CHALLENGES INHIBITING CHINESE ECONOMIC GROWTH of Inst It is a common economic perspective that any country which desires to grow and become world’s economic superpower has to develop positive relations with other world countries. Economic and social policies are also fundamental instruments that dictate the direction of spearheading the desired economic growth and social sustainability. Mentioned are just but the main aspects or tools for steering economic growth and social positivity by any country wishing to emerge as the wealthiest nation in the world. There are also some minor but vital issues to consider and which if ignored may ruin the efforts exerted while focusing on the major ones.
Such issues include democracy, justice, transparency and political bearing of the given country. Undoubtedly, China classifies among the first world countries holding the second position in the list of the wealthiest countries in the world. For China to achieve this status and even pose threat of displacing the United States of America from its superpower status, she adopted certain policies that addressed its economic, social and foreign discrepancies.
However, the restructuring that fostered positive economic performance has been met by numerous obstacles, some of which appear insignificant and therefore ignored by the ruling authority. The potential obstacles have threatened to derail and reverse the positive economic performance with potential risks of crushing the economy if the status quo persists. One of the main obstacles that slow down the efforts made by China to ensure economic superiority is poor and unsustainable economic policies (Xinhua 2012). In a move to spur the highest economic status in the world, the Chinese government expanded and encouraged production activities of the country to increase the quantity of goods and services produced and exported.
To ensure this, the government had to reduce the cost of production that would later reduce the cost of goods and services produced. In order to achieve high sales in export, the Chinese government devalued its currency below the dollar, which is the world’s hard currency. This move attracted many countries into purchasing Chinese products as they sold at cheaper prices internationally, thereby spoiling market for locally produced goods of foreign nations.
As China increased its foreign exports due to the lower prices of goods, it reduced importation of goods and services from the trading partner countries. This made the exchange system unfavorable for the trading partners considering that local industries in the partner countries had to close down because consumption favored Chinese goods. On realizing the negative performance of the locally produced goods both locally, bilaterally and internationally, Chinese trade partners imposed policies regulating import of Chinese products in the victim countries. This move reduced the rate of flow of Chinese goods and services thus the derailed economic growth.
The fact that the Chinese economy appeared stable even during the global financial crisis placed it in a better position to lend credit to other countries like USA and Britain among others to finance their budgetary deficits. Economy Watch (2010) elaborates that when these debtor countries tried to revive their economies by promoting production of more goods and services, they encountered other hurdles in marketing as Chinese products flooded the world markets and sold at lower prices coupled with devalued currency.
This situation made it impossible for the debtor countries to make positive trade and pay back the credits owed to China. As demonstrated by Economy Watch (2010), the increasing foreign debts coupled with protectionist policies adopted by other countries made it harder for China to increase or maintain its exports and recover its debts, retarding its economic performance. To counter the deficit and fall in the gross income, Chinese government opted to raise the tax margins imposed on foreign and local investors, who consequently made exodus to establish operations in other countries deemed favorable for business operations.
This transfer left many Chinese jobless while at the same time lowering the country’s Gross Domestic Product (GDP). In the description of Dorn (2011), another problem inhibiting Chinese positive economic growth is unfavorable political environment. Dorn (2011) clarifies that the unfavorable political atmosphere in China exists because of the monopolistic rule by Chinese Communist Party. This leadership controls and determines the costs of capital markets and the operation of the state-owned banks, thus infringing on capital freedom.
This form of control has led to the rise in the cost of doing business in China as well as rise in the interest rates on loans borrowed for investments. These exercises have increased the rate at which businesses transfer their operation to other countries like US where the cost of investment is low compared to China. The move has also rendered many citizens jobless thus shrinking government’s tax base. The remaining industries that maneuvers to operate in China have raised the costs of their goods and services thus resulting to inflation (Xinhua 2012).
Consequently, Chinese working class have resorted to savings rather than spending their incomes for fear of further inflation. This has led to the reduction of Yuan exchanging hands in the economy and even slow rate of product turnover for many businesses. Insufficient energy and space constitute parts of the problems attributed to compile the derailed economic growth in China (IEEPA 2011). The fact that China attracted many industries and businesses upon the devaluation of its Yuan and lowering its cost of investment has created high competition for energy and space.
As the production businesses overpower the available hydroelectric power, the economy relents to fossil fuel to supplement energy requirement. The fossil fuel used majorly constitutes oil products. IEEPA (2010) confirms that China imports more than 50% of this product where she spends more Yuan thus partially raising cost of production. The fossil fuels used are also environment unfriendly as they emit carbon dioxide that world is struggling to eradicate due to its global warming effects. IEEPA (2010) connotes that these facts have embroiled China in conflict of interest considering its desire to grow using the oil products and conservation of the environment.
As a consequence, China’s rate of production has reduced significantly while at the same time spending more Yuan in attempts to conserve environment from carbon dioxide as well as other toxic emissions and effluents. The pressure exerted by the huge Chinese population and the increased number of investors on land and, space in general have skyrocketed the cost of land in the country. The Chinese government also operates tight laws on land issue rights. These entire issues surrounding land and space have fled off investors as well as scaring potential biding investors (Dorn 2011).
In the demonstrations of Lloyd-Damnjanovic (2012), compromised democracy, freedom of expression and the uncertain fate of the entire human rights constitute part of the set backs derailing positive economic growth in China. To begin with, Chinese government operates tight laws governing movement of people across various parts of the country by making it compulsory for individuals to obtain internal passports. Obliviously, such laws curtail movements as well flow of goods and services in the economy.
This kind of infringement has proved hard for local business persons to endure thus resorting to flee the country and invest in more liberalized economies where freedom of movement is an assurance. There is also greater disparity in the distribution of the national resources between the urban dwellers that happen to enjoy great privileges and the rural dwellers that languish in poverty. Dorn (2011) affirms that this trend has lowered the per capita income of the citizens and increased social crimes and injustices that have depleted national wealth and resources.
Infringed democratic rights have also denied Chinese citizens opportunity to report or condemn unlawful cats by the government leaders who indulge in uncontrolled corruption (Hall 2012). This rise in corruption activities has denied the government the income required to sustain economic growth. References XINHUA. (2012). China faces many difficulties, challenges globally, domestically: Wen. Retrieved August 8, 2012.. IEEPA. (2011). Global Sustainable Development and Challenge China Faces during Economic Growth. Retrieved August 8, 2012.. DORN, JAMES. (2011).
China What’s Next: Economy. Retrieved August 8, 2012.. HALL, SHANE. (2012). The Evolution of Chinese Economy. Retrieved August 8, 2012.. ECONOMY WATCH. (2010). The Chinese Economy: Market liberalization in the Chinese economy has brought its economy forward by leaps and bounds - but rural China remains poor, even as its cities increase in affluence. Retrieved August 8, 2012.. LLOYD-DAMNJANOVIC ANASTASYA. (2012). China Still Facing Human Rights Challenges. Retrieved August 8, 2012..