Impact of Growth in Society
The emerging market economy concept owes its origin in 1981 when it was first coined by Antoine W. Van Agtmael. According to Agtmael (2007), an emerging market economy refers to an economy that is characterized by low to middle-class per-capita income. Such an economy has a high composition of population growth rate that contribute a significant portion on the global economies. Mostly, emerging economies are those in the transition from being small into big based on the development and reform strategies. Growth is an integral part of a society that is still struggling to develop its economy. The growth of an economy occurs when the levels of income per capita output increase. Reflecting on China’s economy, though it is one of the worlds’s most advanced economies, it falls under the category of emerging economies. In Africa, almost all of the economies are emerging because they are dominated by high levels of poverty and illiteracy which impacts negatively on the growth path. China, for instance, has adopted policies for development and reform programs that aim at opening up markets on the global scene. The emerging market economies are described as fast growing economies because of the high levels of growth and development projects they pursue (Agtmael, 2007). It is important to note that, growth has both the good and bad side. The good part entails all the advantages that result from growth patterns of an economy while the bad side is composed of all the disadvantages that attach to an economy as it grows and develops. As such, as an emerging market, China‘s development reforms has impacted heavily on the economy and the people around. The prime focus of this paper is therefore, to look at emerging China’s economy and assess the various advantages and disadvantages for this growth on the economy.
Background
Upon entering Millennium age, China’s economy has made tremendous steps in its growth process. The economy of China has, thus, grown very fast over the last ten years making it to be the talk of the modern economic growth and development in other economies. According to the report released by the Social Science Institute of China on “World economy Yellow Paper” and International Situation Yellow Paper,” it projects that China occupies the second spot of the biggest economies in the world (Sheng & Ma, 2011). Remarkably, these reports also suggest that China is at the forefront in various aspects. Outstandingly, China has embraced numerous investment projects with foreign nations such as undertaking on the marginalization of their economies. As such, most of these developments and projects have seen the economy of China growing faster than those of its predecessors like the United Kingdom, France, and Germany.
Advantages of China’s Emerging Economy
For over 30 years, China has been upholding policies and various reforms that reflect on the ever-growing economy. Most important is the fact that growth of China has positively and negatively impacted on the world economy in various ways. The critical areas of positive attributes of the economy of China are seen in various aspects and more so, on the splendid GDP growth of China. Undoubtedly, the growth of China enables it to go high in the world ranking of the most outstanding and emerging economies in the world. The world economy for China has grown up by a margin of 9.7% on an annual basis regarding GDP since 2006 (Waterschoot, 2012). According to reports from the World Bank, the Growth of China had exceeded that the world’s biggest economies such as that of Britain in 2006 ranking it fourth in the world and contributing to roughly 20% of the total global economy (Waterschoot, 2012). The economic growth for China was mostly remarkable in 2010 when it was able to outdo Japan and made two steps forward to become the second and fastest growing and emerging economy in the world. Following the trends in the economic growth of China, it is predicted that, by 2030, China will be the world’s number one economy in the world.
Further, the rapid growth of an economy means that a country can be able to transact foreign trade with the world’s most prominent industries across the globe. China, for instance, has opened its growth and development plans by investing outside its boundaries. In so doing, it has been capable of beefing up its volume of trade since 1978 to 2008 (Sheng & Ma, 2011). Despite its fall in GDP in 2009 that came about as a result of loan crises, it was able to recover, and in 2010, it recorded yet another high performance when its foreign trade had increased by 17.4 % (Sheng & Ma, 2011). Clearly, this was an illustration of the importance of Chinese foreign trade on its economy. Besides, China has the capability to increase the volume of its foreign trade by 2020 overtaking some of the nations occupying the front spots.
Another key advantage of China’s economic growth is the fact that the country has been able to maximize its foreign exchange reserve enabling it to develop the financial industry in a fast and rapid manner (Sheng, 2010). Statistics from the People’s Bank of China highlights some of the significant changes in the economy of China’s growth in foreign exchange reserves with important changes occurring in the period range from 1978 to 2006 (Waterschoot, 2012). According to Sheng (2010), foreign exchange investments enables China to manage financial risks that may arise from unexpected returns and at the same time acquire financial stability. In fact, some of the developing countries especially from Africa rely on China for loans, grants, and donations.
Globally, the Chinese growth has helped to reduce some of the risks of the world economic crisis and maintaining world economic growth. Remarkably, the 20th century was characterized by a fall of the capitalist class under the hands of economic crisis (Sheng & Ma, 2011). At this time, the Chinese economy was growing swiftly, which laid the basis for China’s financial superiority. As such, it helped the nations undergoing the financial hardships in the economic crisis to get out through successfully thus helping it to shape the economic order of the world.
Disadvantages
China is considered to be one of the most amazing countries for investors, especially for foreign direct investment. However, these direct investments bear some harmful effects on the investors which necessitate for immediate measures for improvement (Bose, 2012). One of the key disadvantages for is because there is low per capita income in China which makes the lives of the citizens difficult. Besides, China is characterized by technological gaps and inadequate job qualifications. Further, lack of uniform investments in China is also another area of concern for improvement in different sectors of the economy.
Further, China has concentrated more on the traditional sector of production at the expense of chemical and automobile sectors. As such, the foreign investors are restricted as to the type of investments they can engage in within the country. Surprisingly, China does not allow foreign investors to own 100% of their total investments in the country because of some barriers it has laid against them within the administrative institutions and non-tariff measures (Bose, 2012). It is also evident that the legal structure of China has not yet adjusted fully to meet the changing needs of the market. A good example is the Walmart Company foreign direct investment in China. The company was set in China many years ago, but since the per capita income in China is decimated, it becomes very hard for the consumer goods to go at the expected rate.
Conclusion
The main objective of this paper was to look at how growth in China bears advantages on the economy and disadvantages as well. As such, throughout the analysis, the paper has clearly indicated these advantages and disadvantages that impact on the economy for foreign investors and the citizens. Moreover, certain reforms and programs need government intervention for improving the economy. However, the population growth can either have positive or negative impacts on the economy. Population increase can lower the income per capita making the consumer goods to sell slowly. On the other hand, population growth ensures a strong market for most produced goods and services. Thus, for an emerging economy such as China, policies should be improved to regulate and maintain the stability of the economy.
References
Agtmael, A. W. (2007). The emerging markets century: The new breed of world class companies. London: Simon & Schuster.
Bose, T. K. (2012). Advantages and disadvantages of FDI in China and India. International business research, 5(5), 164-174. doi: 10.5539/ibr.v5n5p164.
Sheng, Z. (2010). An influence of emerging China’s economy and its influence on world economy. Research in world economy. Research in world economy, 2(2), 21-24. doi: 10.5430/rwe.v2n2p2
Sheng, Z., & Ma, J. (2011). An analysis of emerging China’s economy and its influence on world economy. Research in World Economy, 2(2), p.21-24. http://dx.doi.org/10.5430/rwe.v2n2p21
Waterschoot, J. (2012). The rise of China and the impact on the Dutch economy. Tilburg, the Netherlands: Tilburg University.
