Determinants of Growth Policies and Strategies in China - Case Study Example

Determinants of Growth Policies and Strategies in China Name: Institution: Determinants of Growth Policies and Strategies in China Introduction The general perspective of the economy is obtained by considering the general trend of the global economy. From such a point of view, the international economy continues to grow in all aspects from size to diversity in terms of the products introduced in the markets. Continuous development and growth of the various industries of business also contribute to this economy. It is important to note that the markets mentioned herein are in particular national regions and so there are certain determinants of a country’s economic growth relative to its international market. Such determinants also influence the policies and strategies that the nation adopts to enhance economic growth. This essay paper seeks to determine the level to prevalent contexts and circumstances of a country influence its policies and strategies of growth. The paper considers China in the discussion to illustrate this aspect. The paper, therefore, takes on the approach of studying the fundamental factors that determine the policies and strategies of growth in China. Subsequently, the discussion will be able to look into the nature of these determinants and conclude whether they are mainly about the contexts and circumstances that are prevalent in China only. The content of this paper can be of importance to economists, libertarians and conservatives who have much interest in the form of national economies that influence the global economy. It will also prove important in to the Chinese government in terms of its details as it presents a probable perspective of viewing the Chinese economy. Factors Affecting Economic Growth in China Cowen (2012) discusses the two possible lenses through which can one view the economic problems that China faces. One is the overinvestment on capital goods, or excess capacity, while the other is the continued manipulation of the Chinese currency by the Chinese government. The author’s publication studies china without excluding from the rest of the world, but by the consideration that these two particular identified problems could be experienced elsewhere. Moreover, the crippling of the Chinese economy directly or indirectly affects other economies as well. Cowen (BU4) states that the theory of Keynesian economics which postulates that the government’s activities in terms of investment, expenditure and consumption influence the stability of its economy. The author also holds that since the economy slowdowns resulting from these are due the government’s activities, that very government should provide necessary assistance in difficult economic times. The involvement of the government in the economy should not be limited to the times of difficulty only. Most of the successful economies have their governments implementing policies that monitor the economy during the development, growth as well as during the fall downs. Similar to what Booner (2012) discusses about the American economy, excessive state control, financing difficulties and flawed legal systems are among the problems that hinder economic growth in China especially in the private sector. The logical opinion in this view is the establishment of a favourable legal environment to effectively protect the sector and the economy in general. In the American case, the government predominantly relies on the concept of self-correction. This is a concept which implies that irrespective of whatever the governments does or what happens to the economy, no action is taken and default situations take the course. Any society that relies on self-correction is basically pessimistic and has no definite countermeasures to economical breakdowns (Booner, 2012). A study of Chinese strategies below will show how they compare to the American approach. Explorations of more vital factors reveal the occurrence of deficits as a major component of the true burdens to the Chinese government and the economy (Bartlett, 2012). The presence of deficits in the Chinese government budgets has extended effects that most conservatives believe not to have serious crippling effects on the economy. They, the conservatives and other victims, fall the misconception that reducing government budget deficits yield no gains in the economy, yet overspending forms part of the true burden of the government (Bartlett, 2012). However, evident results prove otherwise. There is more cost incurred in the deficits in form of interests, than the burden from a tax structure. These deficits in the budget derive from financial difficulties within the government. Poor performance of the Chinese industries due to financial problems also cripples the economy a great deal. Another problem that the Chinese economy sees has to do with employment, cost of labor and industrial growth. Considering the population of the country, employment problems are almost evident from a general perspective. Not many people secure employment in governmental offices or in non-governmental organizations. Resultantly, most people opt to engage in informal sectors and self-employment. However, that of importance to this paper is the training and retraining of employees by the industries. The Chinese government has had problems of retaining employees since many leave work due to particular reasons. One of these reasons is poor payment and compensation of the workers. This brings in the point of labor costs where by most Chinese who resign Chinese employment end up working in other countries that offer better payment. This is indicative of a lack of employee appreciation and motivation in China. As Suddaby (2006) writes, the cost of labor in any business is an unavoidable encounter and shareholders of the different industries, especially hospitality and sector of hotels experience it as actually the biggest expense. Chinese Government Strategies and Policies In response to the above discussed and other fundamental aspects that, in most cases, negatively impacts the Chinese economy, the government implements counteractive strategies and policies. There is an evidence of an essential redirection in China’s strategies for the economy. These strategies and policies are meant to restore the economy to desired levels. It will be evident which factor each strategy addresses and thus establish if such factors are only prevalent in the country. A research of this nature uncovers to the global audience what really proceeds in the Chinese economy. The importance of this is that an enormous volume of information about economics is availed for use both locally and internationally. The government’s response to economic problems then becomes the center of interest. Employment Policies and Strategies This country is the most populous and therefore, holding all other factors constant, it has a tremendous workforce like nowhere else in the world. However, the problem of employment that the country has experienced resulted from uncontrolled economic system reforms and as an unforeseen effect of industrial adjustment with much of technological advancements. It is important to note that the employment issue is internal and a circumstance that is only within the context of China. More importantly, China responded by taking up the issue and attaching it to the people’s livelihood. There has been an enactment of relevant laws and regulations that protect the employment rights of the labourers. For purposes of social and economic developments, the government controls unemployment rates and increases job opportunities as a macroeconomic policy. Complementary to this is use of favourable taxation and financial policies to support the unemployed (DI, 2005). Aiming for Re-balancing and Moving up the Value Chain With this strategy, the government aims at financially empowering the citizens and hence increasing rates of consumption of goods and services. This requires a labor-intensive growth and therefore it depends on the achievement of urban employment. This strategy relies on the successive of the previously discussed policy, though the two can be implemented concurrently with optimism for the economy. Careful financial empowerment to the consumer is realised by improving wages and income per household. The policy would advance the gross domestic product of the people. More importantly it increases the essence of the role that they play in consumption of goods and services, hence more revenue from taxation and thus strengthening the economy. The other angle of this strategy is to channel more of new resources to new sectors and industries other than just the old ones. This calls for particular industrial reforms (Kuijs, 2012). Evidently, this strategic plan can only be implemented relative to the condition in China with a clear understanding of the Chinese people and their context. Maximum Output Growth through High Accumulation This encompasses facilitation of huge domestic investment as a primary factor for high rates of growth. The Chinese government plans to achieve this by devoting a good portion of the country’s income to domestic investment. Apart from sensitizing the people about the importance of such, it also offers financial support to viable domestic investors. This strategy not only turns China into a production house but also promotes self reliance of the Chinese people and of the nation. It particularly addresses the issue of too much control by the government and manipulation of industry and sector laws. Moreover, it gives strength to set policies that govern the private sector. In addition, all industries can only concur with this since every single industry is affected by the effects that economic issues have on the availability and supply of labor. The figure below majorly shows the growth of Chinese economy in terms of labour, potential gross domestic product and employment. Figure 1 Source: NBS (China), Statistics India, and FGI estimates. The common factor in these strategies is reformation of sectors and doing things differently compared to the old ways. The Chinese economy has faced a number of challenges and risks but the current growth that seems unstoppable is evidence of the effectiveness of these strategies and other policies in implementation. Therefore, this high rate of economic growth is bolstered on specific important factors which also include investment in infrastructure, education and technology. The government has and continues to invest large amounts of capital and other resources on enhancing education and developing technology. The latter is related to urbanization which is a very important aspect of production, market demand and infrastructure. On matters of infrastructure, a dynamic financial policy of heavy investment on infrastructure effectively steered China’s economic growth and solved the economic development and financial crisis of 2008 (Malkiel, Mei &Yang, 2005). A different view of economy is on the various studies and researches indicating that the global populations continues to grow and, as expected, it will continue to put greater pressure on the planet’s limited natural resources. International relations and universal organizations therefore, suggest that the industries influencing various economies must invest wisely. Theories postulate that the direct aspects relating to this include the role of entrepreneurship in urban growth Conclusion Matters of economy receive international attention from all over the globe and this is because of the extensive effects that it has all over the world. It is also due to the similarities in the factors that influence an economy nationally and internationally. This nature has moved economists and researchers to extend their regions of study and research to explore other economies. This paper had to the objective of studying economy from a different perspective of determining the nature of policies and strategies adopted by a country, in this case China. To achieve this objective, the essay employed to approach of exploring the major factors that influence the economy of China and the responsive policies and strategies that the Chinese government adopts. From the discussion above, the policies and strategies implemented by the government of China directly relate to the major causes of economic crises in the region. Notably, some of these factors are effective independently while others work in collaboration with others. However, they all commonly derive from within the Chinese context and collectively influence the policies and strategies put in action. Conclusively, it is the context and circumstances prevalent in any nation that should determine its policies and strategies of economic growth. References Bartlett, Bruce. (2012, December 18). The True Burden of the Government. Business Day. Booner, B. (2012, December 19). This Is Why America Is Broke. Magazine Week, 19. Cowen, T. (2012, August 12). Two Prisms for looking at China’s problems. The New York Times, BU4. Di, Y. (2005). China’s employment policies and strategies. Hong Kong: Ministry of Labour and Social Security. Kuijs, L. (2012). Economic growth patterns and strategies in China and India: Past and future. Hong Kong: Fung Global Institute. Malkiel, B. G., Mei, J. and Yang, R. (2005). Investment strategies to exploit economic growth in China. Princeton: Princeton University Suddaby, C. (2006). The Top Ten Issues for 2007, Fort Quarter. Retrieved from http://www.colliershospitalitys.com/innvestment Read More