Why Is China Failing?

China is becoming a great economic superpower because of its large economic growth rate. The past two decades, China’s economy has grown at an average annual rate of more than 9% (Fishman, 2005, pg. 117). But the economic cost of environmental harm, growing inflation, and a slowing economic growth rate, China economy may not obtain the highest economic rank on the world stage. China was on the right track to becoming the next economic superpower but I think that pollution, inflation, and the income disparities between the urban and rural people are disrupting its economic growth and brought China into a depression.

The first claim is that China’s large economic growth is failing is because of pollution. The economic cost of environmental harm, measured in public health, worker absenteeism and remediation efforts, is becoming prohibitively high. Decades of pollution from hundreds of factories have allowed industrial poisons to leach into groundwater, contaminating drinking supplies and leading to a rash of cancers. China’s huge population and grand economic ambitions make it the most important environmental actor in the world today, with the single exception of the United States.

Like the United States, China could all but single-handedly make climate change, ozone depletion, and a host of other hazards a reality for people all over the world. According to many Chinese environmentalists, “If economic growth stops, people will go back to the old, dirty, cheaper methods of production. Worse, there will be political instability, and that will overshadow everything; in that case no one will have time to worry about the environment. Of course, this rapid economic growth will cause additional environmental damage; some things in the environment are irreversible.

That’s why I think China will have to lose something — some species, some wetlands, something. We are working very hard to strengthen our environment. But, much as I regret it, you cannot save all the things you would like. You cannot stop a billion people” (Hertsgaard, 1997). Many people believe that in order to become an economic superpower, the Chinesey are willing to make environmental sacrifices. The second reason why China’s large economic growth rate is failing is because of inflation.

According to China Daily, the Yuan has risen 18% against the dollar since China abandoned the peg to the dollar in 2005. The higher Yuan is making US exports more competitive with Chinese goods in their home market because of rising business costs because of having to pay more to sell products in the US (Fishman, 2005, pg. 269. ). Chinese inflation has steadily been rising as supply constraints increase. The government is are also unwilling to tackle the problem of rising inflation as they are mostly concerned about creating jobs for the unemployed.

Because of credit controls and low interest rates, the Chinese government has succeeded in keeping the Yuan relatively undervalued compared to its true market value. This has encouraged inflation. A low exchange rate boosts exports and increase the cost of imports. With the recent rise in commodity prices such as food, oil and energy; this is even more problematic. China is now facing both demand pull inflation (fast growth) and cost push inflation (rising prices). It is a combination leading to rising inflation and rising inflation expectations.

The third claim for why China is failing is because the of growing income inequality between the urban and rural citizens. China’s economic growth has benefit the south and eastern regions more than anywhere else. This has created a growing disparity between north and south. The agricultural north has, by contrast, been left behind. Many farmers struggle to make a living. Therefore, this has encouraged a migration of workers from north to south. There are large disparities in wage income between the urban and rural residents, between different regions, and even among the urban residents.

Such disparities in income between rural and urban residents have created some serious economic and social changes in rural areas. First and the foremost important evidence is the emigration of rural population into urban areas. Villages and farmers are motivated to sell or lease their land for industrial or commercial use because they are well compensated for such transaction. Lastly, significant population has quit farming in favor of wage employment or non-agricultural activities such as running small shops.

These problems altogether have created serious concerns on producing enough grain for the purpose of self-sufficiency in China. Oded Shenkar (2005), a professor of management and human resources at Ohio State University’s Fisher College of Business states that, “China has strong aspirations to be the number 11 economic power, Hundreds of years ago China was one of the world’s leading powers and they want to be number 1 again. They are very clear about it. And I don’t think we should dismiss it out of hand, which is what most of us are doing right now (Shenkar, 2005, 38).

” I believe that even though the Chinese people are determined, a great deal more is needed in order to succeed in the world economic stage. The current issues in China dealing with pollution, inflation, and the growing income disparities are hindering China’s road to economic supremacy. China can get back on track when it addresses the issues that are hindering it. Through reforms in environmental care, income disparities, and inflation the Chinese economy can bounce back from its current economic downfall and once again charge to the top. Works Cited Fishman, Ted C.

2005. China, Inc. : How The Rise of The Next Superpower Challenges America and The World. New York, N. Y. Simon and Schuster. Hertsgaard, Mark . 1997. “Our Real China Problem. ” The Atlantic Online. http://www. theatlantic. com/issues/97nov/china. htm (November, 1997). Shenkar, Oded. 2005. The Chinese Century: The Rising Chinese Economy and its Impact on the Global Economy, The Balance of Power, and Your Job. Wharton School Publishing. Upper Saddle River, NJ. Winters, L. Alan, and Shahid Yusuf. 2007. Dancing with The Giants. Washington D. C. : World Bank.