Socio Economic Musings of China



Source: Google



By Naveed Qazi | Editor, Globe Up Front

China is one of the few countries in the world that has attained one of the highest GDP growth rates in the last five years. In the last five years, the highest GDP growth was appeared in 2007 at 14.20% and second highest in 2006 at 12.70% followed by 10.30% in 2010. In 2008 and 2009, the GDP growth rate recorded a fall around 9.60% & 9.20% respectively. There was a 1.5% increase in GDP from 2006-2007 and 1% increase from 2009-2010 (World Bank and IMF figures).

In the remaining years, the GDP has fallen down as world witnessed poor liquidity trends recently. However, the growth rates still remain impressive amidst global financial crises and in comparison with other countries. The factors behind this growth are investments financed by large public and private sector savings, workforce willing to work on low wages, high level of exports as it increases the productivity of commodities, services and large FDI inflow with liberalized trade barriers, have allowed a higher degree of development in Neo - Communist China.



However, there are some limitations in measurements of GDP. Non-marketed products such as household production or unpaid services are not measured. GDP (Gross Domestic Product) is a yearly total of the amount of goods and services produced in a country, but the underground or parallel economy is not taken into account. It does not evaluate all the assets pertaining in the economy. GDP also measures the prices of products but not the quality improvements in the products produced. It also doesn't measure the distribution of income. Even then, the economic estimates project probabilities of a sustained and powerful growth in the Chinese economy, even if short-term stagnation comes in coming months.



The current rate of inflation in China is 6.2%. It has largely propelled through volatile vegetable and pork prices, due to drought and recent shortage of livestock in China. A very high amount of liquidity in Chinese financial market and high wages in China have also contributed to inflation. Inflation is generally measured in retail price index, which includes mortgage interest and payments. It is also measured by Consumer Price Index, which excludes mortgage interests and payments. A basket of items called 'market basket' are taken into consideration and its index is measured. An annual percentage change in the CPI gives the measure of inflation. There are many implications of inflation on business operations. It raises the interest rates in the economy and borrowing becomes hard.

It also increases risk which doesn’t make a right climate for investment. It makes savings buy less. It also creates demands for a higher wage from workers where a business or state has to re-plan its expenditures. It also slows the economic growth of the country and decreases purchasing power. Premier Wen Jiabao has the best of policies to think of because World Bank (2011) figures have shown that inflation in China got to a three year high in August, of about 6.5%. Tightening of fiscal policies by raising interest rates, controlling liquidity are some of the steps which have been implemented and in the next six months, we may see a drop in inflation.

However, Chinese government has failed their target of controlling inflation beyond 4%. The steps taken right now by Chinese Government are not conducive for Foreign Direct Investment, and it may stagnate GDP growth in China.



The current rate of unemployment in China is 4%. Unemployment is mainly around southern coastal cities and rural China. Some labour market issues in China include high rate of juvenile labour employment. As minors, they face health hazards due to ignorance about work conditions. Also, huge chunks of labour force work at one place known as 'sweatshop factories', who are demanding increased wages and better working conditions.

Also, under the current household system, rural labourers can work in temporarily in cities but they’re not allowed to settle in urban cities. There is a need for better implementation of working laws in China. Several of facilities in China have faced environment, chemical and dormitory violations. The current rate of public debt and public deficit is 17% and -3% respectively. In comparison with other countries, the public debt of China is fairly low in comparison with the United States or the United Kingdom. However, to overcome this deficit, China may have to rethink its expenditure patterns and financing, otherwise, it would lead in the loss of consumption of goods and services, and won’t creates avenues for business expansions, which would halt the sustained growth of Chinese economy.



There will be 221 cities in China in the future, a thirty trillion (Yuan) domestic demand by the end of 2030, and the world will see the largest urbanisation in human history from China.


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As 12th five-year plan gets implemented from Beijing, the world will see the dominance of a colossus economy, a state of deep-rooted cultural nationalism, strong work ethics and competence. Its authoritarian, one party system is trying its best to emancipate rural China by education and reforms for farmers, which is almost half of Chinese population, but corruption among top elites is one social iniquity which needs to be mangled. But as long as economic emancipation remains the flame of desire, no country can uproot the values and achievements of this country, which has surprised the world with its policy-making and leadership deliverance.

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