The Economic Miracle Of China

Decent Essays
There is no denying the fact that china is economic miracle of 21st century. China is what it is because of the reforms intiated by its leadership (since 1978). Deng Xiaoping who intiated the reforms back in the 70s, described his approach as “crossing a river by feeling the stones” . Over years china has transformed itself from a hardcore socialistic economy to a socialistic market economy where investments in infrastructure has become the main pillar to generate economic growth and raise the standard of living of its people.
Before we dwell on the current situation in china, we must understand what made chia the economic superpower it has become to day.

Reasons for rapid growth of china
1. China has grown the old fashioned way, by building
…show more content…
Reasons for Chinese devaluation
 The currency is one of the only determinant of the exports of the country . With the devaluation of the currency is a desperate attempt to make the exports competitive in the world market.
For 30 years china has been growing its exports on the back of low wages and a large working age population which it transports from villages to the cities on favourable terms. However , with consequences of the one child policy of 1979 taking stage the proportion of the working population : dependent population going down , china can no longer have the advantages that it did for 30 years . This is reflected in the fact that the exports of china are down 8.3% on a year on year basis .

 China strategy of pegging its exchange rate with the dollar may be turning out to be counterproductive in the recent past with the appreciation of the dollar in.
Other competitive currencies have depreciated against the dollar while the yuan has appreciated. With the dollar expected only to get stronger in the near future, the devaluation of the yuan is imperative to keep the currency
…show more content…
With declining sales, plummeting fixed asset investment and consumer sentiment the situation is perhaps at its worst in 30 years. China is notorious for ironing out the ruffles in its growth figures and the world has reason to believe this time too!

The following graphs underline the consumer sentiment and fixed asset investment in china over the years.
Consumer sentiment is the measure of the overall health of the economy since the it captures what the consumers feel about the financial state of there as a whole. The possible reasons for falling consumer sentiment could be declining expectations about future income , quality of life, stock markets etc

Declining fixed asset investment is reflective of the fact that both the government and the private players are not investing in tangibles such as plant&machinery that are vital for the economic growth of the economy . Private players may not have the confidence to go ahead with big ticket projects that require large investment in fixed asset . It can also be reflective of the unavailability of loans at favourable rates of interest which doesnt allow companies to raise enough money to undertake the large

Related Documents

  • Decent Essays

    The pound fell to a 31-year low against the dollar, which is an alarming sign. Investors have the right to worry because the exit can hurt the investment in the country and the financial sector. Though the pound is dropping against the dollar, investors are leaning towards companies that export goods on the stock market. Since the pound is weaker, companies can increase profits from exporting. However, analysts believe if investment continues to fall within the country the gains on the stock market will be minimal.…

    • 1042 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    China's World Economy

    • 1005 Words
    • 5 Pages

    This means that China previously depended on exports to boost their industrialization and GDP, but now they will rely on consumption. China’s shift from manufacturing to services has led to a reduced need for commodity, thus leading to a fairly large problem for some of China 's export partners. A second reason for China 's economic problem is the Chinese stock market crash earlier this year. The crash has caused many investors to pull out of the Chinese market which has led to a decrease in trading commodities. A third reason for China’s economic slack off is the current condition of the real estate business.…

    • 1005 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Doubts In China

    • 1790 Words
    • 8 Pages

    With a huge proportion of Chinese investing stock market, these draining in China financial market will effect the domestic economy negatively. As citizens and companies now are losing money, people will spend less and save more if they feel their losing money, and companies will straggle to stop or draw up the price of stock market by purchasing stock themselves,. Then they may adjust the cost and expense, like income, purchase and so forth. These changes will finally let the AD (aggravate demand) goes down, because the I(investment) and the Cd decreased. Subsequently if AD goes down, companies will product less and finally the GDP will go down, which means the economic growth will slow…

    • 1790 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    Chinese economic decline combined with the analysis of the text .the main reasons as follow what affect the Chinese economic growth export , investment and consumption are as follows , firstly the debt crisis in western countries directly affect the export of china and the low income for employees. The Chinese government is actively seek for more national cooperation to solve the export problem. Although the worlds economic disasters slow global growth , the deflationary pressure and the weak trade expansion , influenced the whole firancial inclustry hardy . china tries its best to avoid it .secondly the property price in china keeps growth even though the whole economy in china decline at the fine . what is more the investment of government in all industries foaled .…

    • 1030 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Superiority Of China

    • 1170 Words
    • 5 Pages

    China’s strategy consists of exporting goods at extremely low prices due to a devalued currency. However, China’s strategy of keeping low prices will not hold up over the years for a couple of reasons. China’s renminbi being approved by the I.M.F as a main world currency will make China’s exports less competitive. As overseas central banks make large purchases of the renminbi, it will make the renminbi appreciate (Bradsher). Therefore, China will have a difficult time preventing the currency from appreciating, which in turn will make exports from China less beneficial (Bradsher).…

    • 1170 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Slowdown In China

    • 790 Words
    • 4 Pages

    This is because of China is U.S. second largest trading partner also the largest holder of U.S. debt. Besides, as demand from China decreased it caused the commodities prices to fall. Then, the effect of the devalued of yuan caused the imported commodities to fall further falls in demand. Finally, China as a leading buyer for commodities such as oil, copper and iron ore, as well as the food commodities in emerging and developing economies has caused the demand for this commodities to fall due to their economic growth…

    • 790 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    China’s demographic tidal wave will soon take effect and is irreversible because of the infamous “one-child policy.” The percentage of aging population is increasing and its working population will start to decline. China’s healthcare system is underdeveloped and this will have implications on the younger generation and on the overall economy. Dependency ratio will rise and household savings will decline. “Often referred to as the 4-2-1 problem, the policy has meant that one child has to support two parents and four…

    • 1042 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    But the influence was only temporary; on August 24, the market price still fell, which was a largest drop since 2007. The negative effect of China’s long-term interventionist approach may be more severe than the decreasing of the stock market. Very few people would like to invest in a market that the government can change the policies all the times. Recent events pressurize China’s leaders to revalue what they control the economy. If they insist their decision and continue to keep the current price system, they will be hard to build a stable…

    • 840 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Last year, the working-age population (ages 15 to 59) decreased by 3.71 million, adding more pressure on the Chinese economy. Political pressure While the country clearly has to find a way to overcome the demographic challenge, the one child policy is becoming politically unsustainable as well. According to Dr Fang, “As China’s economy has grown and its fertility dropped to very low level, the majority of Chinese no longer supports such a policy.” He pointed out that younger people “cannot understand why faced with such dire demographics…the government still continues such a policy that intrudes on people’s lives and incurs substantial financial costs”. Therefore, the policy isn’t only a demographic and economic problem for the officials; it is also a political issue. The Internet has been a powerful tool in increasing the visibility of opposition to the law.…

    • 709 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Expectations for additional layoffs and collapse of companies are becoming more prevalent in the economic conversations. China, like many other countries, is in rising debt, which equals approximately two hundred sixty percent of the annual economic output. High levels of debt are not the only impediment to China’s future; exports, which once accounted for thirty-four percent of the economy are currently only twenty-two percent. Due to the slack demand from developed countries, China’s export levels are not likely to increase anytime soon. This shift in demand is presumably a major root of the problem because consumers interest in foreign commodities has changed and results in lacking investment for China.…

    • 1088 Words
    • 5 Pages
    Decent Essays