Relevant Economic Article That Is Based On Either China Or India's Economy From The Last 5 Years Essay
In this essay, I am going to outline on how china has relied on the export sector over the years and how this reliance on exports has transformed the country to be one of the largest exporters in the world. The exports sector has boosted the country in its growth but at the same time I will outline at the conclusion on the problems the country faced as a result of reliance on exports. My final opinion will be the country should concentrate on continuing to build the export sector but at the same it should work on improve its domestic production.
China export sector has proven to be so important to the growth of the county as a result the country has been able to rely on the exports to achieve its economic development. Over the past years the country’s trade surplus rose to about $218 billion by the year 2006 (McNamee et al., 2012). This trade surplus was as results of the rise in the country’s manufacturing sector such as the electronic appliances, machinery, transportation equipments and favorable external environment for doing trade. The trade surplus was also boosted by the slowdown in the import sector since the country relied so much on the domestic sourcing of the intermediate goods. The reliance on the export sector has also led to the dissemination of new technologies that have led to the growth in industries and wage growth.
Trade composition for china has changed since the introduction of the domestic investment in sizeable inflows and capital goods (McNamee et al., 2012). This has made the country export sector be even more sophisticated in the international market. Although, the rate of growth of the country as result of reliance on exports will now be slower than it used to be, the country will need to rely on a shift to more sophisticated goods and services and also use latest technologies in manufacturing of its products. The country was the largest exporter in the world in 2009 beating both the United States and Germany who are the highest exporters in the world.
China growth in the export sector was also driven by the country participation on integrated supply chains of production especially in scenarios where the production of a certain good is undertaken in different countries. China will always form the final and last link in the process especially in the textile and assembly industry. The country was also booted by its low cost labor and factor inputs of production and its domestic market was also growing so fast. This provided a cheaper alternative for production for the foreign invertors (McNamee et al., 2012). Lastly, the reliance on exports has enabled the country to gain access to the international market and also new technologies that boosted the country in its economic development.
Conclusively, the reliance of the country on the exports has also negatively affected the country in the sense that the cost of labor and other inputs of production has also risen and this will have a direct negative impact on the domestic production and the end result will be an increase in the prices of exports making them undesirable in the international market. The country also has been forced to shift into the floating exchange rate due to the pressure from its WTO partners and this will affect its competitiveness in the global market since it will have an impact of increasing the prices of its product. An increase in the prices of china’s product will mean it will loose some of its market share to other developed and even developing counties in Asia. But these problems are short-lived in the sense that, the country will continue to enjoy unmatched economies of scale in production because the country has good prospects of growth than any other country. Eventually the rising labor cost on export relying industries will be balanced by the falling production cost (McNamee et al., 2012). Therefore it will be a great idea for china to continue to strengthen it export sector at the same concentrating on improving its domestic production. It has been witnessed that the more open a country to international is, the more it will benefit from the international trade
Brendan Coates, Dougal Horton, & Lachlan McNamee. (2012). China: prospects for export-driven growth | The Treasury. Retrieved from http://www.treasury.gov.au/PublicationsAndMedia/Publications/2012/Economic-Roundup-Issue-4/HTML/article4