Economic Development of China

Fifty years ago, China finally introduces ‘The New China in the Orient’. After years of warlords and domestic warfare, finally peace returned to the country. People were positive about the future. Fifty years later, the results are huge. By 1998, the GNP (Gross National Product) grew by over 29-fold, which is an average of 7,7% per year. After that, the economy grew by an average of 9,7% a year. Heavy industry grew immense in every factor, and millions of jobs were created. Agricultural growth was immense to, together with the heavy industry China is leading the world with this. The new generations also profit from this growth.

From 181. 000 students to 3. 410. 000 million students a year in 50 years, is an 18-fold increase. Today, 98,9% finishes primary school and 87,3% finishes middle school. You can state that China has benefit a lot from this economic growth. The average income raised from $760 a year a person to $3000 a year a person in 2010. You do have to take a second look at these numbers, because the average income in the east is a lot higher when you compare this with the average income in the rural area in the west, which is $1000 a month and $12000 a person in the big cities such as Shanghai.

Those numbers are shifted too, due to a small group of very rich persons. So are these numbers really that positive as they look? According to the CIA World Factbook, 128 million people still live below the poverty line in China. They did not benefit at all from this economic growth. Furthermore, a 12 hour work day is common for the lower class people. Labor rights are something they never heard before in China. The top 10% earns about 45% of the income in 2004. In conclusion China improved immense over the last 50 years.

But as with Europe in the 19th century, the majority of the population does not benefit directly but a small group does. China still has a long way to go, but as the working class is getting more participated in rights, the better the vast majorities situation will be. Why do companies manufacture in China? A lot of companies are replacing their production in China, but why? Nowadays China is producing for a roughly 1,5 trillion USD. It is still a huge amount, but the U. S. is still producing 45% more with an amount of 2,2 trillion USD.

The reason that China is growing so fast is because there is a huge offer of low-wage laborers. This would be a problem for the high-tech industry, but that is why a lot of “Made in China”-products are small electronic devices, toys and clothing. These are small product and would be too expensive if we let this be manufactured in other countries like Germany. This is also the reason that there is a lot of assembly production line in China. The products are produced anywhere else but they all come together in China to be assembled.

A combination of the transportation possibilities and a right administration make it possible for companies to settle in China. This so called Export Processing Zones (EPZ) are places where companies can settle against a low price, low taxes and without intervention of the customs authorities. This makes it easy for companies to land, handle, manufacture, reconfigured and reexport products. One of these EPZ’s in China is Guangzhou. What does the chinese goverment do to stimulate the economy? China has an advantage when it comes to stimulating their own economy.

Just like the United States, they have their own currency and because the bank-system there is mainly about state-controlled banks, they can control, to some measure, credit growth by means of state-directed bank lending. So the Chinese goverment has the choice to invests a lot into infrastructure and product capacity to stimulate the economy. Wheter the Chinese goverment should stimulate the economy or not is a hard decision. After a major stimulus to minimize the impact of the 2008 global economic crisis, the chinese economy suffered from overcapacity and overinvestment wich only made things worse.

This year however, the goverment is trying to stimulate again to compensate the decrease in economic growth, but not as much as they used to. They’ve already stimulated in ways of lowering the interest rate, adjusting the demands of creditloans and spending more money on infrastructure projects. They’ve also recently increased regional economic relationships with neigboring asian countries and Russia. Conclusion China’s development could be described as amazing. There was an average economic growth of 9,7% per year, the amount of student rose with almost 1800% and the yearly income has increased with almost 300%.

The expectations are very attractive for China because they will grow further and they already have the name of “The next economic motor that will drive the world economy”. By more government stimulations the economy will grow but they may be a little depended on the U. S. and Europe.

The future will tell! Sources: * http://business. time. com/2011/03/10/can-china-compete-with-american-manufacturing/ * http://www. chinaknowledge. com/Manufacturing/Introduction. aspx? subchap=3&content=10 * http://is. china-embassy. org/eng/zgjm/t98246.

htm * http://money. cnn. com/2012/06/26/news/economy/china-middle-class/index. htm * http://www. indexmundi. com/china/population_below_poverty_line. html * http://www. china. org. cn/china/NPC_CPPCC_2011/2011-03/10/content_22100405. htm * http://www. alsosprachanalyst. com/economy/chinas-choice-of-future-economic-policy-is-a-complicated-one. html * http://www. alsosprachanalyst. com/economy/that-unimpressive-stimulus-from-china. html * http://www. nu. nl/economie/2904981/groei-chinese-industrie-zwakt-verder-af. html * http://www. nu. nl/economie/2904536/china-trekt-alarmbel-economie. html