A Study of China and its Economic Growth Models

by Dr. Alan October 03, 2017

A Study of China and its Economic Growth Models : Economics Assignment Samples

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Question

For a country of your choice, critically discuss the following view: ‘Economic growth, sustainable development and migration coexist’.


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Solution

Using China as an example, this paper critically examines the link between economic growth, sustainable development, and migration and tries to establish the concurrent existence of these three phenomena. The position is taken that all three factors cannot coexist; even though in some cases two out of these three might coexist.

OVERVIEW

Economic growth can be defined as the balanced process which leads to an increase in a country’s productive capacity over time, thus bringing about increasing amounts of national output and income (Todaro & Smith 2008).

The measures for economic growth usually take GDP, GNP or GNI values. The figures are generally denoted as the annual percentage increase in the real GDP (which is the nominal GDP adjusted for inflation). It is not necessary that growth in per capita GDP will lead to a reduction in poverty, and increased economic development and wellness, as growth is a narrow concept while development deals with human morality through self-esteem, freedom and other normative measures.

Economic Growth is largely a monetary measure of growth and does not take into consideration non-monetary factors, and that is where other broader measures come in, in the form of sustainable development. Sustainable development is defined as a system of development that ensures that future generations can live at least as well as the current generation. It is usually measured by the Human Development Index. It is argued that sustainable development calls for a steady state economy where natural resources, personal income, and wealth would be controlled (Hayward, Fowler & Steadman 2000), whereas economic growth is itself unsustainable.

Migration has mixed effects on economic growth and development, but it can be channelized into proper development through policy actions. The following section of this paper shows the consequences of some growth models in the Chinese economy and makes a detailed study of these aforementioned topics.

CRITICAL EVALUATION OF TRADE LIBERALIZATION IN CHINA

Trade liberalisation has always been highly acclaimed for its economic growth driven features. The concept of benefits from unrestricted trade can be traced back to the Ricardian theory of comparative advantage that leads to specialisation in the production of those goods and services for which the country has the lowest opportunity costs.

The initial trade liberalization policies of China consisted of: an increment in the number and types of enterprises eligible to trade, introduction of indirect trade policy instruments (tariffs, quotas, duty exemptions and licenses), gradual reduction and removal of exchange rate distortion and shift from import substitution to export promotion (Ianchovichina & Martin 2001). After its accession to WTO, China has recently changed its policies which made it survive through the economic crises with a fiscal and monetary stimulus almost equal to 45% of its GDP in 2009 (Sally 2011).  Sally’s paper shows how China’s ‘Go Global’ policy (through PTAs and unilateral measures) has enabled it to stand strong even in times of turmoil, compared to most developing countries including the BRICS and has emerged with high growth rates, higher employment level and better human welfare development for a large part of its population.

These reforms revived China’s economy and its export rates grew dramatically (especially textile and apparel). Productivity in China’s agricultural, labor-intensive manufacturing and industrial sectors increased and made them more competitive in the international market. Merchandise trade has gradually grown faster than before. Dynamic effects of trade liberalisation like capital accumulation and technology spillovers have had many contributions to China’s economic growth (Food and Agriculture Organization of the United Nations 2007).

It is widely argued whether opening up of trade has left a positive or negative impact on the sustainable development. Sustainable development is directly linked with the environmental condition of a country.  The optimists say that trade will positively affect environment due to two reasons. Firstly, trade allows a country to specialise and manufacture that good, in which it has a comparative advantage (composition effect). Thus a country with a comparative advantage in less pollution-intensive industries will benefit. Secondly, liberalisation has some technical effects which imply that a country would have easy access to cleaner production technologies which will minimise pollution (Chai 2000). On the other hand, if the composition effect is negative, then the environment degrades. Also, a scale effect due to the expansion in outputs for exports is harmful to nature (Stalley 2010). Another very important negative impact is the race-to-the-bottom policies taken up by the government to retain economic activities by lowering standards of environmental regulations (Robbins & Obach 2007).

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