China’s Economy widening and Future success

Student : Dadashov Tofig

Subject : Chinese Economy
Class : SME

Student ID : 1935510212
List of Table
Abstract……………………………………………………………………………,………1
Introduction…….………………………………………………………………………….2
Body of paper…………….……………………………………………………………….3
Economic Growth……………………………………………………………………….4
Productivity Growth and Technological advancement……………….…………………5
Growth in Domestic consumption as a Future challenge……….………………………7
Economic and Social Infrastructure……………………………………………………..9
Export-oriented Manufacturing………………………………………………………….11
Belt and Road Iniative……………………………………………………………………12
Conclusion………………………………………………………………………...……….13
References…………………………………………………………………………………14
Abstract

China's economic growth over the past few decades has been nothing short of remarkable,
propelling the country to become the world's second-largest economy. This paper explores the
factors behind China's economic success, including its transition from a centrally planned to a
market-oriented economy, infrastructure development, export-oriented manufacturing, and a
massive labor force. It also discusses the challenges and opportunities that China faces in
sustaining its growth and achieving future prosperity. The shift towards a consumer economy,
the Belt and Road Initiative, technological advancements, and environmental sustainability
are some of the key factors that will shape China's economic trajectory. Understanding
China's economic growth and future prospects is crucial for policymakers, businesses, and
international observers seeking to engage effectively with one of the world's most influential
economies.

Introduction

In the 1900s, China had a lot of problems. This included when the communists took over in
the 1950s, a big famine, a revolution, and trouble afterwards. Later on, they changed how
they farmed and started trading with other countries. The good things that come from change
in China have been given to the Chinese people. Many people who were very poor now have
more money and things because their number went down by 200 million. Before, one out of
every three people was very poor, but now only one out of every 25 people is very poor.
People are living longer now than they did in 1970. The average age people can expect to live
is over 70 years old today. China has grown a lot and is different from other countries
because it is really big and still growing. China is a country that is changing from a planned
economy to a market economy. There are more than three times as many people living in
China than in all of the other countries that are changing their economies combined,
including 15 countries that used to be part of the Soviet Union. China made changes in the
last 20 years without completely becoming free, without selling everything privately, and
without letting everyone vote. It might seem like having some control over the economy
while also allowing some freedom would cause more problems instead of progress. If things
can't be privately owned and sold, then there won't be good reasons for people to try hard and
make money. That's what Tan (2001) thinks. In 1992-97, the Chinese Communist Party
decided to create a Socialist market economy, where private companies can exist. This was
like when Deng Xiaoping visited the south in 1992 and complained that economic changes
were happening too slowly after the protests in Tiananmen Square in 1989. He was still a
very powerful leader at the time. In simple terms, it is believed that the switch to a fully
functioning market economy will happen faster in the upcoming years. Xi Jinping became the
leader of China in 2013 after taking over from Hu Jintao. He believes that economic changes
need to happen and has no doubt about it. The leaders of China in the 21st century have a
difficult task. They need to make sure that people still trust and follow the CCP (Chinese
Communist Party). At the same time, they need to make society more equal economically.

Economic growth

China started to grow quickly in 1992 when Deng Xiaoping came back to lead the country.
The plans for the economy in the future were not clear yet. For the past twenty years, many
countries are still having a hard time recovering from the financial crisis in 2007-2009 and
decreasing their large debts. However, China has done very well, with an average growth of
9. 3% in their real gross domestic product from 2008-2012. China is worried about the
economies of other countries like the United States and European Union. However, the
Organisation for Economic Co-operation and Development (OECD) thinks that China will
become the biggest economy in the world by 2030. China has a lot of money (US$3. 3
trillion) and has become good at investing it around the world. They used to mostly make
things for other countries, but now they invest money in different places. This means that the
country has successfully switched from relying on farming to becoming a more modern and
industrialized economy. Changes have happened within the group/company. The economy of
China is mostly controlled by the government. However, there have been some efforts to
learn from capitalist ideas and use them to improve the economy. This includes using market-
based incentives for businesses.
In the past ten years, changes in the economy and industry led to more people living in cities.
The new phase of economic development is focusing on making cities bigger and more
populated. As cities grow, it changes how people work and make things. It's really important
to look at how the country is growing financially, so we can see where the best opportunities
for new growth are. This article talks about how China's economy can keep growing. It looks
at things like how much people buy and save, and how productive they are. Lots of things can
affect China's economy, both inside and outside the country.

Productivity growth and Technological advancement

Jon Sigurdson found out that China benefits from foreign investors. Many big companies
from different countries have helped China become a major place for making things. This has
helped the whole world's economy. Sigurdson says that inviting foreign businesses to invest
in China has led to new money and knowledge coming into many different industries. This
has also convinced some advanced technology companies to set up shop in China. Big
companies that use a lot of technology make things in China by putting together parts. They
have been giving a lot of money to China since 2000.
China has done well in getting foreign money in businesses that use a lot of technology to
make things better and be more competitive. Zhu (2012) thinks that the total amount of work
China can do has been the biggest reason why China has grown so much since 1978. From
1978 to 2007, the amount of money invested in buildings and equipment went up a bit. But
compared to how much money was made overall, the ratio of investment stayed pretty much
the same. Zhu's paper looks at how well businesses are using everything available to them to
be productive. There are two important things they look at when measuring this. One reason
is that people are moving from working in farms to working in companies that are not owned
by the government. These companies can be run by local people, foreigners, or groups of
people who work together. Between 1978 and 1984, China made changes to its farming that
worked well. The sector's productivity grew by 5. 62% each year on average. Because of this,
49 million people who used to work in farming were able to find new jobs in factories and
other industries. The average amount of work done by non-farming workers is usually better
than those who work on farms. This helps make overall productivity go up. As the economy
gets bigger, the amount of extra help and benefits from farming and moving workers around
will start to get smaller. This means that over time, the amount that farming improves the
whole economy will not be as big.
We are measuring how foreign investments and moving money around are helping to make
the economy grow better. The changes made in how the economy works since 1978 have
allowed for more trading between countries and for businesses to be privately owned.
Businesses that are not owned by the government made up 70% of the money made by the
country, while the government-owned businesses only made up 20% of the money in 2007.
There were more people working in companies that were not owned by the government than
in ones that were. The non-state sector had 62% of workers and the state sector had only
12%. Moving money around has helped some small factories go out of business and new
ones to start. This has made things work better and makes up for 72% of progress in factories.
Chow (2004) identified that small and medium-sized state companies are not as efficient as
big ones in making money. "In the past, some smaller businesses owned by the government
were sold to private owners. This means that now, most of the company is owned by private
individuals and the company has to support itself without any government help. " Some big
businesses are still owned and controlled by the government officials. They also receive
financial help from the government. The government can't just make state-run businesses into
companies with shares and expect them to be efficient. If the government owns most of the
shares and the people who run the companies have too much power, they can take money
from the business without making a profit. Brandt, Van Biesebroeck, and Zhang think that
when new companies take over from old ones, it makes things work better by moving
resources around. The paper says that from 1998 to 2007, most of the productivity growth
came from new companies joining the market.
This might seem like a big claim, but for the past 30 years, we have been using a certain
system.
China has learned everything it can from the advanced countries and there is nothing else left
to learn from them in terms of technology or markets. This means that China can't learn new
technology from its western partners anymore, even though they used to work together for
many years. This means that technology in China must be made internal instead of external,
so that it develops along with the country's economic growth and investments. When we try
to predict how technology will improve in China in the future, we can't ignore the connection
between what individual regions are doing and what the whole country is planning. It's
important to look at both local and national factors. For the last 20 years, local projects have
been very important in changing China's technology and science fields, and they still are.

Growth in Domestic consumption as a Future challenge

China has faced problems even though it has grown quickly. A few bad economic ideas
caused worry that the economy was getting too hot and now businesses are struggling.
Beijing is also upset about it. China has been putting more money into industries that use
advanced technology, so they can keep growing their economy. However, they also need to
rely more on people buying things within China, instead of just selling things to other
countries. In 2010, people's spending was 35% of the total amount of money the country
made, but in 1978 it was much higher at 48%. The spending by both families and the
government has increased quickly in total amount since the time of changes, but it has not
kept up with how much the economy has grown. In the 1990s, people spent about half of the
money made by the country. This is what Table 1 shows. Since the year 2000, people buying
things for their homes has decreased a lot. In 2005, it only made up 38% of all the money
made in the country. This was the smallest amount compared to other big countries in the
world. The stuff that people bought for their homes made up 67% of the money that was
made in the United States that year. In the UK, households spent 65% of the money. In India,
it was 61%. (Already simple) In Japan, people usually save their money but they still spend
more money on things for their home than people in China do. In fact, household spending
makes up 58% of all the money spent in Japan.
People are spending less money than before.
In cities, the money generated has grown from almost 19% in 1978 to almost 26% in 2010.
The highest point was in 2000, when it reached over 31%. For people who live in the
countryside, their buying and spending has decreased a lot over the years - from 30. 3% of
the whole country's economy in 1978, to only 7. 84% in 2010This number may be a little bit
different because some people who lived in the countryside now live in the city and are
counted as city residents instead of rural residents. We should focus on places where people
are making more money, like the Pearl River Delta. China having a lot of money saved up is
not normal when you compare it to other countries, which is confusing for some experts. In
2008, people saved 54% of their money, like it says in Table 2. In 2010, the country earned
more money from other countries than it spent. This surplus was about 9% of the money the
country made that year.

The World Bank says that in the last ten years, how much money families have and what they
do with it has greatly impacted how people spend money in China. In the late 1990s to early
2000s, more people owned homes which led to a big increase in the amount of money spent
on houses compared to other things. This meant that people spent less money on other stuff
during that time. Next, companies made more money which helped them put more money
into their own businesses. This was done without any rules requiring state-owned companies
to share their profits, and without other types of investments being more appealing. In the
early 2000s, the government collected more taxes and used some of that extra money to
invest in public projects. As more businesses invested in making things, we were able to sell
more to other countries than we bought from them. This helped our economy grow quickly,
especially after 2004. These things caused the amount of money people spend compared to
how much the country makes to decrease a lot in China recently.

TABLE 1 China’s household consumption* as a percentage of GDP

Country 1990 1995 2000 2005 2010 Averages
China 47 43 47 38 35 40.75
Japan 53 55 57 58 59 57.25
United States 64 65 66 67 68 66.50
United Kingdom 61 63 66 65 65 64.75

TABLE 2 Comparison of gross national savings (percentages)

Country 1990 1995 2000 2005 2008 Averages
China 39.2 42.1 36.8 51.2 54.3 44.72
Japan 33.2 29.3 27.5 26.8 27.0 28.76
United States 15.3 14.2 15.9 15.0 15.6 15.2
United Kingdom 16.4 15.9 15.0 14.6 15.6 15.5
Economic and Social Infrastructure

China's coastal provinces are growing faster than the rest of the country, especially in terms
of exporting goods to other countries, which has increased a lot since 2000. Hu Jintao wants a
more balanced society that includes both coastal areas and inland areas. This means that we
need to rely less on exports to make our economy grow. The slow increase in buying things is
linked to China not creating a lot of jobs because of the way they are making progress. From
1978 to 1993, jobs increased by 2. 5% every yearBut from 1993 to 2004, when more money
was invested in the country, job growth only went up by a little over 1%. In the 1990s,
businesses started using more machines to grow, which meant that they didn't need as many
workers to do things like make steel. This slowed down the creation of jobs because fewer
workers were needed. The industries that made machines used fewer workers than the
industries that made things for people to buy. Even the service industry used fewer workers.
In the last 10 years, the Chinese government has said many times.
China has a rule to make more jobs for people. This has helped keep unemployment low. This
is shown in Table 3. This happened again in the years 2012 and 2013. The number of people
who work in rural areas used to be 130 million, but now it's gone up to 164 million.
When you count all the types of joblessness, the number of people without work in China
could be 30% of all workers in the country. This means that the numbers showing how many
people are jobless in cities might not be accurate and might be much higher than what is
reported. China is having a hard time finding jobs for people, and although we don't know the
exact numbers for certain types of joblessness, it's clear that many people are struggling to
find work. The situation at home and abroad is complicated and there are many things that are
unknown, which makes it hard to have a positive job outlook and keep it going. The Chinese
government thinks it is important to work on solving unemployment issues, even though they
don't have exact numbers for how many people are without jobs. If China's economy grows
more slowly, it will make it even harder for people there to find jobs.
The Chinese government is having a lot of problems with things like prices going up, some
people having a lot of money while others have very little, unfairness, big problems with
people doing bad things for money, and it being hard to get good healthcare without spending
a lot of money. In cities, only half the people had basic health insurance, and in the
countryside less than one fifth had cooperative health insurance. A study showed that people
who live in cities in China feel like the way people behave towards each other is not very
good. This makes them feel less safe and trusting of others. Also, many people think there is
corruption and division between rich and poor. People who are poor don't think they can
improve their lives by themselves. China will face more problems soon because the economy
is growing slowly and they have not spent enough money on healthcare. Nicholas Lardy says
that the government has not been successful in putting China on a new growth path, and there
are many reasons for that. The amount of taxes rural people have to pay has gotten a little bit
easier, but it's still hard. The amount of money people in cities save from paying less in taxes
isn't big enough to make a big difference in how much they can spend. Although some social
services funded by the government have gotten better, Chinese people are still saving money
just in case something bad happens.

TABLE 3 Comparison of unemployment rates (percentages)

Country 2000 2005 2008 2009 2010 2011 Averages

China 3.1 4.2 4.1 4.3 4.1 4.1 3.98
Japan 4.7 4.4 4 5.1 5.1 5.6 4.81
United States 4 5.1 5.8 9.3 9.6 9 7.13
United Kingdom 5.5 4.9 5.7 7.6 7.9 8.1 6.62
Export-oriented Manufacturing

Export-oriented manufacturing refers to a strategic approach adopted by countries to focus on

the production of goods specifically intended for export to international markets. This
economic model has played a crucial role in China's rapid economic growth and has
positioned the country as a global manufacturing powerhouse.

China's export-oriented manufacturing sector took off in the late 1970s when the country
embarked on market-oriented reforms and opened up its economy to foreign investment. The
government implemented policies and established special economic zones to attract foreign
companies and promote export-oriented industries. These measures aimed to leverage China's
abundant labor force, low production costs, and improving infrastructure to attract foreign
direct investment and stimulate economic growth.

The export-oriented manufacturing strategy enabled China to become a major player in

global supply chains. The country specialized in producing a wide range of goods, including
textiles, electronics, machinery, automobiles, and consumer products, among others. Chinese
manufacturers gained a competitive edge through economies of scale, efficient production
processes, and a growing pool of skilled labor.
Several factors contributed to the success of China's export-oriented manufacturing. First, the
country invested heavily in infrastructure development, such as ports, roads, and logistics
networks, facilitating the efficient movement of goods both domestically and internationally.
This infrastructure backbone supported the smooth flow of inputs and finished products,
reducing costs and enhancing competitiveness.
Second, China's large labor force provided a significant advantage in terms of cost-
effectiveness. The availability of skilled and semi-skilled workers, coupled with relatively
low wages compared to developed economies, attracted multinational corporations seeking to
optimize production costs. The labor-intensive nature of many industries, combined with
efficient supply chains, allowed China to manufacture goods at competitive prices.

Third, China's export-oriented manufacturing sector benefited from a comprehensive network

of supporting industries and suppliers. This ecosystem of suppliers, ranging from raw
material providers to component manufacturers, allowed for efficient production processes
and reduced lead times. It created clusters of industrial activity in specific regions, such as the
Pearl River Delta and the Yangtze River Delta, further strengthening China's manufacturing
capabilities. Manufacturing strategy had substantial implications for China's economy. It
drove economic growth, increased employment opportunities, boosted technological
advancement, and facilitated the accumulation of foreign exchange reserves. However, it also
posed challenges, such as environmental degradation, income inequality, and dependence on
external demand.

In recent years, China has been gradually transitioning towards a more balanced and
sustainable growth model, aiming to reduce its reliance on export-oriented manufacturing.
The government has implemented policies to encourage domestic consumption, promote
innovation and high-value-added industries, and upgrade manufacturing capabilities. This
shift reflects China's aspirations to move up the global value chain and foster long-term
economic prosperity.

Belt and Road Iniative (BRI)

 China's ambitious BRI seeks to enhance connectivity and trade among participating
countries. Successful implementation of this initiative can open up new markets, boost
infrastructure development, and promote economic integration, benefiting both China and
partner nations. However, challenges such as debt sustainability, geopolitical complexities,
and environmental concerns may influence the outcomes and impact of the BRI

Conclusion

Over the past 30 years, the leaders of the Chinese government have agreed that the market
system is effective, and government officials have learned more about how the Chinese
economy works. Working together and learning from past experiences will help things get
better. We can learn from China's experience that having good markets alone is not enough
for economic growth. It is also very important to have knowledgeable and skilled people. In
order for a country to grow economically very quickly, it needs good schools and other places
where people can learn skills. It also needs a strong businesses to help sell things and make
money.
Experts in the Chinese government are talking about whether they should keep their current
goals for how much their country's economy should grow. China's economy didn't grow as
quickly as it has in the past, but it still grew. China needs to keep its economy growing a lot
so that lots of people can have jobs. This is because there are many workers in China. China
needs to improve the skills of its people and use better technology to keep growing. If the
Chinese government invests a lot of money in things without making them better with new
technology, they will not make as much money back. Investing in things that don't make
money might cause the value to go up too much and create a financial disaster. After saving
lots of money for many years, China needs to make some big changes to encourage new ideas
and new ways of doing things. This will help them be more productive and make more
money to keep growing. To boost the economy and make more money, China needs people to
buy things. But if people are worried about the future or don't feel secure financially, they
might not want to spend their money. Right now, many Chinese people are saving more
money than they're spending. That's not good for the economy because it means people aren't
buying things. China might not become the biggest economy in the world by 2030 like some
people thought, unless they make changes to how much stuff they make and how much they
buy in their own country. This is based on past information and research.

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