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A look at chinas economic growth due to recent foreign policies

This essay sets out to explore the relationship between the two and examine the degree to which they can effectively co-exist. The Chinese government long ago began the journey in search of prosperity and economic competitiveness for the economy, starting with Chairman Mao and the catastrophic Great Leap Forward in 1958.

China’s new role in the global economy

It was no longer smelting down pans and door knobs to produce ultimately useless metals, but rather was using resources to produce goods with high levels of demand. Whilst the Chinese economy increasingly resembles a free market economy, its politics remain relatively authoritarian and centralised. Were policies in China effective in generating growth?

Some would argue so, but critics are quick to provide arguments against this hypothesis. The following study will therefore analyse the effectiveness of the Chinese government in facilitating economic growth through its adoption of certain policies and actions during the last three and a half decades. Is its response to the global financial crisis a success-story for Chinese government intervention or a worrying sign of its propensity for excess?

Is the corruption observed at various levels of Chinese politics a genuine threat to growth and prosperity?

  1. He argues that the Chinese current account balance is not accurately measured, and the prediction of an annual current account deficit for 2018 hinges on high oil prices, a commodity that China imports in great quantities, and flawed methodological changes in the measurement of the value of tourism.
  2. Policies such as this one, some would argue, discriminate against foreign investors and discourages them from operating in China, creating a loss of potential FDI and consequent economic growth. As it has turned into an industrial hub, it has become the main trade partner of most countries in the area.
  3. This has enabled the nation to acquire military and other strategic assets abroad, and to project its soft power even further.
  4. Interesting perspectives of Chinese scholars. China has become economically more powerful and there is evidence that it has started wielding that power abroad more assertively.

The financial system The banking sector of China was one of the first to be fully socialized and consists of the four state owned banks: Under the Ministry of Finance, the banking system was centralized.

Consistent modifications to the system have been undertaken ever since the civil war 1949-52 to suit new conditions and policies, and changes were identifiable especially during the start of the reform in 1979. Under the control of the government, the banks were flexible during the financial crisis by boosting lending and cutting interest rates. With the global impact of the financial crisis, the roles of governments were incredibly important in maintaining and recovering the economy to a post crisis state.

  • One significant role of the Chinese government in generating economic growth up to the modern day was clearly demonstrated through the policies employed during the global financial crisis 2007-2009, the result was a relatively stabilised financial system at the same time that several advanced western economies faced severe downturn;
  • China is also the leader in volume traded globally and in foreign investment into Africa and South Asia;
  • Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post;
  • The following study will therefore analyse the effectiveness of the Chinese government in facilitating economic growth through its adoption of certain policies and actions during the last three and a half decades;
  • China is vigorously projecting soft power and presenting a peaceful image abroad by promoting cultural, educational, sports, tourism, and other exchanges.

One significant role of the Chinese government in generating economic growth up to the modern day was clearly demonstrated through the policies employed during the global financial crisis 2007-2009, the result was a relatively stabilised financial system at the same time that several advanced western economies faced severe downturn.

Nonetheless, compared to foreign economies, the growth rate of China during the crisis was seen as approvingly competitive. So how did China maintain a high growth rate during the financial crisis? In contrast, the financial systems in the Western economies, such as the UK, exposed its flaws through lack of government control.

  • As it has turned into an industrial hub, it has become the main trade partner of most countries in the area;
  • There exists even more potentials for both businesses and consumers, but a difficulty that agents face is the media censorship in China;
  • Under the Ministry of Finance, the banking system was centralized;
  • We have seen that the government is in favour of protecting the domestic market, i.

When crisis hit the UK economy, the government tried to mitigate the effect by encouraging banks to lend and borrowers to borrow for investment and consumption, but lacking confidence both banks and consumers were reluctant to follow government suggestions. The situation demonstrates the lack of government control over the financial system, though this promotes democracy to an extent, economic activities cannot be managed in effective ways in situational changes such as during the crisis, this had led to the fall in economic growth between 2008 to 2009 using GDP indicator as illustrated in figure 27.

  1. Very few of the websites targeted by the Chinese government have expressly commercial purposes but rather are channels of political dissent. Were policies in China effective in generating growth?
  2. More fundamentally, the strong GDP growth 6. World Scientific Publishing, 2016.
  3. According to the Financial Times, GSK has admitted bribing government officials back in 2001, in order to boost drug sales in China.

However, gradual improvements in government understanding and interventions in relevant sectors of the economy have led to the increased FDI in China, for example amendments were made to the Equity Joint Venture Law of 1979 in 1990 and the Interim Provisions on Guiding Foreign Investment issued which provided guidance for FDI has also been revised, the latest catalogue is in effective use from 2012.

Figure 310 shows us that FDI in China has increased dramatically from the beginning of the 1990s, and it seems rational to suggest that government laws played a major role in generating the FDI inflow, by building business confidence. The implication of this on the Chinese economy is extreme because it dismisses the threat of foreign monopolies in the market which could be damaging to the economy. The majority capital from FDI will therefore stay within the economy, reducing potential leakages in the long run.

  • China will need to boost cooperation with other countries and international institutions to deal with these challenges;
  • The PRC considers itself a country whose historical greatness was eclipsed by Western and Japanese imperialist aggressions.

We have seen that the government is in favour of protecting the domestic market, i. However, certain policies are bound to discourage potential foreign investors. It has already been mentioned that the Chinese party within any joint venture will hold the majority of shares.

Policies such as this one, some would argue, discriminate against foreign investors and discourages them from operating in China, creating a loss of potential FDI and consequent economic growth. Nevertheless, you could argue that the strength of the Chinese economy provides more incentive to invest which overshadows its more undesirable policies.

Corruption Although economic freedom has weaved its way into China, Chinese politics has by no means improved to the same extent as its economy and corruption is certainly a theme.

Corruption of the Chinese government leads to the distortion of market allocation mechanisms and in the long term impacts economic development.

As mentioned before, government spending, a component of aggregate demand can be effective in generating a multiplier effect but this is restricted because of political corruption. Bribery scandals in China are endless. According to the Financial Times, GSK has admitted bribing government officials back in 2001, in order to boost drug sales in China.

Such news had made its appearance on global media, creating a disincentive for firms to invest in China. In general corruption leads to the suppression of economic growth by creating uncertainties in economic actions.

A brief history of China’s economic growth

Levels of corruption are often difficult to monitor, but nevertheless cause damage to the economy of China by dividing the nation with power, restricting the economy to grow in the most efficient way in the long term, i. Internet The global use of technology, including the internet, has undoubtedly risen in the last few decades, following innovative ideas which play an essential role in the modernisation of the world, in particular for developing countries such as China.

The internet unleashes the types of opportunities which in the history would be classified as near impossible: There exists even more potentials for both businesses and consumers, but a difficulty that agents face is the media censorship in China. However, this behaviour causes imperfect knowledge of markets and sometimes acts as a barrier to innovation and trade.

Does China’s politics facilitate economic growth or suppress it?

An example of government intervention is demonstrated through the inaccessible Google search engine in China, and under the policy of internet censorship, more than 2600 websites are blocked in mainland China21. This stifling of freedom of expression may be unsettling, but does it have any meaningful impact on economic growth?

Access Check

Very few of the websites targeted by the Chinese government have expressly commercial purposes but rather are channels of political dissent.

Their culling may not be particularly palatable, but this does not mean there will be an impact in terms of GDP per capita. On the other hand, it is undeniable that a sense of creativity and experimentation has been central to the growth of the most successful internet and technology-based companies of the last two decades. By stifling this inherently creative environment, the Chinese government may be prompting a hard-to-observe, yet significant slowdown in economic growth.

Additionally, government policies regarding investments have had huge benefits for the domestic market.