Chinese Economy

As well as being the largest and most populated country, China also has the second most successful and powerful economies in the world.

Coming second only to the United States, China has a GDP of over $7.8 trillion when measured in PPP (purchasing power parity) terms, or third after the USA and Japan when using exchange-rate terms. Either way, China is big and it means business.

China’s economy is very diverse, and they have branched out into many different industries that have been successful. Most transnational companies have a base in China, and lots of companies have moved their manufacturing offshore to factories there. China boasts an abundance of cheap labor that attracts companies who are looking to minimize production costs and maximize profits. As well as this, due to the sheer population of China, they are offered a huge market for the products as well as trading them overseas.

Over the last three decades, China’s per capita income has consistently grown at a rate of at least 8% per annum, making it the fastest growing major country in the world.

During this time, poverty has drastically dropped in China and standards of living have increased. In 1978 the poverty rate was at 53%, by 2005 it had dropped to only 2.5%. Also, between 1990 and 2005 the infant mortality rate dropped by 39.5%.

Despite this, the country’s per capita income is considered to be relatively low compared to other countries in the world and has raised criticisms about China’s income inequalities. Although the major cities have grown and developed drastically, many of the rural areas have been neglected and left behind. In per capita terms, China stands at 107th out of 179 countries, with a per capita income of only US$2,000.

One of the main problems facing China is it’s every-increasing consumption of natural resources. If these are depleted, China may suffer serious consequences.

It wasn’t until the 1980’s that China really made a big splash in the global economic pool. China’s economic reform began in 1978, and these reforms brought with them significant and steady investment growth, as well as increased consumption and standards of living. Since then China has been a major player in the global economic market. The reforms of the late 70’s and 80’s were initially focused at collectivizing the country’s agricultural activities. The government were trying to shift the agricultural center from farming into household activities. Later on the forms shifted focus to the liberalization of prices, and later still to the process of fiscal decentralization.

China’s success is often attributed to it’s market liberalization, and has helped the economy grow more than 10 fold in the past three decades. The reforms of the 1980’s has meant that more independence has been granted to businesses that were owned by the state government. This meant that managers and local level government figures had more power than before, and has led to more privately owned enterprises opening up, particularly in the services and light manufacturing sectors. As well as this, the banking system was diversified and the Chinese stock market was better developed, which helped China grow as the economic reforms took hold.

These reforms also meant that sectors outside of the control of the state government grew at a rapid pace, and because China opened up it’s doors the rest of the world - foreign investment and trade drastically increased and provided much of the income of the country.

China has a labor force of over 807.7 million people. Of this number, 43% are involved in agriculture; 25% in industry; and 32% in services. The unemployment rate is somewhere between 4-11% - but official and unofficial statistics vary.

The main industries in China are: mining and ore processing (iron, steel, aluminum, coal and others); machine building; textiles and apparel; petroleum; cement; chemicals and fertilizers; consumer products, such as toys and electronics; food processing; transportation equipment such as automobiles, ships, locomotives, and aircrafts (Boeing is based in China); telecommunications equipment; and commercial space launch vehicles.

China also has a large agricultural sector, and some of the products it exports include: rice (China is one of the largest rice exporters in the world); wheat; potatoes; corn; tobacco; soybeans; peanuts; tea; millet; barley; apples; cotton; pork and fish.

The country also has an abundance of natural sources, although as mentioned before, these are fast depleting. Some of their main natural resources include: coal; iron ore; crude oil; mercury; tin; tungsten; antimony; manganese; molybdenum; vanadium; magnetite; aluminum; lead and zinc.

Despite being such a successful country, China is often criticized for it’s run down and shabby facilities and work conditions. Although many of the major international companies who have factories in China have some of the most advanced and state-of-the-art facilities in the world, many of the factories are backward and ill-equipped. The overall quality of products and facilities in China are considered to be quite low. They excel best at mass production.