China’s Growing Economy After North America, Europe, and Japan, the area of China, Taiwan, and Hong Kong is a fourth growth pole in the world economy (Jue 108) which in 1994 was expected to double in size by 2002. Today, the growth rate is still on track to fulfill that prediction. Recent Chinese economic policies have shot the country into the world economy at full speed. As testimony of this, Chinas gross domestic product has risen to seventh in the world, and its economy is growing at over nine percent per year (econ-gen 1). Starting in 1979, the Chinese have implemented numerous economic and political tactics to open the Chinese marketplace to the rest of the world. Chinese reform measures even anticipated the rush of foreign investment by opening newly expanded industries to out-of-country investors.
As trade expands globally and countries within geographical proximity and of similar cultural descent and philosophies ally themselves in order to better compete on a world level, we are seeing the development of increasing number of geographical trade alliances, whatever the underlying reasons behind each. The alliances that have been in place for a while are proving to be very successful in competing in the international markets, stimulating the economies of nearly all of their member states. Effects of this change in economic strategy by a world power can be felt by practically every nation of the globe involved in international trade. The change in the amount of imports and exports to and from China will increase the demand on countless markets. Also, with all the foreign investment China is receiving, the socialistic republic will only grow more and more interdependent upon the world economy.
However, the impressive growth rate of Chinas economy is not without its shortcomings. Problems such as inflation and inefficient state-owned enterprises plague the rise of the Chinese economy. When China opened its economic borders 19 years ago, environmentalists spoke of the efficiency of their farming systems and how they used hardly any organic fuels in the production of food for their people relative to some of the other countries of the world-most notably the United States. What they neglected to mention, however, that one farmer at the end of one rake struggling to feed his family kept fuel consumption very low indeed. It was not, by any stretch, efficient. Matching conditions still exist today.
Rumors of the wonderful prosperity of the south and eastern provinces have reached the more isolated-and less prosperous-interior provinces. Those current farmers who would travel in order to be more prosperous themselves are often stopped at the borders of industrial growth and made to turn back. Everyone in China seemingly wants a share, but the industrial provinces can physically support no more drain on their existing housing and infrastructures, and they are finding themselves unable to enhance their current positions despite their economic prosperity. When examining an issue, it is imperative to honestly look at all sides, and not all of Chinas sides are forthcoming. The country has indeed become more open toward foreign investment, and in fact openly courts it.
China have been known to have placed several restrictions on the multinational companies that have opened operations within their borders, but they are generally not so restrictive as to be prohibitive. For example, after IBM accepted Chinas conditions regarding the true ownership of IBMs facilities and environmental rulings, it seemed that all of the rest of the world wanted to join in. Deng Xiaoping called Chinas entrance to and courting of the industrialized world crossing the river by feeling for the stones (The Economist 26). In feeling for the stones, Chinas already realized economic transformations have vastly improved the lives of hundreds of millions of people (The Economist 26)- Chinese people. Economic measures instituted by Deng Xiaoping have been grouped together, under the general term of gradualism, but many observers now say that in order for China to continue its double-sized growth over the long term and to rectify the problem of the state industries that are losing billions of dollars, economic shock therapy needs to be administered, and quickly.
But the current plan of Chinas President Jiang Zemin and his advisors includes no such shock therapy. It does include, however, divesting the government of all but one thousand of the more than three hundred thousand state-owned businesses that have cost the Chinese government $85 billion in looses over the past ten years. The following chart shows the distinctions of several of Chinas economic indicators, and their changes since 1987. Table 1. Selected Economic Indicators (Billions of dollars) Factor 1987 1997 Change Gross Domestic Product 300 610 610 Merchandise Exports 30 180 150 Foreign Investment 2 48 46 Hard Currency Reserves 25 128 103 Losses of State-Owned Industries 3 88 85 (Business Week, Sept. 1997) From the preceding chart, the growth in Chinas GDP over the past ten years in nearly indefinable. Other indicators are highly favorable, with the economys only apparent problem being that of the losses of the state-owned industries.
The losses incurred over the past ten years could have served extremely well in furthering the quality of life of the Chinese people, rather than simply supporting the workers in those industries. Those workers represent no small percentage of the Chinese population- there are 100 million workers in those state supported industries that have lost so much money (Clifford et al.). The plan of action proposed by Jiang Zemin in rebuilding the Chinese economy includes: Restructuring state enterprises. Already responsible for a third of the countrys industrial output, these could be converted to public corporations. When these companies become shareholder-owned companies, it opens the door to foreign competition.
Government holdings can be at the level of minority shareholder. Strengthening financial markets. Set up the equivalent of our SEC and allow annual capital-generating stock listings in Shanghai and Shenzhen. (China already has a start on regulating securities exchanges (Reuters).) Selling state assets. Currently, there are 305.000 state-owned businesses.
The government would retain 1,000; the remaining would be sold. Those that cannot be sold will be allowed to go bankrupt. Building social services. Literally millions of Chinese citizens stand to lose their jobs through the sale and conversion of state-owned businesses. This action is intended to both replace some of those state-owned enterprises and provide assistance to those affected in the form of training, housing, and pensions design.
Cutting trade tariffs. Though China is not a member of ASEAN, the country does aspire to join the World Trade Organizations (WTO) by the year 2000. Tariffs must be reduced to 15 percent by that time in order for China to be eligible for WTO membership (Business Week). Even while concentrating on internal adjustments, the government apparently intends to work toward that end. Jiangs objective is to build a complete market system which will give China a chance to grow at an average of 6.5 percent annually for about 25 years and come forth as a $5 trillion modern industrial superpower (Clifford et al.). If the President is able to succeed with his plan of action, the impact will be tremendous for the global economy of the 21st century.
Hong Kong, the center of the Chinese capitalism, could have the opportunity to be side-by-side with London, Tokyo, and New York as financial centers. As long as Chinese individuals move in on global bonds and stock markets to help finance everything, like superhighways to steel mills, China could take part in even more parts of the worlds capital. The main goal for Chinas modern foreign policies is the development of the Chinese infrastructure. The significance of improved communication and transportation cannot be over-stressed. Economically, enhanced means of communication and transportation allows more expedient supply of demand scheduling. Two of the latest Chinese ref …