Analyse_the_Impact_of_Development_Strategies_on_the_Economic_Growth_and_the_Quality_of_Life_for_an_Economy_Other_Than_Australia.

Analyse the impact of development strategies on the economic growth and the quality of life for an economy other than Australia. (20 marks) Globalisation is the process of increasing integration between different countries and economies resulting in the establishment of a single world market and the increased impact of international influences on all aspects of life and economic activity. This essay will look at how globalisation has affected the Chinese economy in areas of economic growth, trade, foreign investment, labour market, wealth and income levels and environmental conditions; and analyse the policies used by the Chinese Government to encourage economic growth and their quality of life. Globalisation has many impacts both positive and negative. In recent decades globalisation has had strong impacts in China and thus is predicted to be one of the 4 largest economies by 2050. In the past decade, China has experienced significant increases in international trading and investments flows due to globalisation, which lead to high levels of economic growth. From 2001-2007 China experienced an average economic growth of 8.5% per year and there has been a sustained growth of around 9.0% on average since the 1970s. Economic growth is a quantitative measure of the increase in GDP over a period of time. A rise in economic growth indicates an increase of a nation’s economic capacity – over the past 30 years, China has amazed the world as its fastest-growing large economy, with a sustained growth rate of around 9% since the late 1970s, bringing millions of people out of poverty. According to an article in the Sydney Morning Herald, China’s Gross Domestic Product (or GDP) is the lowest in three years, “The Chinese economy has slowed to its lowest growth rate since early 2009, with GDP growth printing at 7.4 per cent in the September quarter.” One of the strategies undertaken to promote high economic growth was the “Open Door” policy. Adopted under the leadership of Deng Xiaoping, the “Open Door” policy has been carried out for more than 20 years since the 1980’s. This strategy was extremely beneficial for the Chinese economy as it started by setting up the Special Economic Zones (or SEZ) in southern coastal provinces, to attract foreign trade and investment; it offered low tax rates, cheap labor and less regulation. Most importantly this strategy integrated china in the global economic market and had a great impact in promoting high economic growth and development. Recent trends show that with improvements in their economic growth and development, China’s Human Development Index (or HDI) has risen from 0.368 in 1975 to 0.687 in 2011. There has also been an increase in overall education level and overall reduction in poverty. However, despite the improvements in economic growth and development in China, in recent decades, the richest 10% of the Chinese population (mostly living in coastal cities) owns 45% of the nation’s wealth, while the poorest 10% own only 1.4% of it. The coastal cities benefit more from globalisation because of its closeness to the rest of the world. This uneven distribution of income shows that the improvements in the quality of life are not equally shared. Statistics also show that although economic development is overall improving, the gap between the richest and poorest is still widening. 28.4% of the population in 2005 was classified by the World Bank as being below the international poverty line of US$1.25 per day. As mentioned above, globalisation encourages international trading and economic growth, and China has benefited particularly from this. During the past 30 years the average export levels have increased by 17% annually. This shows that China’s international trade levels have increased dramatically due to globalisation. In 2001, China joined the World Trade Organization in response to the globalisation trend and reduced its trade barriers, opening up to foreign investments and international trade. This was beneficial to the economy as it further enhanced the spirit of integration and trade liberalisation. This strategy has brought major beneficial changes in its economy such as having access to the world market, attracting foreign investment, adopting new ways of management, the access of new technologies, market information, global production, and market network and distribution. In 2010, China contributed 13.6% to global growth and accounted for 9.4% of world merchandise trade. In the same year, they became the second largest goods trading nation in the world after the USA. China is the second largest recipient of Foreign Direct Investment (or FDI) in the world. They are receiving $US116.01 billion in 2011, which is up 9.72% year-on-year. FDI and Transnational Corporations (or TNCs) have increased rapidly since globalisation and the opening of markets and deregulation by the Chinese economy. Foreign investment capital became a major factor of growth, with US$30 million of investment in 1994. However, this rapid growth has caused some problems, such as high inflation rates in urban areas and increasing economic income inequalities between regions. The patterns of labor participation have dramatically changed since the 1970s. From a level of over 70% agricultural workers now compromise less than 50% while industry is 22% and services are 29% which are rapid increases in response to the generally higher levels of earnings received in these sectors. Although China, in the past, had really good employment, from 2002 until 2012, China’s unemployment rate averaged 4.15% reaching an all-time high since 3.9% in September of 2002. As a result, the government has been required to physically accommodate the huge rural to urban shift in population. Reforming the agricultural system was a strategy used by the Chinese government to decrease unemployment. This strategy was successful as the industries not only promoted high economic growth and surplus in the rural labor force but there was a high rural growth, employment and wealth and income level. As a result, the rural poor decreased to 11% as income grew by 15% per year. There have been some substantial improvements experienced in income levels with about 400 million people lifted out of absolute poverty since the 1970s. Nevertheless, China has experienced increasing degrees of inequality on a number of levels, their impressive growth performance has not benefited all provinces completely. The Chinese income inequality rose substantially from 1985 to 2001 because of increases in inequality within urban and rural areas and the widening rural-urban income gap. China has pursued unsustainable practices to maximize opportunities of globalisation, they have perhaps become too absorbed in becoming the fastest growing economy with such high growth, development and HDI levels that environmental issues are not seen as being important, therefore this issue is just being ignored. Environmental issues are the results of China’s carelessness when introducing strategies to improve economic growth and development such as the “open door” policy. This policy caused most of the environmental issues including air pollution, water contamination, land degradation, loss of habitat, loss of grassland, top soil and forest, desertification as well as the spread of a lot of diseases such as lung cancer and inefficient waste disposal. In conclusion, the impact of globalisation on the economic performance on China has proved to be a positive one as summarised throughout this essay. Globalisation has created positives in the Human Development Index, there is more literacy and a longer life span as well as higher incomes and less and less people coming out of absolute poverty each year. China are not just benefiting themselves by becoming a more market based economy but they are also creating positives through the rest of the world by selling their comparative advantage of cheap labour to many Transnational Corporations and Foreign Direct Investors. Although that they do have had an enormous positive out of globalisation they also had negative in pollution levels and the income inequality. As stated throughout the essay China has embraced globalisation with open arms and uses many strategies to help the impacts that globalisation has to offer which included their entry into the World Trade Organisation, the introduction of the “Open Door” policy, economic growth, trade, foreign investment, labour market, wealth and income levels and environmental conditions. As China lower their trade barriers, giving the positive impact of increase in international trade and foreign investment, resulting in significant levels of economic growth and development. Globalisation has also provided competition for domestic industries, encouraging high efficiency and competitiveness. However these benefits of globalisation are not equally enjoyed across the population, as there is an inequality in distribution of income, in which the government established no specific policies to address this problem. The growth in economy also caused environmental problems such as degradation and pollution, which the government have showed keen interest in managing this problem, but have so far failed to reinforce the policies established to protect the environment. -------------------------------------------- [ 1 ]. Wikipedia [ 2 ]. http://www.bukisa.com/articles/92710_economic-impact-of-globalisation-on-chinas-economy [ 3 ]. The Global Economy Handout [ 4 ]. The Global Economy Handout [ 5 ]. http://www.smh.com.au/business/china/china-gdp-growth-lowest-in-three-years-20121018-27t6r.html [ 6 ]. http://hdrstats.undp.org/en/countries/profiles/CHN.html [ 7 ]. http://www.voanews.com/content/china-struggles-to-bridge-gap-between-rich-poor-142453445/180546.html [ 8 ]. ‘Influence of Globalisation on China’ handout [ 9 ]. ‘Influence of Globalisation on China’ handout [ 10 ]. http://news.xinhuanet.com/english/china/2012-01/18/c_131366513.htm [ 11 ]. The Global Economy Handout [ 12 ]. http://repec.org/esNASM04/up.30985.1075445708.pdf