Economical Growth of China

Chinese culture is one that is built on tradition, and humane values. The culture in China is widespread throughout the whole country, and the entire population follows a certain set of rules and values that were set by the deep-rooted traditions that have influenced the most of Eastern Asian countries such as; Japan, Mongolia, Taiwan, North and South Korea. The culture is considered to be emotional and flexible, which is embedded with the culture’s influence from Taoism.

Throughout the history of China, Taoism was considered several times to be a state-religion however, during the first decades of the People’s Republic of China it became suppressed and now is practiced along side five other religions. Guan’s (2012) study, refers to emotional as: The difference in the understanding of cultural understanding of the line “into the world” and the strength of its direct effect on the human mind and emotions, thus making hidden emotions, thereby affecting people’s behavior and value. (p.88) In other words the unified understanding of “into the world” has a strong effect on the culture, the behavior and the values of the population.

The flexibility of the society can be understood as a value of which they abide by; “What you do not want done to yourself, do not do to others. ” Which in action refers to the people having different reactions and actions toward a certain situation or setting. The Chinese culture also follows the rules patriotism, and it is believed that knowledge should be used for national affairs and to the benefit the whole society. Guan (2012), states that in China:

The purpose of learning is not to knowledge, but to use and manage the society. Its ultimate goal is a state of society, which is stable, serene, and ordered. The culture also believes that ethics, loyalty, probity, and shame are extremely important. Loyalty is very important in relationships; probity is believed to not hide mistakes and blunders to avoid corruption, and finally shame. Shame enables people to see more good than bad, in other words if someone follows an evil path he/she must feel shame in order to change paths. It is believed that having these three values makes a

successful society and country. Guan (2012) confirms: The loyalty guarantees the social atmosphere of mutual trust between the people. The probity constitutes the foundation for rulers ruling order…. shame is not to together with immodest people. At the same time, people should have the sense of shame. If ethics, loyalty and shame are not taken seriously by people; the county is likely to perish. Economy Basics China is built on a socialist economy, which has been an example for many countries because of its rapid and firm growth that has given the country strength to improve the quality of life immensely.

In 1953, the country had established more than a 100 industrial corporations which were weak, and they also developed stronger ventures that were already available such as aircraft manufacturing, automobile, tractor, power generating equipment, metallurgical equipment, mining machinery, heavy and precision machinery, consequently laying a pilot foundation for a socialist industry. Within the same year, the country had founded and implemented its First Five-Year Pan for Economic and Social Development which was successful it the growth of its economy.

In the decade from 1956 to 1966 prior to the eruption of the Cultural Revolution, socialist construction was carried out in an all-round way. New industries like electronics and petrochemical engineering came into being and the industrial layout was improved. China achieved complete self-sufficiency in oil supply from 1965 onwards. The capital construction and technical upgrading of agriculture were launched on a large scale and results were achieved gradually. Remarkable success was also achieved in science and technology. (Consulate-General of the People’s Republic of China in Chicago 2003, par.

3) During China’s Eighth Five-Year Plan (1991-1995), inflation caused a small problem and the economy started to fluctuate, however soon after putting it into control the economy went back into rapid growth. China’s economy developed at an all-time high speed. During the period, the central government put forward the basic policy of “seizing the opportunity to deepen the reform and open wider to the outside world, promoting development and maintaining stability. ” (Consulate-General of the People’s Republic of China in Chicago 2003, par.

7) Also during that time, China started to expand their foreign trade and they soon after became one of the largest in the world in regard to exporting goods. Which ultimately caused a much-needed balance for trading, and the country’s foreign exchange grew even faster. The growth over the next two decades caused China’s GDP to increase, which improved the populations quality of life. “The annual growth rate of GDP averaged around 10 percent and the target of quadrupling the annual industrial and agricultural output value of the year 1980 by the end of the century was fulfilled ahead of schedule.

” (Consulate-General of the People’s Republic of China in Chicago 2003, par. 10) In 1996 China developed and implemented its Ninth Five-Year Plan for National Economic and Social Development, as well as its long-range objective up to 2010. The plan was built to attain new achievements and increase economic growth even more and more. Engineering labors were engorged for all the people in the country therefore, leading the country to modernization. “This was a sign that China’s economy had entered a period of sound operation and thus laid a solid foundation for the fulfillment of the Ninth Five-Year Plan.

In 1997, adhering to the principle of “seeking progress in the midst of stability” and the macro control policies, China continued to develop at a moderately high speed. ” (Consulate-General of the People’s Republic of China in Chicago 2003, par. 10) In 1997, China and the world faced a slight economic crisis caused by the Asian financial crisis along side the massive floods that occurred within that year. China accepted the crisis and the population united together to fix the crisis and the result; greater achievements were obtained and the national economy went back to steady growth.

The GDP slightly grew but much less than what the country needed, in regard to its plan. According to the ‘Consulate-General of the People’s Republic of China in Chicago’; the development of fixed-asset investment in state-owned enterprises, increased by 19. 5 percent for the year as a whole. However, total investment increased by 14. 1 percent in regard to fixed assets of all segments of the economy, and this escalation played a noticeable role in fueling economic growth. (2003, par. 12) Chinese Politics on Trade

What gives China an advantage in regard to trade and exports is that the country produces goods that are within reasonable quality with low prices. During the time of which China entered the global economy once more, it was competing with countries with money-spinning exporting markets such as the USA, Japan and the EU. Hong Kong, which is a Special Administrative Regions of the People’s Republic China, was a great help for China’s global economy. The low prices, which China offered to exporters, were an easy way to attract investments as well.

Breslin (1999, 1182) stated, “The percentage of Chinese exports to Hong Kong, which subsequently re-exported to other destinations, increased from around 30% in 1979 to over 85% in 1994. ” The country abides by importing plans, which are mandatory however they do not import key commodities such as steel, textile and machinery. China has built a system of which they export all basic needs to countries abroad, and only import policy plans and raw materials. Chinese import tariffs remain among the highest in the world. “Average tariff rates have been falling in response to international pressure.

From a high point of 43% in 1992, they have been progressively lowered to around 17%, with a promise for further reductions to follow. ” (The Politics of Chinese Trade and the Asian Financial Crisis: questioning the wisdom of export-led growth 1999, p. 1188) China’s trading regime has been subject to much criticism by other countries. Breslin (1999, 1189) summarizes the issues into two sections. The first being the country’s …’wide-scale infringement or intellectual and property right in China where the production of counterfeit and fake products is commonplace.

’ Which in other words means that the country takes ideas from foreign countries and creates a version of their own, of which they resell. The second …’is the lack of transparency in China’s policy-making process. ’ Which means the degree of access to information the citizens have over governmental operations and policy developments are unavailable. Another problem of which the Chinese industry has faced was reliability. Foreign investors in China have complained about the poor quality and the unreliability of Chinese supplies.

Leading investors to import key products from other countries, and focusing on the labor’s intensive component assembly. “The majority of investors sources their components from other production sites in Asia and sells their finished goods in the developed markets of the West. This has contributed to the situation where China now runs a massive trade surplus with the primary destination for processed exports, the USA, and trade deficits with those Asian states that are the source of component imports (notably South Korea and Taiwan).

” (The Politics of Chinese Trade and the Asian Financial Crisis: questioning the wisdom of export-led growth 1999, p. 1190) China’s strong and skilled labor force has given the country opportunities when it comes to foreign exchange, which is due to country’s expanding educational system. Popescu (2013, 91) stated that “China has made substantial investments in producing high-skill labor: expanding access to all levels of education will foster China’s growth. ” Leading China to become a “world factory with it comparative advantage of low-cost labor” as stated by Popescu (2013, 92).

He also states that the foreign direct investment (FDI) “has played and important role in bridging local labor with advanced technology, including international market networks. ” (Popescu (2013, 91-92) Financial Crisis When the Asian financial crisis hit in 1997, China was affected mainly through a decrease in foreign direct investments as well as a decline in the growth of the country’s exports. China’s advantage was it’s currency that until today is not spontaneously convertible, as well as capital inflows that were basically overpoweringly of long-term investments.

“With a managed exchange rate underpinned by strict limitations and controls on currency convertibility, the renminbi was safe from attack by international speculators. ” (The Politics of Chinese Trade and the Asian Financial Crisis: questioning the wisdom of export-led growth 1999, p. 1193) The crisis hit neighboring countries like Japan and Taiwan, which affected them much more than China. That same year, China chose to try and restructure their own domestic economy and place an even greater reliance on export-led growth, which led their hit by the crisis less than neighboring countries.

Economic Reforms As mentioned before, China restructured their domestic economy during the crisis in 1997. This led the country’s economy to advance and gain more power than other countries in the region. They reformed the state sector and modernized the banking system, which was an obstacle, that led the state-owned establishments to report losses and became inefficient. Breslin (1999, 1193) states that much like its next-door countries, “It too has massive bank debts caused largely by the provision of non-performing loans to the state sector.

It has invested millions of dollars in construction projects that people don’t want. ” All this affected China’s exporting to other countries, especially exports to Japan and there were talks of a shrinking market in regard to Chinese exports. Also, when South Asian currencies began to plummet China’s export prices decreased and lost its competitive advantage within the region. Later in 1997, exports began growing and so did foreign investments even though the rate was considerably small but the China kept pushing to recover.

“When exports grew by 11. 6% in the first four months of 1997, the government organized a televised national conference to announce the news. Rather than congratulate themselves on achieving such high growth, the party leadership instead used the conference to warn of an uncertain future. ” (Breslin, 1999, 1194) After the domestic restructuring China became independent on exporting goods and foreign domestic investors, nevertheless exports were the development initiator.

“This growth rate was by and large attained by an ever increasing reliance on exports as an engine for growth. Rather than being an important component in growth, exports all but became the sole generator of growth, and the safety net for domestic restructuring. ” (Breslin, 1999, 1196) After China recovered from the 1997 Asian financial crisis, the country started to grow faster than it did before. Keeping the unemployment level below 4% is until now a very important factor to keep the economy growing.

“During the reform years, China has made up for its under-development of markets and narrowed the technological gap with advanced economies. ” Popescu (2013, 91) Between 1997 and 1998 China began large-scale privatization, all state establishments with the exception of some large monopolies, were sold to private investors, also from 2001-2005 state-owned establishments decreased by 48%. China’s economy continued it’s vast growth and still regenerate’s growth until today, in 2005 China became the largest Asian economy even exceeding Japan.

“China has the potential of maintaining an 8% annual growth rate for another two decades, contributing to the multi-polar growth world in many other ways in addition to GDP growth and trade. Chinese consumption and production growth will continue to support adequate prices for commodity prices. ” Popescu (2013, 90) Conclusion China’s notable strides in human capital investment, and the relatively stable central-local share of government budget, the country proves to be one of the best economies in the world.

The safety towards state-owned operations, and domestic producers have sheltered employment and provided a safety net. Moreover, it has also contributed to the creation of a dualistic economy; one part dependent on the maintenance of at least an element of state control, the other market and internationally positioned. In many ways the Chinese experience of restoration with the global economy gives a great example for other developing states of how to manage international economic exchanges. In specific, the upholds of a closed financial system provides a safeguard against unpredictable capital flows. ­­­­­