The paper "Factors Impeding China’ s Economic Performance and the Wider Impacts on Global Economy" is a great example of a macro and microeconomics case study. In 1978, the Chinese Communist Party leader, Deng Xiaoping inducted the open door policy as a free-market reform (Smyth, 2008). This reform revived China from being a poor and undeveloped country to being a growing open market economy (Naughton, 2006). A free-market reform meant that China could accept foreign direct investments, privatize state-owned businesses, remove price control and allow entrepreneurs to start their own business.
The open-door policy was the beginning of dramatic economic growth for China. Between 1978, the start of the open market policy and 2012, the economy of the country has grown by approximately 9.4 percent annually since China is the largest developing economy which has led to more than 500 million people being lifted from poverty (Naughton, 2006). In addition, the reform brought about other transitions that are currently in progress such as the replacement of the rural productivity by urban productivity and the country also is shifting from being developing to a developed economy.
However, China stills lag behind when it comes to the GDP per capita and regional inequality is very high (Rawski, 2001). China is still considered a poor country despite the positive results brought about by the open market reform. China’ s economic slowdown that is associated with the decrease of the country’ s annual gain of 10 per cent in 2007 to the value below 8 percent has powered prevalent speculation concerning the economy’ s growth potential (Naughton, 2006). For a fundamental country, China accounts for more than 35 per cent of the global growth of GDP.
For this reason, the hindrances to the economic growth of China have affected the global economy as a whole. This paper will explore the factors impeding the economic growth and performance of China. It will also detail out how such factors can have an effect on the global economy. The wider explanation is that China’ s economic growth and performance are slowing down and there are many concerns that this transition of the economy will bring about disruptive results (Guariglia, Liu and Song, 2008).
The immediate sparks in relation to the instability in China’ s economy is a warning sign about the global economy. The fall of China’ s economy began as an innocent incident with a fall in markets. This fall has continued to gather momentum and it is now looking very worrying. China’ s economy is considered the second largest in the world by nominal GDP and the largest economy by purchasing power equivalence (Rawski, 2001). China is the world’ s largest hub for manufacturing and the largest exporter of goods. In addition, the country is the largest trading economy globally and takes a vital part in the international market.
As of 2015, China has been considered as having a slowing economy. This slowing economy has been caused by a number of factors. One factor hindering the economic performance and growth in China is the demographic shift (Naughton, 2006). China is expected to experience a serious demographic shift in the years to come. The one-child policy over the years has reduced the number of people and especially of adults of working age. This has led to a decrease in the population that has resulted in a decrease in labour and in the number of the working group.
In order to reduce the shortage of labour in China, the government announced the relaxation of the one-child policy. This recent relaxation of the policy coupled with the big decrease in infant mortality has increased the number of children.
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Rawski, T 2001, What is Happening to China's GDP Statistics? China Economic Review, 12, 347-354.
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