The Rising Economy of China Research Paper Example | Topics and Well Written Essays - 1500 words

The Rising Economy of China - Research Paper Example However, from 2007 – 2009 china like the other developed nation saw a downfall in its growth but the recovery system was very good. Unlike the other western nations and US, China did not suffer from huge recession. Going through few measurements, China’s economy is the second largest and is moving towards becoming the largest. (Grumbine, 2007) This research paper on China has examined all the implications including both the opportunities and challenges, considering the U.S. economy form the huge growth of China and her emergence as one of the most powerful economy in the world. Will China Overtake the U.S. Economy? The real GDP of China has grown twice as fast before the reformation period. Let us go through the factors, which have led this success story of China. Looking at China’s rapid growth, many economists and analysts have given their view studying it since 1979. If we look through China since the period of economic reformation, we see that China has been able to accumulate huge wealth and has gone through many developments. Both of these factors went equally hand in hand. Improvement in productivity led to the improvement of the growth and this hereby-generated huge fund, which ultimately led the road for new investment. Another advantageous situation for China was that it could draw huge amount form the domestic savings from that of finance investment during the time of economic reforms. (Wu, 2011) What led to China’s foreign direct investment (FDI) were incentives and trade reforms. This became the major source for China. The increase in annual FDI was the fastest in China in 1990s. During this period, the growth was $37.5 billion in 1995 to $3.5 billion in the early 1990s. This makes a ten-fol increase. In between 1995 -2009, annual FDI level was doubled. This capital is used efficiently by China and hence has been able to contribute to the economic growth. (Wu, 2011; Roett and Paz, 2008) It has been seen that much of fore ign domestic investment in China goes into export and manufactures which includes export like consumer electronics. Several case studies reveal that the gain in productivity has been one of the major cause in this huge rapid growth, economically since the implementation of the reforms. Taking an example of an International Monetary Fund (IMF), which concluded that the growth in productivity was the most significant reason for china’s economic growth? This study shows us that during 1952 – 1978, the accumulation of capital accounted for 65% of output growth in China, whereas the input growth for labor and productivity was 17% and 18%. Just the opposite happened during 1979 – 1994 (this was the period when economic reform in China took place), growth of productivity was nearly 42% of the economic growth output whereas the labor and capital inputs was 58%. (Roett and Paz, 2008; Blankert, 2009) Resources were reallocated due to which productivity had increased in ec onomic reform of China. This took place in areas where the control was under the governance of the central government like trade, agriculture, and services. Reforms in agricultural sector boosted production. This also realized the workers for pursuing employment in actions where the marginal production is high. (Wu, 2011; Roett and Paz, 2008) The rise in economy in China happened to have strengthened the relation of U.S. – China. Total amount of trade went up from $4.9 billion in the year