Role Of China In The Present World Economy Economics Essay

The outgrowth of China as the Second largest economic system of the World already demoing marks of going the figure one, tells about the important function it plays in the present universe economic system. China was one of the poorest states of the universe in the period of 1970 ‘s. China ‘s revolution started with the economic reforms of 1979. Remarkable alterations took topographic point from so onwards ; Chinese economic system which was a centrally planned system, that was closed to international trade changed to a more Market Oriented System that had a quickly turning private sector.

China had an one-year growing rate of 9 per centum between the periods of 1979 to 1990. The one-year growing rate grew to 10.4 per centum during the period of 1990 to 2012. This was a major contrast to the powerful economic systems of the remainder of the universe. This growing changed China ‘s position in the Global Economy. It lifted more than 600 million people from the poorness line. ( World Bank 2013 ) When the economic reforms started it merely registered 1.8 per centum of planetary GDP but in 2010 it became the 2nd largest economic system catching Japan, having 9.3 per centum of planetary GDP. ( Justin Yifu Lin 2011 )

Economic Growth of China

With a population of 1.3 billion, China freshly became the 2nd largest economic system of the universe after United States and is progressively playing a critical and dominant function in the planetary economic system.

Between the periods of 2005 to 2010 the international ranking of China ‘s GDP achieved three major springs, going fifth in 2005 catching France and to 4th in 2006 Overtaking United Kingdom, lifting as 3rd in 2007 catching Germany and to back in 2010 Overtaking United States. The per centum of China ‘s GDP to the GDP of the United States amplified from 18 per centum in 2005 to greater than 40 per centum in 2010. ( Jia, 2011 )

The GDP of China was 7.3185 Trillion US dollars in 2011. The GDP value of China represents 11.77 per centum of the universe economic system. A major constituent back uping Chinese economic growing has been exports, China became the universe ‘s largest exporter in 2010 ( CIA 2013 ) , it ‘s besides backed up by its financial and pecuniary policies, development in Infrastructure and the huge sum of Foreign Investments into the state. ( World Bank 2013 )

But still China remains a underdeveloped state and its market reforms are uncomplete. In 2011, China had a Gross National Income ( GNI ) per capita of $ 4,940 and ranked 114th in the universe. Still over 170 million people live below the poorness line. China has the 2nd largest figure of hapless population in the universe after India. Reducing poorness remains a cardinal challenge to China. ( World Bank 2013 )

The below chart shows the top 10 economic systems of the universe ( GDP in trillion US $ )

Beginning: CNN Money ( 2012 ) .

Balance Of Payments ( BOP ) of China

The BOP consists of two major histories called the Current Account and the Capital Account. Normally states have a shortage on one and a excess on the other, but remarkably China displays a excess on both. ( Simon Taylor, 2012 )

China ‘s Current Account Balance is excess, because more money enters China than go forthing it that is exports are greater than imports. In 2011 the Current history balance of China was recorded as $ 201,714,192,225 harmonizing to the World Bank. The Capital Account balance of China is besides a excess. This is due to huge sum of Foreign Reserves that come into the state ( Simon Taylor, 2012 )

Influence of Chinese Exports on the World

China became the universe ‘s largest exporter in 2010 catching Germany. Chinese exports totaled $ 1.194 trillion in the same twelvemonth. Most of the goods used by the universe at present are ‘Made in China ‘ . Its chief exports are electrical points and other machinery, including informations processing equipment, dress, fabrics, Fe and steel, optical and medical equipment. Most of the states are dependent on Chinese exports. China ‘s chief export spouses are US ( 17.7 % ) , Hong Kong ( 13.3 % ) , Japan ( 8.1 % ) , South Korea ( 5.2 % ) and Germany ( 4.1 % ) . ( Economy Watch 2010 )

Breakdown in the exports of China can badly impact a states economic system. A recent illustration would be the nautical struggle with Japan and the subsequent break in the supply of the rare Earth metals which badly affected the Nipponese economic system. ( Wagner & A ; Jackmon, 2011 )

Consequence of China ‘s Exchange Rates on the World

Chinese currency has become a really of import factor in universe economic system. It is demoing marks of going the International Currency of the universe really shortly. When Renminbi ( Chinese Currency ) appreciates it will hold a positive impact on houses exporting to China but a negative impact on those supplying inputs for China ‘s processing exports. Stock monetary values lift for houses viing with China in their place market while falling for houses importing Chinese merchandises with big imported-input content. ( National Bureau of Economic Research 2011 )

It has been a great issue in the planetary economic system about China ‘s currency devaluation in order to maintain up its fight. China histories for one fifth of planetary fabrication ; it is the largest beginning of US imports and foreign proprietor of American authorities debt. Therefore, being closely linked with other states, if China devaluates its currency, the importing state will confront higher cost of production and thereby a rise in monetary value degrees. ( Bradsher, 2012 )

Influence of Chinas labour force

China ‘s full population is about 1350 million out of which 795.5 million is the entire labour force. China is known for its cheap and quality labour. Most of the deveolped states tend to outsource labor from China in order to cut down pay costs. The labour Torahs of China are besides favourable for outsorcing. All the universes largets makers such as Apple, Intel, Foxcon, Nike, Reebok, HP, Dell etc outsource their prodction installations to china to cut down cost. This consequences unemployment in those states. Besides if the contractors demand for higher rewards so the cost of goods will travel up.

China ‘s aid to other states

China is viewed as playing a more positive function in the universe than either the US or Russia. China chiefly focuses on increasing its economic power in the universe. China has become the universe ‘s largest loaner, surpassing even the World Bank in loans to developing states, with more than 3 trillion US Dollars. ( Voice of America 2011 )

China joint ventures so many undertakings, for illustration Sudan which is an oil rich state was unable to bring forth oil even to fulfill its ain domestic demands, but now with the aid of China it non merely produces oil to carry through its demands but besides to export. China has become the largest trading spouse from Asia to Africa, even in many parts of Europe and Latin America. ( Mengzi, 2011 ) Hu Jintao, China ‘s president, in an reference to concern audience provinces that Chinese economic system had helped make 14m occupations around the universe through its turning imports ( Financial Times, 2013 )

China has become Sri Lanka ‘s figure one giver ( donating more than 1bn US dollars per twelvemonth ) , chief trading spouse, and major provider of more than half of the state ‘s building and development loans. The building of the Hambantota Development Zone has been a peculiar beginning of concern, which will include an international container port, oil refinery and international airdrome. China has helped to construct so many ports in the Indian Ocean. The ports in Bangladesh ( Chittagong ) , Burma ( Kyaukphyu ) and Pakistan ( Gwadar ) would be the illustrations. It is besides steadily helping Pakistan ‘s naval enlargements ( Wagner & A ; Jackmon, 2011 )

Menaces to Chinese development

Many states see the development of Chinese economic system as a menace. Americans are extremely concerned over China ‘s turning economic strength, and follow really rigorous Trade and Economic policies over China. Two big economic systems of universe, both India and Japan concerned about the lifting power and influence of China, signed a Comprehensive Economic Partnership Agreement to stamp down the growing of China. India has besides late engaged in negotiations with Malaysia and South Korea to construct schemes to stamp down China ‘s development. ( Wagner & A ; Jackmon, 2011 )

A big figure of immense companies are traveling their fabrication lines back to their place state. This will hold a drastic impact on the Chinese economic system which prospered due to outsourcing. The Economist says that China is presently running by big amount of foreign investing and if these stop coming the Chinese economic system might fall to earth.


China did n’t make its current place in a twenty-four hours. It was a long term measure by measure procedure ; the growing was backed up by its Strong Macro Economic policies. The current place of China seems to be reasonably strong in the Journey to make the top ; the economic system seems to be turning though there are some fluctuations. Still the per capita GDP seems really low, which makes the state to hold the 2nd largest hapless population of the universe. Both its Current and Capital Histories resembles an unusual Excess than in any other state of the universe.

China creates a immense impact on the universe with the power of its exports. Chinese currency is demoing marks of going the international currency of the universe. Most of the economic systems particularly who are holding strong economic dealingss with Chinas are really much concerned of its exchange rates as it straight affect their economic system. The strong high quality labour force of China makes the big makers of the universe to outsource to them. China plays a more positive function in developing the economic systems of the universe than any other. Some states see the growing of China as a menace to them and implement so many schemes to draw them down. So it is clearly apparent that China is a cardinal participant in the economic system of the present universe.