China Economic Miracle Progress
Exchange Rates in China
Exchange rates affect the pricing of each of the countries’ imports and exports. Currency manipulation has huge impacts on global trade. There are concerns that China and other countries manipulate their currencies in an effort to increase their exports. A weak currency makes exports of goods and services cheaper, which can increase the export output as well as create job opportunities in the sector. However, there are implications to other countries, making it harder for them to export goods to these countries. On the contrary, the United States consumers that rely on the inputs from these countries benefit from the weak currencies because the cost of importation becomes cheaper. From the policies stipulated in the International Monetary Fund, the membercountries are forbidden form currency manipulation. In addition, there are also policies provided in the United States law that can address the issues surrounding currency manipulation. This paper therefore, gives highlights on the China currency issue and policy recommendations that could be adopted to solve the problem.
In the past decade, China has carefully managed the value of Yuan against dollar. Some of the policy makers insinuate that China’s renminbi (RBM) is undervalued against dollar, arguing that this has given the Chinese exporters some advantage as compared to the United States exporters. Since 1994, the Chinese government started to peg RNB to the dollar until through 2005 (Staiger and Sykes 591). Since 2005, they shifted to a controlled pegging system that allowed the government to regulate the currency only ensuring that it fluctuated within a certain range. Consequently, the RMB began to appreciate until 2008, when they halted the appreciation of the currency because of the concerns that it affected the Chinese exports. In 2012, China allowed more flexibility of its currency against dollar, and increased the band in 2014. Between 2005 and 2015, the RMB was appreciated by a margin of 25% against the dollar (Nelson 8).
Furthermore, before 1994, China maintained an exchange system that consisted of fixed exchange rate and the relative exchange rate systems. The access to foreign exchange was highly limited to reduce imports to China. China began to reform its currency policies in 2005, which led to the appreciation of the RMB currency by a margin of 34% against the United States currency (Nelson 7). The surpluses on China trade have gone down with some of the analysts projecting that it would approach market value. Other analysists insist that the China currency is undervalued against the dollar, thus continue to the mounting pressure to the china government to adopt the market-based exchange rates.
Goals and Preferences
Exchange rates play a vital role in the global trading system as the regulate import and export of goods and services. The first proposal for legislative action against the undervalued China currency issue was first introduced by Senator Lindsey Graham of North Carolina in 2003. Successive Congress bills followed until 2010, where the House of Representatives finally approved the Currency Reformation Act (Woo 83). The objective of the bills was to give instructions to the Department of Commerce to appeal against Chinese importation if their currency were not revalued. The legislation treated the undervalued China currency as an export subsidiary. Therefore, China’s policy of intervention in the currency markets has been a concerning issue as it is considered distortive to the economic and trade policies. The China currency policy benefits the Chinese government as it makes export less expensive than import. They argue that the undervaluing of the Chinese currency is the main contributor to the United States deficits with China as well as decline in the manufacturing job opportunities.
The Chinese government has implemented policies to manage the appreciation of the RMB by printing the currency and selling it for the dollar and assets in the United States. It has also put policies that managed and controlled the buying and selling of the RMB currency. The currency interventions have increased the Chinese foreign exchange reserves to approximately 40% of it GDP (Staiger and Sykes 588). Some analysist have attributed this as evidence that the Chinese government keeps the value of RMB below as compared to if it were allowed to float freely in the market (Staiger and Sykes 583). The Obama government has focused strongly on hedging against the Chinese power alongside its rent for less advocacy of Beijing’s inclusion in the regional economic, security order and political aspects. The president’s efforts lie in the expansion of government spending and building of federal reserves.
Policy Options and Analysis
Many policy makers have alleged that the Chinese government manipulates its currency to make the Chinese exports to the United States cheaper and the imports expensive than if they had been determined by the market value (Woo 63). They make arguments that although the pegged currency was necessary in the beginning of China’s economic development, it was no longer justifiable given the growth of China’s economy and the trade flows as well as its impacts on the international economy (Woo 64). In addition, the critics also allege that the undervalued currency is the main factor behind the US trade deficit with China. Some other policy makers have linked the Chinese currency manipulation to the massive accumulation of foreign exchange reserves in China (Yang, Yin, and He 123). Currently, there is high unemployment rate in the United States, which has intensified the concerns on the impacts of the Chinese currency policy. The majority of the policy makers argue that appreciating the RMB currency will boost jobs in the United States, as most analyst find a direct correlation between the trade deficit in the United States and the level of unemployment (Yang, Yin, and He 125).
The increase in the aggregate spending of cash to make investments boosts the economic size eventually. In addition, the private firms also benefit from lower interest rates caused by the trade deficit from China. In the medium term, according to the economic theory, the undervalued RMB has no effects to the United States economy, rather it shifts production away from the United States import and export competing firms to China where they can benefit from cash flows. There is no clear cut on the gains and losses in the employment and production sectors as this will vary across different regions of the economy. An analysis by the International Monetary Fund (IMF) indicates that the appreciation of China’s currency alone will have a limited benefit to the global economy, unless it is accompanied by increase in China’s consumer and expansion of the service sectors.
To some extent, Brown’s accusations against the Chinese government hold because RMB appreciation might have long-term negative implication to the United States consumers. The Chinese practice of the manipulation of its currency could be one of the reasons for the failing United States economy. For instance, the undervaluing of Chinese currency led to trade deficit with China of approximately 227 billion dollars in 2009, 273 billion dollars in 2010, and approximately 295 billion dollars in the year 2011(Funke 470). Because of the increasing trade deficit, the United States economy has continued to suffer because appreciating the RMB currency means that there will be an increase in the costs of exported products to the USA. This will have negative impacts ono the consumers who will have to pay more. In addition, appreciating the RMB would lessen the Chinese ability to purchase the United States Treasury securities, which has the potential of increase in the interest rates. Furthermore, it will also affect the manufacturing industries in the United States, this is because the manufacturing firms will be forced to shift their business to lower cost Asian countries. This will make China more consumer demand other than exporter, hence reducing barriers.
The Chinese government argues that their currency policy does not aim at causing instability but rather at fostering global economic stability (Yang, Yin, and He 120). They argue that their goals are to increase employment of its citizens. Their officials have strongly condemned the pressures mounted by the international community for china to appreciate its currency. The officials view the economic growth as a critical component in political stability and economic sustainability. The undervalued RMB currency could have both positive and negative economic implications. The majority of people agree that greater currency flexibility by the Chinese government would greatly reduce the global economic imbalances, which is the main contributor of the current global financial slowdown. In addition, on a long-term basis, the current currency reforms in China would boost the economic efficiency of the country. The Chinese government has pledged to improve the flexibility of its currency, citing that appreciating the Yuan could lead to massive job lose hence detrimental to its economy.
The United States can derive economic and political benefits from the Currency Exchange Rate Oversight Reform Act of 2013, which it misses by virtue of generally supporting an appreciation of the Chinese renminbi. Some of the policy makers have debated on the effects of exchange rates appreciation on the trade flows to the United States economy (Woo 65). For example, if China appreciates its currency, the United States’ exports to China will increase, consequently reducing China’s imports, which will cause the decline in the trade deficits. The appreciation of the dollar will have both long term and short-term impacts on the United States economy. This issue is further made complex because of China’s role in the global supply chain. China is one of the major assemblies of multinational corporations, owing to the sharp increase of the United States importing from China. Several products that used to be assembled in countries such as Japan, Taiwan, and Singapore are manufactured in China. Then, they arrive to the United States market. The firms operating in China import the raw materials for the manufacture of finished products that are then sold on the foreign markets.
Policy Recommendations
Various avenues have been sought in the effort to address the existing disagreements between the countries. Based on the multilateral trade policies, countries have set up commitments to avoid manipulation of their currencies, made within the contexts of the World Trade Organization agreements and policies. Some of the members in the 114th congress have put forward measures such as the enation of TPA legislations into law (Nelson 18). The clauses of this law include ways of addressing currency manipulation through the use of remedies that enhance transparency and cooperative mechanisms.
Furthermore, some others have put forward counter veiling laws that would restrict importation of goods from the countries suspected in manipulation of the currency. For instance, the Trade Facilitation and Trade Enforcement Act passed in 2015 by the Senate has included provisions that would improve the surveillance and international cooperation on the exchange rates. Other measures that could be adopted include the use of diplomatic measures that preserve the status quo to address the existing disagreements because labeling countries as manipulators of currency could to more adverse effects such as trade wars, which would increase the United States borrowing costs.
Seeking the International Monetary fund (IMF) intervention is also the aspect that could be adapted to solve the conflict. The IMF has the mandate of setting up policies that regulates exchange rates amongst its member countries. It also has policies that govern the code of conduct of the member countries. The code of conduct policy states that the member countries should alienate themselves from adjusting or manipulating their own currency or gain advantage over other members. However, the IMF has never publicly named any member country violationof their currency, which has made it difficult to pursue the violators. The World Trade Organization could play a role in finding solutions to the current dispute because of its relationship between the exchange rates and the business trade.
Position of China in the World’s Market
Modern companies have to expand globally in order to maintain their competitive positions in the world’s market. However, American companies do not always have a deep understanding of the customs and traditions of people in foreign countries. China is attractive to foreign investors as it offers the high-qualified workforce that can be attracted by comparatively low wages. On the other hand, the company wants to specify the potential of Chinese consumer pool. The report evaluates the reasonability of the expansion plans as well as outlines the major steps towards their implementation. The report has both theoretical and practical significance. It can clarify the major cultural aspects of Chinese society as well as provide companies with effective instructions regarding the optimization of their economic and financial strategies. The report concentrates on Chinese social customs, family life, attitudes, religions, education, and values. Although China is a unique country that is very different from the United States, it is reasonable to invest resources in the market and collaborate with it through different business projects.
The business people in any country do not make their decisions automatically. They consider a large number of interrelated factors including cultural ones. The role of culture is crucial in the contemporary world because it demonstrates the ability of a given company to understand the demands of its clients and partners (He, 2012). The correct addressing of the cultural needs of the company’s partners may maximize both its revenues and its international reputation. If cultural needs and peculiarities are not addressed properly, numerous misunderstandings may emerge, and the demand for the company’s products may decline. It is especially applicable to China, where the role of customs and traditions is more important than in Western countries.
Social Customs
First of all, it is necessary to describe Chinese social customs. Chinese companies prefer having business relations with organizations familiar to them (He, 2012). Therefore, it is reasonable to use the services of intermediaries while entering the Chinese market for the first time. The entire system of business relations is highly formal. Thus, American managers should not rely on an informal communication style, especially at the initial stages of interacting with Chinese business partners. Chinese customs respect the social rank of all individuals and parties. Thus, American business people should organize their communication accordingly. As the positions of Confucianism are very strong in China, its key principles especially in the field of the ruler and subject should be respected. The oldest person should be greeted first regardless of his/her business position. Moreover, handshakes are the most common non-verbal elements when Chinese business people work with foreigners. Chinese are often reserved with foreigners if they do not know anything about them; and friendly if they are familiar with a given company (Wang, Khoo, Nakatsu, & Cheok, 2014). Touching is not welcome, and all formal rules should be followed.
Despite the formal style, Chinese people have a good sense of humor although their funny patterns are different from American ones. Chinese individuals are ready to laugh at themselves as it allows evaluating the situation objectively (Kang & Feng, 2013). Thus, their business partners should be ready to do the same and recognize one’s shortcomings through humor. In the majority of business situations, the person’s title and last name are used. The gift etiquette should also be taken into account. In fact, gifts are typically given at weddings and the New Year, although birthdays are also a legitimate cause for making a present in the modern business environment. Clocks and flowers are associated with funerals, and they should not be selected as gifts (Wang et al., 2014). They should be presented with two hands and the maximum respect.
The Family Role
The company’s managers should also be aware of the role of family for Chinese people. They attribute a higher significance to family than in many Western countries. Therefore, if the business conversation includes mentioning the family of Chinese partners, the highest degree of respect should be demonstrated. The US managers should also be aware that the oldest members of Chinese families can substantially influence the decisions of other relatives. It should not be viewed as the imposition of one’s will, but rather a fact that comes from Chinese norms and traditions. Moreover, the implication of the One Child Policy results in the majority of modern Chinese families having only one child. The government tried to regulate the population dynamics through law imposing. Thus, many young Chinese people are more self-centered than the previous generations due to the government policy (Kang & Feng, 2013). The basic unit is the extended family as many Chinese people live with their parents. Women work outside the home in different occupations. Today, many women are employed in the production sphere, such as electronics especially in the export-oriented companies.
Class Roles
It is difficult to analyze the Chinese class culture as it is presented in a hidden form. The reason is that Communist ideology advocates classless society. However, the actual facts demonstrate that several social classes exist in modern China. The first one is the privileged class that consists of bureaucrats of different levels (Kragh, 2012). They control the political power and have a more opportunities in comparison to other people. The second one is Chinese business people, who tend to increase their role in society. The third one is the general Chinese population that is mostly occupied in export-oriented spheres. The fourth one is the underclass. The underclass individuals have a very limited set of social and economic opportunities.
Attitudes
It is also reasonable to concentrate on the attitudes of Chinese people. They typically demonstrate highly positive approach to all people, and it is necessary to maintain the balance between the positive attitude and adherence to the basic formal rules and requirements in China. It seems that the major difference between China and the United States is the combination of collectivist and individualist elements. The US is typically considered as an individualist society, while China is a traditional collectivist one. Although the modern global environment contributes to the existence of collectivist and individualist elements in all countries of the world, it is evident that traditional Chinese values are centered on collectivism and the sense of harmony (Kragh, 2012).
Religion
In order to ensure success in the foreign country, it is necessary to explain the role of Chinese religion for the US managers. The Chinese religions are more complicated than that of Western countries. The first reason is the long history of their emergence and development. The second one is the existence of various religions and traditions that are different from Western patterns. The major religions in China include Confucianism, Buddhism, and Taoism (Guang, 2013). Confucianism pays the major attention to ethical values and beliefs. In particular, it stresses the respect to older people, the existence of moral duties, and self-control (Mingzheng & Xinhui, 2014). Buddhism is centered on liberation that can be achieved through spiritual practices (Guang, 2013). Finally, Taoism promotes living in harmony with the law of the universe. Therefore, the suggestion is to specify the religious beliefs of Chinese partners in order to be prepared to their preferences and views. It is necessary to demonstrate loyalty to the representatives of all religions.
Education
China has a well-developed system of education, although it is completely controlled by the government. Chinese students demonstrate high results especially in spheres of Math and IT. The situation with humanitarian subject is more difficult, as some ideological elements in education are still present. Currently, numerous business people aim for American higher education for them and their children. It makes the understanding of their traditions and worldview easier as they are also more open to American values (Kragh, 2012). In any case, it is reasonable to collect some information about the education obtained by Chinese partners. It will demonstrate both their training level and closeness to American principles.
The dominant Chinese values are based on the country’s long history and perception of religious principles. The principles of loyalty and duty are among the central ones for Chinese people (Fann, 2000). One the one hand, they are very loyal to different points of views and usually do not express their disagreement in an open way. On the other hand, the Chinese understand the role of moral duty and demonstrate their respect to older people and foreigners. In general, Chinese partners can support favorable conditions for all parties if they also demonstrate loyalty to Chinese values.
Relationship
Chinese companies organize their relationships on the basis of trust. They want to be familiar with the major guiding principles of their partners. They also value the corporations with established reputation and reliable partners. The majority of Chinese companies have are risk-aversive, and they prefer the known mechanisms of realizing their business goals. Cooperation is more prized than competition (Fann, 2000). Therefore, it is reasonable to concentrate on the mutually beneficial cooperation between companies. Women do not typically manage business, but the role of females in business projects tends to increase. Chinese may consider Americans to be very open; however, in some cases, they may perceive Americans as disrespectful to their culture. Thus, it is crucial to be positive and respectful to Chinese values and principles.
The Chinese market is potentially attractive for investments and expanding business operations, although the traditional Chinese culture is very different from Western perceptions and worldview. Moreover, the Chinese market is considered a source of the workforce and as a new consumer market. In order to maximize the potential positive effects, it is reasonable to formulate the following recommendations for cooperating with businesses in China.
On the cusp of the 20th century the Celestial Empire saw itself as the center of culture and enlightenment, surrounded by infidel barbarians. It would not be correct to infer that the Empire suffered ostracism from the civilized world at that time. The prototype of modern-day China just treated its neighbors with an insouciant disregard. Indeed, even when the communist coup swept Mao Zedong to power, the newly established People’s Republic of China (PRC) continued regarding the limitrophe states (save for the USSR) as pawns that clustered around the Chinese nucleus on the geopolitical chessboard. However, it was not until the demolition of Mao’s cult of personality edifice that the PRC emerged from a cocoon. Domestic political environment created by Mao Zedong and consolidated by his celebrated successors rendered introduction of the market-oriented economic reforms impossible. Effectiveness of the existing reforms was further diluted by the activities of every arm of the sophisticated Chinese bureaucracy. Nevertheless, due to the geopolitical changes of the late 1970s, the PRC started gradually discarding the Communist Party’s traditional tenets, which hindered any economic progress. The initial reforms at the end of 1978 were geared towards the agricultural sector. 1989 was the most pivotal year, as it ushered in a new stage in the economic development of China. The Tiananmen Square Massacre of 1989 became a harbinger of the shift away from central control of the economy. The fledgling authorities settled on a strategy of altering the Chinese leviathan. Transition to the capitalist form of society was slow, but at the same time jarring for Mao’s pertinacious henchmen.
Even though the firm grip of the Communist Party of the PRC on the economy is still evident, the party’s foremost politicians do not inveigh against such economically sound ideas as privatization and private entrepreneurship as vigorously as they used to three decades ago. Cheap labor, unfathomable bounty under the vast Chinese terrains, and a handful of prudent and well-timed economic reforms billow the sails of the Chinese economy. A phalanx of experts surmises that the PRC may be undervaluing its birthright when it allows all foreign companies to operate in the Chinese territories. They further opine that the projected economic bonanza of China will fail to materialize. Still, China managed to overtake Japan as the world’s second-largest economy a few years ago. In all likelihood, these alarmists will not have ample grounds to elicit schadenfreude from the state of Chinese economy in the nearest future. Indeed, the pace of economic growth in China has somewhat slowed down recently, but it is still astonishing. Nowadays, there is another popular tendency in the international arena. Certain scientists maintain that any single country will not be able to duplicate the PRC’s outstanding economic exploit in future. However, a clutch of reform-minded maximalists from the countries with emergent economies and vibrant societies like those in India and Brazil would eagerly oppugn the validity of such a statement. By and large, this paper concludes that China’s economic miracle is worth lauding, but dispels the myth that its economic growth and transformation will not be repeated in the nearest future.
Place your Order
Provide a Payment
Communicate with the Writer
Download your Paper
Empirical Analysis
Numerous figures of China’s unparalleled economic growth have been bandied about over the course of the last 20 years. This phenomenon has even earned a special soubriquet “economic miracle”. The adoption of the registration law was the first step of the Communist Party on the way of development. Previously, all citizens were officially divided into peasants and townspeople. If a person was born in a peasant family, they could not change their status ever. This law significantly curtailed civil rights and liberties of rural residents as compared to the townspeople. Buttressing this statement by facts, it would be wise to recollect that the Chinese peasantry was denuded of the rights to receive higher education, pension, and medical treatment insurances, as well as other forms of social security. Moreover, taxes that the government levied on the peasantry were much higher than those imposed on the townspeople. It should be noted in this regard that China is an agricultural country, as farmers constitute more than 65% of the population. Having adopted the registration law, the Chinese authorities have actually transformed the bulk of the Chinese population into the mere labor force that was willing to “work for peanuts”. Recasting the last sentence in a more formal wording, the Beijing government has enshrined savage labor exploitation and abject poverty in law.
Realizing that grinding and widespread pauperism would prevent the Communist Party’s leadership from increasing state revenues, the Communist Party had no choice but to lift its analog of the “iron curtain”. In order to reinvigorate domestic demand, it embarked on the policy of reforms and transparency. Some of these reforms were effective, while others backfired. Cheap labor led to a decrease in the cost of goods. The country quickly became the world’s factory. Western investments started inundating Chinese businesses, which in its turn resulted in the mass production of goods for export. As the exports were surging, an influx of money flowed into the Communist Party’s coffers. After a series of unsuccessful political campaigns such as the Cultural Revolution, the Great Leap Forward, and others, credibility of the party turned out to be significantly undermined. The country’s leadership decided that they must bestir themselves to remedy this deplorable state of affairs. To this end, the Communist Party tried vigorously to hammer the paramount importance of the undertaken measures home to the populace. In order to repair its battered credibility in the international arena, the government began to invest the lion’s share of the profits in the acquisition of a developed country’s paraphernalia.
It was at this time that skyscrapers, hotels, and stadiums started mushrooming out. By the same token, the Communist Party sped up development of the infrastructure as well as introduced the latest achievements of scientific and technical breakthrough. In essence, the Communist Party effectively copied the most salient trappings of the developed world. That is how China obtained magnetic levitation trains, garish public toilets, high-speed Internet, authorization to host numerous international exhibitions, etc. Moreover, the mainstream Western media often report about Chinese millionaires and billionaires, the number of which is growing despite the global economic crisis.
In fact, it turns out that the population of China is working for the development of only a small part of the country. Due to the peculiarities of the mentality, Chinese workers perform their responsibilities with a special combination of diligence, gusto, and panache. Having lived in extreme poverty for a long period of time before and after the horrors of the Cultural Revolution and the artificial famine begotten by the Great Leap Forward, a thumping majority of the Chinese acquired a fear of poverty on the psychological level. As the ill luck would have it, the acquired fears of the parents are transferred subliminally to the offspring. This tendency is further exacerbated by the fact that the bulk of the workforce receives only a modicum of a certain company’s income, insufficient to maintain a hand-to-mouth subsistence. Regardless of income, every Chinese person puts by a portion of each wage for a “rainy day”.
VIP support ensures that your enquiries will be answered immediately by our Support Team. Extra attention is guaranteed
Get VIP Support $11.55According to official data of the Chinese authorities, 10% of the richest people in the country have 50% of all income, while the poorest 10% of residents have only 1.4% of income. The Gini coefficient, which reflects the gap between the rich and the poor, is constantly growing in China. In 2006 it amounted to 0,496 (the Gini index vibrates from zero to one, with normal being less than 0.3). In juxtaposition to the PRC’s figures, the Gini coefficient of India have stood at 0.32 points for the last 20 years. In terms of GDP per capita, China is not even in the top hundred countries. Hence, those politicians who constantly intone pieties about the staggering success of the Chinese economy ignore the fact that the fruits of this success are shared only by the vested interests. According to the consulting firm McKinsey & Company, less than 1% of Chinese households have income equal to or exceeding the average income of the American households.
Furthermore, the Chinese authorities spare no effort in order to propagandize all their achievements, presenting them as the attributes of a “new China” created by the Communist Party. However, if one chose to lift the veil from over the indicators of the incredible economic growth in China that are plentifully strewn about by the Chinese officials as well as from over the showcase cities that are extensively demonstrated to the Westerners, the Chinese authorities would not be able anymore to fool the world with its veneer of economic ascendancy. The events that have taken place in China over the course of all these years cannot be referred to as development of the country, for the ruling elite was not originally confronted with the task to raise the welfare of the people. On the contrary, this model of development implies that the vast majority of people in the country should be poor if “economic miracle” is to happen. The Chinese leviathan has always been preoccupied with the task of strengthening its authority, enriching the pivotal figures of the Communist Party and consolidating its grip on the population. This set of convictions does not resonate among the majority of the Chinese population, but the Communist Party apparatchiks run roughshod over any opposition and often cow people with militant tactics.
By and large, the Communist Party cannot afford to lose its main source of income, namely cheap labor of the peasants. This means that as long as the present system holds valid, this group of people will remain below the threshold of poverty. The statistics demonstrates this point clearly. According to official data, the incomes of the rich Chinese citizens are 11 times higher than those of the poor. According to the Beijing National Economic Research Institute, the gap is even more yawning. The middle class is an all but extinct feature of the Chinese society. Policy chosen by the Chinese authorities established a system in which social and other problems are often solved only by means of improving statistics. This means that the official statistics in China does not reflect the real situation. Local officials write positive reports, but the real problems remain unresolved and are constantly deteriorating. This is exactly the reason why both the number of popular protests and magnitude of public commotions are on the rise in China. Even though the Communist Party lashes out at any dissent and nips the overwhelming majority of small-scale socio-economic upheavals in the bud, the Chinese recalcitrants take to the streets and orchestrate wildcat strikes ever more often. According to official data of the Chinese authorities, in 2008, the country saw more than 80,000 public disturbances, which is 10 times more than in 1993. Various kinds of economic perturbations are inherent in the outbreaks of public discontent, for workers constitute the bulk of the protestors. Thus, it is quite obvious that the Chinese “economic miracle” will not last long. Being a driving force behind China’s economic upsurge, unfair and dishonest policy towards the peasantry is one of the country’s biggest problems at the same time.
One way or the other, progressive transformations in China are firmly on the mind. However, blind imitation of capitalism poses a plethora of potential risks for the Chinese economy. Indeed, the numerous inherent cobwebs and pitfalls characterize the transition of China towards the market-oriented type of capitalism. The country’s recent problems with the so-called “fortune management bank products” corroborate the idea that even seminal reforms in the financial sector of China’s economy cannot guarantee an unmitigated success without the establishment of the appropriate regulation bodies. Nonetheless, China’s rapid growth should not eclipse the need for economic development in this country. According to the International Monetary Fund, at some point between 2020 and 2025, China will approximate the so-called “Lewis turning point”, when a mother lode of the low-wage workers will be exhausted, while such factors as labor mobilization will exert little influence on the economic growth. Consequences of the irrational use of capital, inevitable in a centrally planned economy, will come to the fore as a result of the imminent decrease in the amount of raw materials and demographic resources. The recent practice in China shows that economic transformations may lay bare old problems as well as create the new ones. Ironically, China may need powerful state planning in order to transmogrify itself from a state controlled economy in to a market economy.
Conclusion
It is not significant that China’s GDP has surpassed that of Japan. It is not even important that GDP of a modern-day relic of the Celestial Empire still have chances to exceed GDP of the United States. All this is mere symbolism, and some retrospection bears this claim out. For instance, the so-called “South Asian tigers” (Japan, South Korea, Taiwan, Singapore, Hong Kong) dominated the world’s economic agenda in the 1970s. Their supremacy was supplanted by the astounding success of the People’s Republic of China. The PRC had been at the fore of the world’s economy during the 1980s. In the early 1990s, it forged ahead of the rest of the world, innovating and reforming its economic sector. Nowadays it seems like China is too close to embedding itself in a wall. This means that the baton of leadership is going to be passed to other nations soon. This hypothesis poses an interesting conundrum to many analysts, because it is next to impossible to indicate the world’s next economic turbo-charger with pinpoint accuracy. The highest chances of occupying this niche are divided equally between the countries that have just accomplished the economic transition, or those that are still proceeding along the path of transition, as well as those nations that are hard-wired to perceive pragmatism of the economic rebound. These are India, Indonesia, Vietnam, and Malaysia. Curiously enough, a multitude of large-scale companies have started moving their industrial production facilities to these countries even from China. Dampened economic growth of the PRC does not retain a latent capability to menace the world economy, as it will be countervailed by the economic progress of the “new Asian tigers”. China is not a shell of its former self yet, but it is about to yield to the pressure of the new “economic miracles”.
