China's_Growth

The global economy consists of all countries in the world at different stages of economic development that produce goods and services and contribute to the world GDP. The global economy is divided into four categories of countries AIE’s, NIE’s, LDC’s and TEC’s. Collectively the GWP IS $61 trillion. The most impressive growth has been china. China has generated impressive 8-10% GDP in the last 10 years while reducing poverty however this has come to a cost to the environment. Economic growth refers to an increase in value of goods and services produced by an economy, high income and living standards which leads to an increase in aggregate demand and full employment. Whereas Economic development refers to structural changes needed in the economy in order to promote economic growth and development. The Chinese economy has undergone 3 phases: 1949-77/ 1978-00/2001+. Those phases have contributed on achieving high economic development and economic growth up till now in the chine economy. The 1st strategy used in china to promote high economic growth and development was to close the economy in (Phase 1: 1949- 1977). This strategy was unsuccessful because there were more negatives than positive effects on growth and development. The negatives regarding economic growth and development were china’s economic system as a planned economy, government allocated resources and all the private firms, and banks were nationalized and this wasn’t efficient. In rural zones farms were collectivized , price and wage systems were fixed , as well as imports and export prices were fixed .china suffered famine and poverty with their “ great lap forward” which attempted to industrial agriculture and industry but it wasn’t successful and the “ cultural revolution” which was a political reform to over throw the communist party . Those strategies had a negative impact on the Chinese economy and social life. The country couldn’t trade; the heavy industries were inefficient, low worker motivation, non existing light or service industries, shortage of basic food stuff and a poor quality of goods and services. However there were some positive goods beneficial for china such as no inflation as the prices were fixed, no unemployment as workers were allocated jobs , SOE’s were efficient and profitable, education , household housing and health and care were regulated via strict system. There was a minimal wage differential as result of the price wage fixing. However, this reform wasn’t successful and it did require more strategy reforms to promote growth and development. The second strategy aimed to open the Chinese economy and it did involve 9 radical reforms to promote economic growth and development. (Phase 2 during 1978-2000) The 2nd strategy to promote economic growth and development consisted on reforming the agriculture system. This reform was successful as it consisted into 3 beneficial key parts , de collectivization , the TVE’S , which was extremely beneficial as the industries owned by townships and villages promoted high economic growth and surplus in the rural labor force, high rural growth and employment. The TVE’S have been the principal force for increasing the rural economy in china. There was created a “non- rural “farming system which was beneficial as rural farmers decided what to produce. As result there was an increase in food production from 2.6 % to 7.1%, rural income grew by 15% per year. China’s GDP p.c increased to more than $ 4000 as result of this strategy. Rural poor decreased to 11%. However, there is a restrict labor mobility, inequality in the distribution of income, socially there is a bias employment and a gap between the rural and urban areas as the population is employed in different sectors of the economy. Furthermore, people aren’t used to allocate resources efficiently as they don’t have experience, overuse of chemicals to increase output will result in a lost of the soil’s minerals in the future. Overall this reform has been successful and unique economically and socially as it promoted high economic growth and development.