Tuesday, June 7, 2011

Chinese Economy Growth

With the worlds largest population, it is no great surprise that Chinese economy growth has begun to increase rapidly in the last decade. In fact, the growth has been so fast that there is now concern that the economy may be overheating and there will be a period of contraction as it resettles.

Despite the large population and the many natural resources afforded to the country, China has until recently been a sleeping economic giant. Divided by warlords and foreign invasion and exploitation in the 19th and early 20th centuries, China turned to communism in 1949. Attempts to mobilize a still mainly agrarian population in the 1960s and 1970s were failures and led to much hardship. Laws restricting personal economic freedom also restricted any efforts for the economy to grow.

However since the 1980s (albeit at an initially gradual pace), restrictions on the freedom to own private property were lifted, and this has assisted with the Chinese economic boom. In turn this has lead to a surge in average per capita income and disposable income. Traditionally China has always been an inward looking society, but now is the second largest importer of goods in the world. Wherever possible the Chinese will purchase home grown products, which means that revenues stay within Chinese borders as much as possible, but at this stage of its economic story there are still a number of products that are produced elsewhere, such as the US that are not available in China.

The population that was once based almost entirely on the land is now increasingly working within an urban setting. Hours are long and pay is low compared to other parts of the world, but the vast Chinese population ensures that there is always someone available to fill any post. Huge numbers of factories produce goods and working parts for companies throughout the world. So as well as being a large importer of goods, China is now the worlds biggest exporter. However, the agricultural sector is still highly significant, and one third of a billion people work on land, producing an enormous amount of basic foodstuffs such as wheat, barley, potatoes, tea, and of course rice, of which it is inevitably the worlds biggest exporter. Livestock also constitutes an integral part of this element of the economy, particularly with relation to pigs and chickens.

As China is still run by the Communist party, most of its major assets are still state owned, and the banking sector is no exception, with 98% being managed by the central bank and finance ministry. This manages the whole internal banking system in addition to foreign trade and overseas transactions.

Also rich in natural resources, the economy growth in China has been driven by extensive mining of coal, which it has in abundance, as well as iron ore and almost every other key industrial element. Additionally there are vast supplies of oil and natural gas, most of which is used internally, a significant factor in ensuring economic freedom from other countries. The growth of the Chinese economy might suffer some minor downturns on the way, but the general trend for the coming century is certainly upwards.

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