China must stop its economy being too dependent on exports and investment.
http://www.bbc.co.uk/news/business-17425356
Monday, March 19, 2012
Monday, March 5, 2012
After an annual parliamentary meeting on march 5th 2012, China have set an aim, to grow its economy by 7.5% for the future year. Unsurprisingly, this is a decrease of 1.7% from 2011 which sat at 9.2% of gross domestic product. China has also set an inflation target of around 4% similar to that of the 2011 target.
The change mirrors the government's focus towards economic restructuring and quality-of-life issues like the environment and income inequality, rather than singularly focusing on growth.
Monday, December 5, 2011
Impact of globalisation on China
| Globalisation of Chinese Economy | |
| Benefits | Costs |
| Because of globalisation, China’s economy now interacts with other economies of the world, and results in high levels of economic growth. | Globalisation has been accepted by china through de-regulation (e.g. Creating an open market economy). This means that laws have been changed to allow interaction with other countries and results in a loss of power. |
| There has been an increase in use and ease of communication, between economies. This leads to increased trade and financial flows. | Because there is an increase in market interdependence, China’s economy has become quite vulnerable and exposed to external factors that threaten it. (e.g. The Global Financial Crisis) |
| Through globalisation, people are able to travel around the world quite easily. An Increase in international migration has boosted tourism and has brought money into the economy. | There are social and economic costs to China due to globalisation. The Engage with the rest of the world, a countries economy must go through structural change. This can cause economic and social dissatisfaction during the restructuring of the country. |
| In China, there has been an increase in Foreign Direct Investment (FDI) this is accelerates growth and increases financial flows within the economy. | |
| Globalisation has boosted China’s economy and therefore reduced poverty. There are increased living standards and an increased life expectancy. | |
| There is now economic peace and stability after globalisation. There is a higher confidence in China’s economy through the interaction and interdependence of all the economies of the world. | |
Evaluation of Chinese Economic Reform Staegies
China’s economy has seen many changes and has experienced many reform strategies, to expand and improve in the best and most effective way possible. Different leaders of China have implemented these different strategies after many years of economic turmoil and despair, until the economy started showing signs of improvement and growth. These reform strategies include; an Open Policy, De-collectivising, and Special Economic Zones.
Deng Xiaoping, the leader of the communist party lead China towards the answer for all their economic problems, the implementation of a partial market economy. Foreign Policy in China was all about ideological and strategic issues, until the implementation of the economic reforms. Through the introduction of these reforms China has been able to open up its economy to the rest of the world, encouraging investment and trade and resulting in massive growth for China and its economy.
Globalisation is the worldwide movement toward economic, financial, trade, and communications integration (the process of the worlds markets coming together.) Through reform strategies, China’s economy has begun interacting with other countries’ economies. China’s Foreign Direct Investment (FDI) and Opening stock exchanges are examples of reform strategies aimed at the financial and trade factors of globalisation. Increased FDI and opening the Shanghai Stock Exchanges were feasible through China’s ‘Open Policy 1979’. Through this ‘Open Policy’ strategy, which aimed at the deregulation of trade, China found new economic relationships and trade paths. This strategy was effective in the way in which China used external economies to grow its own. It was also effective in the way it expanded its financial resources and mediums to create high levels growth and investment.
After the implementation of the Open Policy there was an increase in Gross domestic Product (GDP) and FDI. Many other countries invested into China Economy and this generated a lot of income within the Chinese economy, Raining GDP. This increase in GDP also affected China’s Human Development Index (HDI), another Economic indicator. Chinas Standard of living increased and so did its life expectancy. These improvements in China’s economy prove this strategy to be effective.
Even before the ‘Open Policy’ of 1979, China’s economic reforms began in 1978, with the agriculture sector. The threat of another famine, (seen in the period of ‘The Great Leap Forward’) caused the Chinese government to drastically change the policies surrounding that particular economic sector. Through this new reform strategy, Deng Xiaoping de-collectivised the agricultural sector. Collectivism is the practice or principle of giving a group priority over each individual in it. Meaning Deng Xiaoping changed the values of the country to not look after the group as a whole but start to focus on the individual in certain circumstances. This increased agricultural production and stimulated the rural industry of china. After the success of the agricultural reform, other industries were also undergoing drastic economic changes. This increased productivity, encouraged private businesses and again, saw huge increases in FDI (sometimes increases of hundreds of billions of $US). As FDI began, the Chinese economy was becoming more and more exposed to the rest of the world economic patterns (as seen in globalisation). Policies continued and incentives were implemented, encouraging high levels of foreign investment and the globalisation of China’s growing economy.
By de-collectivising the economy, responsibility triggered motivation and incentive which drove the economy to growth and success. GDP and FDI grew also effecting HDI positively, similar to the strategy of the ‘Open Policy.’ However by de-collectivising the economy, China saw huge increases in inequality, and the GINI index moved closer to 1.
High incentives such as special taxation, interdependence and trade priorities drove China to the implementation of Special Economic Zones in 1980. This was a way in which China could have guaranteed trading partners that they could still have some control over. These Special Economic Zones (SEZ’s) allowed trading between different nations, with special interest rates, tariffs and insure a priority over other nations. SEZ’s was one of the first steps China took in trading with other countries.
Through special economic zones, preferential regulations were put in place to attract FDI. This influx of funds gave china’s economy the resources it needed to grow to what is now the second largest economy in the world. GDP and HDI also grew at substantial rates. Consumer Price Index (CPI) increased due to the increased demand for products. Through these indications this strategy was effective for Chinas economy. However the Chinese government did loose quite substantial amounts of power to this strategy. Changed laws, meant that interaction with other economies would increase interdependence. This meant there was only so much China could do to change and manipulate its economy.
China has implemented many Strategies over many years to try to grow and improve its economy. Globalisation consumed China’s economy, and shaped and moulded it into an extremely strong and impressive economy. Many of these strategies were very effective towards the growth of GDP, FDI, and HDI. Though these reforms brought success and growth there were parts of China’s economy that didn’t improve. After the reform strategies there was an increase in inequality and a loss of government control. Other aspects include the effects of industrialisation on public health and the environment. These issues have been neglected through the economic reforms of China.
Sunday, December 4, 2011
Tuesday, November 29, 2011
China's Foreign Direct Investment
Foreign Direct Investment (Inflows and Outflows)
Definition: FDI stands for Foreign Direct Investment, a component of a country's national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. It does not include foreign investment into the stock markets.
During 1979 to 1991, FDI inflows were low, but they grew steadily. From 1992 to 2001 FDI inflows initially increased very rapidly, however, they slowed after 1997 and declined in 1999 and 2000, followed by a moderate recovery in 2001. The total value of China’s foreign trade increased from US$509.65 billion in 2001 to US$1,760.4 billion in 2006. China’s current FDI sits at $1732.339 (Billion $US.)
Source: Taken from
China's Terms of Trade
Terms of Trade
Definition: Terms of trade is an index of the price of a country's exports in terms of its imports. The terms of trade are said to improve if that index rises.
China is one of the world’s largest exporters, especially in the industry of manufactured goods. China exports $1.581 (Trillion $US) worth of traded products and imports $1.327 (Trillion $US) worth. The difference is $254 (Billion $US) and means that the trade budget is in surplus.
Source: Taken from
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