Table of Contents
Table of Contents
B.O.P(Balance of Payment)
In the late 1970’s China was an insignificant participant and contributor to the world economy in the trade of goods, services and capital but since then china has achieved a lot in economic performance and the contribution to the world economy by China has increased. China recorded a GDP(gross domestic product) of $7.318 trillion in 2011(The World Bank,2013).This GDP made China the single biggest contributor to the world economy(China Daily,2013).China has the largest population of over 1.3 billion(The World Bank,2013).It is the world’s second largest economy after it overtook Japan in 2010 and China shows a lot of potential to get to the number one spot to become the world’s largest economy by beating The United States Of America. China is a member of the BRIC countries which consists of the world’s fastest growing economies and is forecast to be four of the world’s dominant economies by 2050. Justin You Lin the chief economist, World Bank stated in November 24th 2011 that “The world desperately needs engines of growth right now, and fortunately with continued strong and pragmatic economic policy making China can provide that impetus (The World Bank, 2013).He also stated that China has the world’s largest foreign reserve which exceeds $3 trillion. China in the present world economy acts as a very important trading hub as many firms around the world have relocated to China and it is from China that these goods get exported to the world economy.
The four main macroeconomic objectives which are Economic growth, Inflation rate, Unemployment and Balance of payment has been handled effectively by china since its development process which enabled it to become a very successful economy in the present world. In the present, the world economy has become dependent on China for its exports and imports to the world economy. If China would reduce their trade with other economies by imposing quotas or embargoes, this will severely affect the other dependent countries. Many western firms were lured into China because of China’s resources such as cheap labour, availability of land, less legislations and formalities for setting up businesses etc. Examples of western brands which are very popular and successful in today’s world economy that has relocated to China are: KFC, Intel, Microsoft, Nike, Audi, General Motors, etc. A well educated workforce was another reason for china’s development (A.Anderton, 2009). The change of the market structure from a planned economy to a more free market type of economy led to many Chinese individuals setting up their own businesses which increased exports and linked China to the world economy, finally investment began to flow into the Chinese economy.(A.Anderton,2009).A planned economy is where there is high government intervention and social welfare is given the most priority whereas in the free market economy there is less government intervention, profit motivated and high competition in the market and the factors of production are owned by the private sector. The four main macroeconomic objectives of China will be discussed below:
Economic growth can be defined as the increase in the production capacity of a country which enables it to produce more output than it was able in the previous years. This is when the gross domestic product (GDP) increases. GDP is the national income excluding income from foreign investments. Between the years 2001 to 2006 China’s average annual national income was recorded as 9.7%,the highest by any economy between 2001 to 2006(A.Anderton,2009).In 2010 China recorded a total economic output of 3.7 trillion(Economy Watch,2012).China has helped other developing economies to...
References: A.Anderton, 2009 A/levels economics
East Asia Forum 2010 [online] www.eastasiaforum.com
Economy Watch, 2012 [online] www.economywatch.com
The Trading Economics, 2012 [online] www.tradingeconomics.com
The Economist, 2013 [online] www.economist.com
The World Bank, 2013 [online] www.worldbank.com
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