The future of China

Future of China

Anticipating the future scenario of Chinese economic development is intricate as the causes impacting the future economic development of China are extremely complicated, some of them beneficial whereas others are restrictive."

Instead of focusing on all aspects of studying the future of China, the paper focuses on a single aspect, which is the economic future of China. It appears that everybody is thinking about China. It is a country having the world largest population and boasts to be the most ancient civilization. The population of China constitutes one-fourth of total people of the entire universe. China spreads roughly across 3,860,000 sq. miles. Sinkiang or Chinese Turkestan and Tibet, which as a total form roughly three-tenths of the net land area. This massive land area houses a diverse assortment of climates varying from the tropical in the extreme Southeast to the continental in the Northeast and the Northwest. (Adler, p.1)

However what is the reason behind talking, deliberating and evaluating China at such length? 2 Even after twenty years of growth, Chinese economy has encountered major alterations in "quantity" as well as "quality." (the trend of Economic development of mainland china in the 21st Century) This state of affairs was absent 50 years back, or just ten years back. Russia is no more in the limelight for the moment, maybe for the time being, but rather obviously at present. The economic victory of Japan appears a little blemished in a lot of people's view. The situation over Europe seems hazy. In a situation, when the U.S. appears to be rather less influential and less enthusiastic compared to what it was a decade earlier, China appears on the growth path. (the Future of China, the Future of the World?) Currently, all eyes are set whether the Chinese economy in the forthcoming years will be able to keep up with the streak of speedier growth into the long-term. (the trend of Economic development of mainland china in the 21st Century)

The beneficial trend in China

With a large expanse of land area, similar to the U.S.A. Or Canada, China is even bestowed with plenty of other natural resources. Natural resources like climate, flora and fauna, water, minerals, energy, and the like are the fundamental constituents among the factors which impact social and economic activities, particularly for the under developed economies having a dearth of capital and technology. Hypothetically, in a country which is devoid of production and other modern industries on a scale which is not globally competitive, one of the major practical ways to eliminate poverty and low standards is to ensure develop the sectors which are based on the natural resources. In the decades just gone by, the natural resource-based sectors persisted to contribute the most crucial part in the not so developed regions of China and would assist in the economic future of China. (Guo, p.19) Further the outcome of "reform and liberal entry and exit" policies have remarkably enhanced largely the strength of China. In the meantime, the economic well-being also transformed considerably. (the trend of Economic development of mainland china in the 21st Century) China's growth has been unparalleled in terms of its march ahead. A strong achievement has been recorded, gauged by the GDP and by growth of businesses in China. (the Economic Future of China)

China's GDP growth is anticipated roughly at 8%, well ahead than the almost standstill rates prevailing in Europe, Japan and the United States. (Fast lane to China: companies that never thought of doing business overseas are now looking to the thriving Chinese economy) the prevailing function of an authoritarian planned economy is deteriorating; the extent of inclination towards the market and globalization is on the rise; the private sector is demanding more and more chunk of the total economy. Apart from the market of general goods, Chinese administration has looked attentively to the growth of the futures market, stock market and labor market lately. With the proliferation of the several markets, the technique of market competition will put more and more function. As regards legal systems, to completely execute its open-door policies and draw more FDI, China has enacted several new laws and policies since 1979. (the trend of Economic development of mainland china in the 21st Century) the quest for resilience pertinent to the industry of China where a huge, untapped market is present and where the purchasing power is bettering at a rapid rate compared to other developing areas. These factors, together with comparatively low wages, indicate that gains are there which has to be capitalized from increased conventional management system, like the Fordist-type of system of mass production in manufacturing. (Warner, p.77)

Exports might also come to be a source of economic growth in the domestic economy. China has achieved the status of being the world's greatest producer with low unit cost, not merely conventional labor-intensive articles such as shoes and toys and garments and sports equipment, but more and more items such as information technology, hardware and electronics as well. Undeniably, of late, China has emerged occupying the third slot in the production of information technology hardware which includes computers, telecom devices etc. China as we have observed is gradually becoming more and more unified into worldwide manufacturing chain. China is growing to be a leading exporter of information technology hardware to global markets, and recent products are shipped to China for manufacturing always. (the Economic Future of China)

The manufacturing industry of China has been a trailblazer one and established a new paradigm. Approximations made by some industry researchers reveal that currently half of the world's cameras, 30% of the air conditioners and TVs, a fourth of the washing machines and a fifth of the refrigerators are presently manufactured in China. Piggybacking on this pattern, large MNCs of the likes of General Electric and Toyota are shaping or up-scaling their production facilities. Technology leviathan like Intel, who is currently delivering Pentium 4 chips from a $500 million plant based in Shanghai have also contributed their portion. However, there are indications - a plethora of tell tales, apart from bare facts pointing out that a lot of tinier enterprises having sales in the region of $100 million to $1 billion are making their destination as China also. (Fast lane to China: companies that never thought of doing business overseas are now looking to the thriving Chinese economy)

There is no instance of any country who has a major role in the global trading system with the rapidity like that of China in the past quarter century. (the Economic Future of China) Foreign Direct Investment or FDI in China is the most remarkable expression of the policy of allowing foreign companies in China. Coupled with relentless import and export expansion, FDI has more and more opened the Chinese economy to the Western world during the earlier decade. (Ash, p159) the economy of China which is marching ahead quite fast which has reason to be successful in drawing massive amount of Foreign Direct Investment or FDI. China had agreed to FDI since the past one-half decades, ever since the initiation of the restructuring program since the late 1970s. Nearly, one third of every FDI happening in the developing nations on an international scale happens in China. (the Economic Future of China)

Some wonder then why China is drawing the overseas enterprises at the moment both large as well as small. It presents the optimum blend of opportunities which is just impossible to emulate by any other country: Cheap labor, a huge captive market, speedier growth, excellent infrastructure facilities, properly skilled manpower and an administration which is hassle-free for the corporate world. The mobile telephony business in China shows a good instance of how China's national market, far ahead compared to its export scope, has been proving attractive for overseas enterprises. U.K. based business researcher associated with the research organization Strategy Analytics, Neil Mawston, has observed that large MNC handset makers like Nokia and Motorola established production bases in China with a view to be proximal to their markets. In his opinion, the bulk of the phones produced in China are intended for its domestic market. After all these years China exported mobile handsets only in 2002. (Fast lane to China: companies that never thought of doing business overseas are now looking to the thriving Chinese economy) Moreover, the bulk of it arrived in China during the previous decade and the future appears rosy in this aspect. Therefore it goes without saying that the Chinese economy has been performing quite fine in measures of development, business, and drawing FDI. (the Economic Future of China) recent BBC World Service Poll from 22 nations covering 22,953 individuals was undertaken for the BBC World Service by the global polling company Globe Scan along with the Program on International Policy Attitudes or PIPA at the University of Maryland which reveals that regarding likely future trends, nearly everybody is upbeat on China considerably enhancing its economic strength in the world. Even though a lot of attention has been generated on competitive danger from China's massive capabilities, the nation's mounting economic potential is witnessed as encouraging in a majority of the countries. When inquired to share their views whether it is going to be encouraging or damaging in case China assumed to be "considerably having more potential on the economic front compared to today, " in sixteen nations nearly the majority of 11 nations or a multitude of 5 nations witness it as encouraging. Prominently, this upbeat notion is seen in several nations, like Mexico of 54%, whose production sectors face a major competition with China. Taking an average estimate, 49% see it as encouraging and 33% view it as downbeat. In just four nations does a multitude view it as downbeat - Italy which is 47%, Spain -- 47%, Turkey -- 42%, and Argentina -- 41%. There is also a divided opinion in two nations - the U.S. And Germany. (22-Nation Poll Shows China Viewed Positively by Most Countries Including Its Asian Neighbors)

The U.S. Dow Jones Indexes who carried out a survey lately about the future development of the top 50 worldwide transactional corporations, one-third of these corporations consider that the economic growth of China constitute the most encouraging aspect for their advancement five years ahead. The Dow Jones Indexes launched the "Global 50 Giant Index" for the 50 major multinational corporations five years back. According to the survey, the economic growth of China was placed first among several factors which would be impacting the future development of the corporation in the coming five years. Among them constitute China's low cost but good products, exceptionally talented human capital and an extensive market. Truly, 13% of the companies maintained that the economic growth of China would put a harmful impact on their future growth. They primarily implied that China's economic development would involve hike in oil prices and raw and semi-processed materials and compete with their products. but, an added 20% firms maintained that their future proceeds from the global markets would arrive chiefly from China, and their market share in China will be enormous as that of the U.S. The exploration outcomes even revealed the patterns of development of the large multinational companies in five years from now. Merger and Acquisitions -- M & a will no more be the primary means for the progression of these multinationals, their development in the coming years will depend primarily on the improvement of their own products and services. (Survey: China's economic growth is a most positive factor)

To include more of the several advantageous causes for the development of China constitute that taking into account the massive population in China, supply of cheap workforce is taken for granted, which offers immense advantages to the long-standing persistent economic growth. A huge population not just indicates a quality supply of labor, but an enormous market scale as well. As the economic growth of China continues to be at a nascent level in contrast to that of the Western nations, the earnings and purchasing power are quite restricted. Therefore, a huge opportunity exists for the growth of domestic market. The inhabitants of China habitually keep aside huge sums for savings and thus have a high savings rate. It will be a vital assurance of the demand of investments for future growth in investments and enabling of speedier economic development. (the trend of Economic development of mainland china in the 21st Century) considerable gap exists between the stages of production technologies available in China compared to other developed nation, which is a pointer that a huge scope exists for development of old-economy industries in China. The economic restructuring in China have been executed in a phased way. Therefore the restructuring work is yet to be over till now. Ultimately, under the trend of globalization, the spate of economic development and consequences of improved production technologies have provided the economy of China an increasingly significant part to contribute as regards industrial labor division in the global trade system.

Therefore it is discernable from the above deliberations that following twenty years of restructuring and inviting foreign companies, the Chinese economy has been marching ahead. The macroeconomic settings has faced "qualitative" modifications like an improvement in the extent of globalization, the economic system favoring towards market driven economy, development towards private companies, phase wise allocation of economic management powers, augmentation of regional economic power and more and more stress on laws and legislations by government control. These important modifications can be regarded as vital achievement of the execution of reforms and the policy of inviting foreign companies by Chinese government. Taking into account the basis of these achievements, it is therefore regarded that the twenty year long economic reforms and liberalization of the economy have implemented a global influence on the economy of China and would present encouraging prospects for the nation. (the trend of Economic development of mainland china in the 21st Century)

Restrictive Trends in China

Nevertheless, we should indicate that not every change on the "nature" of Chinese economic setting as an outcome of "restructuring and the policy of inviting foreign companies" are encouraging to the steady growth of the Chinese economy and society. To put in differently, restructuring and inviting foreign companies have even resulted in a number of damaging impacts to China. These impacts might result in such adverse outcomes and destabilization of the society and economic stalemate in the coming years. (the trend of Economic development of mainland china in the 21st Century) Overall, China is classified into a 'developing country' status. However the enormous expanse of the nations implies that a lot of regions are there which are on their path towards industrial and economic growth. Disparities in the speed of industrialization have broadened regional disparities in economic development leaving certain regions in a transitory state. It goes without saying that, it is totally expected that as a socialist, industrial country, China occupies, on the whole, has been capable of attaining a certain level of growth. What is crucial for the current objectives remains that disparities in regional economic levels have led to huge gaps in the nation that would be a hindrance to the future prospects of China. (Ash, p.126)

It is popularly regarded that the exceptional economic growth of the Chinese economy in the last twenty years does not hold any assurance that identical pace of growth will be maintained in the coming years. As per guesstimate by the World Bank, the pace of GNP growth of China will come down with the passage of time. The mean yearly growth rate will come down from 8.4% within 1995-2000 to 6.6% within 2000-2020 and subsequently a mere 5.5% by the year 2020. The causes of the lowered economic growth rate primarily comprises hold up in the growth of labor force and alterations in the age composition of the population, deterioration in the rate of capital output, waning in the propelling force given by enhancement in the organizational modifications and dwindling scope for technological progression.

The downbeat view maintains that more and more dependability on overseas investment in China would thwart capital formation through domestic savings and pressurize the subsidiary company's dependency on the flagship company and deteriorate the international balance of payments or BoP by payment of interest and dividends would be a hurdle to its future positive growth (Park, p.65) Apart from that, the citizens are yet to reap from China's economic growth particularly in the country side. Nearly 160 million of the nation's 1.3 billion people thrive on below one dollar per day. This state of underprivileged condition has forced the rural folks to rush to the cities in search of jobs that are paying. This change in demographics is showing bad results; cities and farmlands are gradually eating away China's farmland. The country which in the past has been self-reliant presently is compelled to import enormous quantities of grain and oil. The menace of pollution constitutes another shortcoming of the nation's economic development. China houses 16 of the 20 maximum polluted cities in the world as stated by the World Bank. (Supersized! China's economy booms)