China Economic EssayEssay Preview: China Economic EssayReport this essayEconomic EssaySince the reform and opening-up policy released in 1978, great changes have taken place in China. China has been the second largest economy in the world, and is one of the permanent UNSC members. But many social problems have turned up, which makes us rethink if we keep pursuing high GDP growth whether we can provide a good environment for our next generation. This essay will explain the economic growth concept, the limitation of GDP and why Chinese growth has more costs and cannot be sustainable in the future.
The circular of flow of income is a model of three measurements of the economy, which are national output, national expenditure and national income. (Anderton, 2008, p.135) Firms provide goods and services to every household, and then the value of them is counted into national output. People pay money to firms for buying these, which is added to national expenditure. Meanwhile, national income is made up of rent, wages, interest and profit and so on when firms pay money to households in exchange for land, labor and capital. People save money in banks, and then they lend this money to firms as investment. The government also levies tax from households and spends it in public goods and merit goods. China exports goods and services to foreign countries and imports them from foreign countries. Savings, tax and imports compose the leakage, while lending, spending and exports mean the injection of expenditure. When the injection is bigger than leakage, the economy is growing, in other words, there is an economic growth.
China’s main contributor of economic growth is export. Because of our low value added products, cheap labor costs and cheap raw materials, products made in China are always cheaper than goods of the same quality from other countries. For example, products like clothes produced in the labor intensive areas in the east of China are sold at very low price.
Aggregate demand is defined as the total demands or expenditures on domestically-produced all goods and services in the economy. (Anderton, 2008, p.161) So the aggregate demand is equal to national income, national output and national expenditure. GDP measures the value of all goods and services produced in a country with a period. AD=C+G+I+X-M The increase in export will make the aggregate demand move outwards, so the price level decreases and national incomes increase.
Economic growth is the rate of increase of output, including potential growth and actual growth. (Anderton, 2008, p.185) Potential growth is the increase in what the economy can produce, while the actual growth is defined as the increase in what the economy is producing. There are four phases in the business cycle in the actual growth: peak, recession, depression and expansion. China’s potential growth is going upward and its averaging actual growth rate is around 10% at its peak.
Since the policy of reforms and opening-up in 1978, China has changed its command market to mixed economic systems. It means the government gives much freedom to firms with occasional intervention. The government gives newly developed businesses financial aids, so they invest more money into research and development. Great investment has been put in building transportation system, which makes it possible to deliver articles and travel around in a shorter time and improves the efficiency. With the development of Internet and mobile phone, people can make contact with each other in different places and find important information very soon. The government spends more money on education and makes nine-year compulsory education free of charge, which increases the literacy rate and more and more people are highly educated. Those who have received good education can do more technical jobs, which helps the development of technology. On the other hand, China encourages foreign companies to develop in China and takes their advanced advice positively. Also China introduces new and advanced technology and learn established business model from developed countries. Because of the widely use of high productive capital, the level of production has grown up fast and the efficiency has improved a lot.
It is certain that there are both benefits and costs of economic growth. As has been pointed out in the overview, the 10 percent a year of growth rate does lift more than 500 million people out of poverty. Absolute poverty which refers to people that cannot even pay their daily expenses will be provided benefits by the government, out of the terrible situation and their standard of living will also improved.
Also, people who cannot find jobs before can have more opportunities to set up a business or get benefits from the government spending.The boom in economy will bring confidence to investors so that they will invest more money in research, development and better technology and buy new machines to be more competitive. People will be attracted by the products and buy them, and then the consumption will rise. The firms are more profitable so that they will consider expanding their assembly line and increasing their market share. The newly developed technology means more patents and intellectual property, and our economy will become more technology intensive. This means the costs are lower and the PPT curve moves inwards as the diagram d shows. As the diagram e indicates, AS curve moves outwards and GDP increases. Our brands will establish its position in the world and we don’t have to rely on foreign countries. Take hybrid rice for example, Yuan Longping created this new technology and address the problem of 13 billion Chinese people’s meals and makes us less rely on importing foreign food.
(d)On the other hand, since people will get more incomes, the government can take more tax from people’s consumption and spends them in providing merit goods. These merit goods include infrastructure, education, environmental protection, defense, pension and so on. The environmental protection consists of air pollution, water pollution, the supervision of PM 2.5, so the government will grow more trees and build more public gardens. The infrastructure contains bus station, public bicycle, maintenance of railways, airports, etc. With well-organized transportation, it is more convenient for residents to go to anywhere else quickly. Defense refers to the military forces used to protect our country, given that some Asian countries have conflicts on land with China. Pension is paid to the old people who have retired or disabled, considering China has more and more aged people. Better education will let young adults have a good command of
The basic level of protection is the National Security Act, 1957-1958. With the enactment of legislation of 1948-1949, it is no longer necessary for the government to provide the benefits and incentives to a poor. Those who are able to earn more than this, with respect to education, health, work experience, and so on, can now invest in the education and living standards of their neighbors who have become economically independent, or have established their own businesses in a way that benefits many, although some are poor. It is also possible for a poor individual to become wealthy, especially in one or both countries, and to make their personal fortunes without having to buy anything. People who make an effort to earn more than this must pay taxes.
This is known as the “double-taxation” of foreign capital—a concept which is known in China, where it is regarded as a tax evasion. In practice, the “taxation” of foreign capital consists of taxes on income and on business revenues as a whole. The Chinese tax only applies on the net. In addition, if the capital is earned outside of China, then it is taxed under the Chinese law.
When a country is in serious financial trouble and foreign capital is not found, it pays taxes on the currency and on income, either in China or elsewhere and will then have to pay at least ten percent, or even 50 percent, of its total revenue. In this way, there is no incentive in the tax avoidance system as a whole. Many individuals in our country enjoy huge wealth (of at least $23 billion) while the government pays no taxes on their money, as they can now invest anywhere in China without paying any tax.
In addition, if foreign investment is not found in the country, then an individual must pay an income tax on the capital that was already taxed on their investment. This law will be enforced by the government with additional penalties.
The Internal Revenue Service is under the control of the Chinese Communist Party, a party that has governed much of China. China has been fighting for its independence and independence against the Communist Party since 1949. Under Mao’s influence, the party came into power in 1971. However, this is the first government in history to impose an exorbitant tax on the financial sector, and the entire country has experienced a rapid reduction in its population. It continues to follow these principles in many cases. However, the current government has not been able to maintain or even improve the rule of law. China’s economic condition and social and cultural evolution has made the domestic political system increasingly difficult for the country’s people. China’s economy is undergoing a major demographic change which will require the growth of an ambitious social development program (e.g., a national socialist state) that seeks to bring all citizens into economic and socio-economic equilibrium with the rest of the world. A socialist government in China is no chance for an authoritarian government in much of East Asia.
Under the leadership of Chinese President Xi Jinping, the government has established a massive fiscal stimulus program with nearly $2.5 trillion under its belt and $2.1 trillion under budget. This stimulus stimulus budget is large, not small, and can be used to fund a number of social programs across a range of countries. China has been the main beneficiary of this stimulus program since China entered the GDR in 1974. Through its fiscal stimulus portfolio, the government has also brought China to a level where any political party will see a serious problem with the debt of the GDR. The government wants to create a country in which people will not run out of money. At the same time, it would also like to maintain some degree of peace and stability throughout Eastern Asia because, under the U.S. approach, economic stagnation
The Economic Crop Reform program, which is part of China’s official development strategy and is administered by central government for each of the three largest and most active sectors of China’s economy, is well supported by the GDR. Both of the main objectives of the program are:
Increase economic growth by over 2 % (2.6% is the target of the policy).
Recognize global climate change as a big problem and commit to improving water quality, energy efficiency and conservation, reducing fossil fuel emissions, and reducing global warming by as much as 50 percent from the 1970s and 90s.
Incentivize citizens over an energy demand increase of 50 percent or more.
Recognize global environmental dangers.
Recondition the military and commercial base in some countries, such as Chile, Indonesia and South Africa, and, more recently, Indonesia.
Increase public investment and development, a number of tax revenue cuts for wealthy and developing countries.
Include economic, social, and cultural reforms.
The U.S. government has also supported these reforms by creating a series of economic and industrial incentives to promote the United States into the GDR.
The government also maintains a strong working relationship with South Koreans through free trade agreements and other agreements, including the Trans-Pacific Partnership (TPP).
In addition to the “free trade and free travel” agreements, including the Trans-Pacific Partnership (TPP), Japan has been among numerous countries pushing an open-border trade deal on the eve of the 2008 financial crisis, for example.
U.S. trade policy has been a major driver of the U.S. recovery since the last post-World War II world war II crisis.
While the U.S. has enjoyed strong economic growth of over 2.5 percent in recent years, China has seen its growth be constrained by high levels of inequality and over-policymaking.
On the contrary, its gross domestic product, which is also characterized by low growth, has continued to expand at a steady rate since 2007, reaching $37 trillion in 2007 dollars. The U.S. currently has the second largest gross domestic product of other developed economies, behind the developing world, behind the middleman, which includes the United States of America and Germany. In 2007, China had the third smallest gross domestic product in the world, behind Russia and the United States.
Despite low growth, the U.S. has been able to attract investment, growth, jobs and employment in the emerging economy, especially in rural America. Thus, the United States now has greater economic security than other emerging economies.
To understand Chinese economic growth, let’s look at China’s historical contributions to the world economy.
Chinese Foreign Investment
China’s contribution to the world economy is more or less unchanged over the past three decades (Figure 1). In 2000, with China’s rapid economic growth and the Chinese People’s Republic’s growing economic power, it entered the global competition because of its superior economic power, including its superior physical infrastructure and improved technology.
Figure 1. Chinese Financial Contributions to the World. (Source: United Nations World Bank.
In the early 1990’s, while China was growing rapidly and