Determinants of Economic Growth: China - Example

The paper "Determinants of Economic Growth: China" is a great example of a report on macro and microeconomics. Mahaney's proposition bears a fundamental truth when analyzing the realities of why certain nations prosper even amidst tough geographical, demographical, and economic prospects. While there are different viewpoints that can be taken when analyzing the truth or falsehood in his statement, wide empirical research intimates that the key factors that propel nations to economic prosperity are not universal but rather, are tailor-made and fitted to the context of each country. As such, this paper will explore the truth in Mahtaney’s statement by analyzing a wide array of literature and economic statistics that will provide an objective opinion on whether strategic growth and policies are dependent on the circumstances of each country or whether they can be applied unilaterally across the board. Particularly, the essay will conduct a case study of China in assessing this statement.

Agreeably, the rapid economic growth in China has marveled at the Organization for Economic Cooperation and Development (OECD) and other countries as well. China’s gradual growth and eventual integration into the world economy can be attributed to several internal policy measures and an economic approach that has proved to be both sustainable and competitive. China’s rapid economic growth – what popularly came to be known as the economic miracle – spun a period of four decades beginning in the late 1970s until late 2010. During this period, China has recorded exponential growth, with a marked openness to global trade and market liberalization policies. The country has equally turned around its high population predicament – which from population statistics represents one-fifth of the entire world population – into a large market for local and international goods and services.

It is observable that China’s rise to become a global economic powerhouse has been characterized by a tendency of initiating unique and innovative strategies and solutions to their prevalent political and economic challenges. It is this unique trait that makes Mahtaney’s statement holds relevance and a strong argumentation basis.

In many quantitative studies, China’s growth reform has been attributed to institutional changes. Certainly, China has made tremendous efforts to ensure that their institutions are highly productive and steer clear of corruption. Moreover, the deliberate shift from an agriculture-based economy to an industrial economy was one of the key contributors to the rapid economic growth. Subsequent internal structural policies and reforms reshaped the economic landscape in China and contributed to consistent growth. Additionally, China has over the years instituted several reforms and policies that have promoted its economic growth.

Pursuit to Gain Comparative Advantage

Traditionally, the Chinese government had put great emphasis on capital intensive production methods. In the years prior to the 1970s, the Chinese government had restrictive measures that barred rural to urban migration and had largely neglected the agricultural sector. So severely had these policies been implemented that there were elaborate measures to ensure that rural residents remained in their respective residents. However, these policies had a major economic flaw; they ignored the huge and cheap labor that factories could tap from the residents in rural areas. Moreover, reliance on capital intensive methods was not only expensive but also unsustainable. For close to three decades, this strategy stagnated the Chinese economy and the per capita income remained low.

Therefore, one of the major reforms that propelled China to the global scene was the abolishment of these previous laws and a shift toward more labor-intensive economic sectors and production methods. In line with these reforms, China began focusing initially on the agricultural sector and later on opened up rural-based industries that would manufacture goods for exports. While most of the leading world economies would not decentralize industries at the time, this strategy proved to be the most economically rewarding for China. To begin with, huge overhead costs related to manufacturing were cut down. The availability of cheap labor in rural China equally made it possible for industries to concentrate on expansion since there was readily available labor.

Admittedly, China’s greatest comparative advantage can be attached to the shift to the labor-intensive production approach. Another with the opening up of the country to international trade, the country was able to attract foreign direct investment which coupled with the high availability of labor, catapulted the country’s economic growth. Even with the current trends of globalization, China has developed a niche for hosting most of the world’s franchises due to the huge labor pool. This realignment in its structural reforms to allow labor mobility has been a great boost to its overall growth.