign trade.
The rapid economic growth in China has both positive and negative impacts in the country as well as internationally through influencing the factor of production and competition. It is also clear that the economic stability of the country is threatened by the monopolies retained by the government in different sectors of the economy such as banking.
There is, therefore, a need for reduction of state intervention for there to be a sustained growth in the country. All in all, the progress is so far admirable although steps have to be taken to avoid negative effects but rather add on to the positive effects, both to China and other countries with which it is associated.
List of Tables
Table1. The annual growth rates (%) of China’s economy, 1970–2004.
Source: Huang J and Rozelle, S, 2009, China’s rapid economic growth and its implications for agriculture and food security in China and the rest of the world.
Table2. Changes in structure (%) of China’s economy, 1970–2004.
Source: National Statistical Bureau, China statistical yearbook, various issues; and China rural statistical yearbook, various issues.
Reference List
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