Good Essay On Economic Analysis
China is one of the most influential communist states of the world. China lies in the Asian continent of the world, with the East China Sea, South China Sea and the Korea Bay bordering the country. The geography of the country is diverse with many mountains and deserts in the Western region and plains in the eastern parts. The major river landmarks are the Huang and Yangtze rivers. President serves as the head of the state, and the Government is run by the leadership of a Prime Minister (Insights, 2015). The economy of China is market-based and is affiliated with certain international organizations to facilitate trade and growth. One of such organizations is the Asian Pacific Economic Cooperation (APEC).
Production Output Performance Analysis:
The GDP growth rate of China was 1994 was around 13 percent, and the figure had reached around 8 per cent in 2013. This shows that the economy has undergone a number of changes to reach the present state. The economy’s GDP rate boomed in certain years, like in 2009, mostly because of the economic recession and the cheap products that China is able to produce. But, after that the GDP growth seems to be stable at 7-8 percent. The GDP per head has increased however from 4044 to 41, 908 RMB (Chinability.com, 2015).
There have been doubts regarding the national accounts quality in China after the figures for GDP were disclosed in 1998. This was proved true in the accounts of 1990s, where the growth of the economy was overstated and at present there are suspicions of understatement of growth. There was an overheating of the economy over the years, which was eventually shown in the GDP rate of 11.4% in 2007. The global economic recession did affect China’s growth rate, with the economy’s GDP growth going down to single digits. The Government then made the decision to put in as high as four trillion into the economy in order to give it an active stimulus movement, with an increase in infrastructure and human capital investment. This was a positive move for the economy as it acted as a base for preventing the nation from growth fall in 2009 and a steady recovery pace since 2010, when the GDP growth rate finally rose to 10.4%. However, the stagnation of markets is yet to cause the Chinese major markets to having a decreased growth at about 9 percent in the year 2011. The degrading global conditions of the economy are also equally responsible for GDP growth rates throughout the globe moving in a decreasing trend. China would not be an exception. The Government cannot have the same stimulus as it did few years back because there are issues if inflation that also need to be considered.
What the Government is doing to correct this situation of diminished growth rates is focusing on the service industry in order to create higher paid and number of jobs and increasing the level of income in those jobs. Also, the costs would be reduced because of the labor incentive nature of service industry. The urbanization drive has also been initiated by the Chinese Government to ensure economic development (BBC News, 2015). There has been a release of fiscal stimulus schemes on a monthly basis, in order to syringe balance into the misbalancing economic growth.
The Chinese Government is thus trying to strike the balance between sustainable economic growth and development and at the same time keeping the GDP growth rate high; high enough for the creation of new jobs and better opportunities. The Government has now and then proclaimed that it has been able to achieve all of its headline GDP rates, by the stimulus strategy that it used.
Labor Market Analysis:
The major problem in the labor sector of China exists in two forms: The shortage of required labor and the problem of unemployment. Each year, millions of students graduate from the University, with no one to summon the unemployment requirements. There is also a brain drain aspect attached to the labor market in China. The trend of history suggests that there was a decrease in the trend of students working as labors as economy transitioned from 1988 to1995. Though the number of people who attended school in this age increased, the number of people working in the population decreased, causing the cases of voluntary unemployment. This decline may have also been because of the propensity of the previous generation for continuation towards education. The unemployment rate, however, was not very high. A capitalist economy led the state top have almost a full employment through most of the phase of economy, at the end of the 1990s and the start of the 2000s (Li, H., & Zax, J. 2015). But, the trend is in a decreasing pattern since the economic recession, and its effects hit the world.
The spending of the Chinese Government on market stimulus is limited and the tolerance level of overspending for infrastructure on the municipal level is very low, there is no chance that the era of almost null unemployment can be achieved. There cannot be an evidence for the labor crisis in China, as the situation has not reached that point, however, there are clear indications that the rate of unemployment is increasing and because of the ripple effects, many of the sectors are deciding on the scaling back of their hiring options. The support from Government in this matter has led to a light lesser rate of unemployment. The solution for this would be now to maintain the internal consistency and productivity of the organizations, keeping in mind the limited employment growth since 2008 (Rapoza, 2013). There needs to be a vision, not just in Companies, but also the Government in keeping the stimulus flow intact. Another way could be outsourcing labor to increase national returns.
Price Level Analysis:
The price level analysis of the Chinese economy can be done in two distinct periods: the first with the surging inflation before the start of 2011 and the new phase where inflation control has worked wonders. There has been a continuous debate about how all the factors at once; the stimulus, rapid growth and the credit expansion on the large scale that China has adopted will lead to a massive inflation situation. In addition, so was the situation until a few years back, with inflation being a hot topic. The interest rates are increasing, and that means big problems like appreciation of the currency, which is against the Chinese policy and the amount of debts at the domestic level. If the credit market were to rise, the problems of inflation would have skyrocketed.
Source :( Guilford, 2015)
The second phase is where the Consumer price inflation seems to be getting in control. This transition phase from a decade is explained by many economists as the result of tight monetary policies that the Chinese Government resorts to. The determination of the interest rates by the Government and not the market is also another feature why the tighter monetary policy is able to control effectively inflation in a short period (Guilford, 2015).
The concluding remarks on the Chinese economy may be reflected in the statement that the major control of all the national level macroeconomic indicators is in the hands of the Government. This means that the market as a limited scope when it comes to determining the aspects of economic indication. One aspect where the economy may work on is the exercising of free decision-making and factor flow in the market, so that true economic liberalization can be practiced, and macroeconomic indicators can reflect true results.
BBC News,. (2015). Why China is doing better than its headline GDP figure. Retrieved 18 April 2015, from http://www.bbc.com/news/business-27045529
Chinability.com,. (2015). China's gross domestic product (GDP) growth. Retrieved 18 April 2015, from http://www.chinability.com/GDP.htm
Guilford, G. (2015). The mystery of China’s fading inflation, explained. Quartz. Retrieved 18 April 2015, from http://qz.com/169958/the-mystery-of-chinas-fading-inflation-explained/
Insights, G., Desk, R., Data, T., Connected, G., & Academy (for students, t. (2015). China: Introduction >> globalEDGE: Your source for Global Business Knowledge. Globaledge.msu.edu. Retrieved 18 April 2015, from http://globaledge.msu.edu/countries/china
Li, H., & Zax, J. (2015). Economic Transition and the Labor Market in China (1st ed.).
Rapoza, K. (2013). In China, Full Employment No More. Forbes. Retrieved 18 April 2015, from http://www.forbes.com/sites/kenrapoza/2013/06/28/in-china-full-employment-no-more/
Schuman, M. (2015). China’s inflation problem and the perils of unconventional policy | TIME.com.TIME.com. Retrieved 18 April 2015, from http://business.time.com/2010/12/17/chinas-inflation-problem-and-the-perils-of-unconventional-policy/