China Becoming World-Dominant Power in Economy

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Introduction

With states and cultures dating back about six millennium years ago, China forms one among the oldest civilizations existing in today’s world. The civilization and ethnicity of China is the base of one of the world’s ancient and most composite civilizations. The country proudly possesses a history abounding in more than five thousand years of political, philosophical, artistic, and scientific progression. The history of science and technology in China dates behind the first millennium BC. The technological contribution of this country to the development of society and humankind has both a long and rich history. In the distant past, instead of depending on Greek philosophers or philosophers of other civilizations, primeval Chinese philosophers made a momentous move on in science, astronomy, technology, and mathematics. According to available information, the first noted down observations of solar eclipses, comets, and supernovas were made in this country only. Traditional Chinese Medicine, herbal medicine and acupuncture, are a series of conventional medical practices that stem from China, which improved day by day over several thousand years. These procedures include hypothesis, medication, and diagnoses like herbal medicine, massage, and acupuncture, etc. were also practiced in China. Thus it is obvious that since its origin China has been far more civilized and advanced than the rest of the world. (Kynge, 26) However, in today’s world, China is becoming world-dominant power in the economy, and the entire perspective of world view on China has changed for a better perception in recent time.

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Background

The impasse of the last Chinese Civil War, which lasted from the month of April in the year nineteen twenty-seven to the month of May in the year nineteen fifty was civil combat on the land of China between two prevailing parties of China, the Kuomintang (KMT or Nationalist Party) and the Chinese Communist Party (CCP). As the result of this war, these two political bodies use the same, formerly used name China: the People’s Republic of China (PRC), administering mainland China, Hong Kong, and Macau; and the Republic of China (ROC), administering Taiwan and its surrounding islands. (Nyland, 49-73)

In the month of January, in the year two thousand six, President Hu Jintao, the president of People’s Republic of China, called for his country to make the modification from a manufacturing rooted economy to an economy with innovation at its origin, and finally, National People’s Congress, this year has permitted large enhancement financial support for the purpose of researches. The research based on Stem-cell study and therapy related to genetics, which to some belief in the Western world, is a controversial project, has to face the smallest quantity guideline in China. China has approximately 926,000 researchers, the number only second in the world, with the United States being the first nation with 1.3 million researchers in it. (Fleisher, 249-261)

These days China is also dynamically emerging its semiconductor, software, and energy industries, consisting of renewable energies such as solar power, wind, and hydro. In an attempt to lessen contamination caused by coal-burning power plants, China has been the foremost country in the process of making use of pebble-bed nuclear reactors. It has been seen that technological development often leads to political supremacy, and China at this point is well approaching the summit occupied by top nations of the day. (Garnaut, 134)

Economy

The People’s Republic of China has an economy, which is graded as the fourth-largest economy in the world when measured by nominal GDP. Its cost-effective productivity for 2006 was $2.68 trillion USD. Its per capita GDP is rising rapidly. According to the report of 2006, about 73% of China’s Gross Domestic Product is in the personally-owned segment. (Fishman, 33) Since 1978 the People’s Republic of China (PRC) government has been restructuring its economy from a Soviet-style centrally planned economy, where the state or government have the sole power over the issue of production and takes all decisions about their utilization and about the dissemination of income, to a new market-oriented economy, in which the manufacture and dissemination of goods and services are done through the system of free markets directed by a gratis price system. Within the political skeleton given by the Communist Party of China, this economic system has been termed as “Socialism with Chinese characteristics” and is a category of mixed economy (Zhu, 133-156). Since 1978 after the implementation of these reforms, millions of people have been elevated out of poverty, bringing down the poverty rate from 53% of the populace in 1981 to 8% by 2001.

The authorities have substituted an arrangement of household dependability in agriculture in lieu of the previous collectivization, in which farm laborers are not paid wages. Rather they were given a share of the farm’s net output. This augmented the influence of local officials and plant managers in the industry, allowed a wide variety of small-scale ventures in services and light industries, and exposed the economy to augmented foreign trade and foreign investment. The political administration has emphasized inspiring individual profits and utilization and beginning new organization systems to assist improved output. The government also has paid attention to foreign trade as a key conduit for economic growth. Since 1978 the consequence has been a tenfold boost in GDP. According to some international economists, due to failing in fully featuring in progress made by private enterprises, Chinese economic progress has been in actuality understated during much of the 1990s and early 2000s. In 1952, aggregate industrial production of china was calculated to be 34,900 million yuan in existing prices. That makes up to roughly 3% world share then. Current GDP per capita showed an insignificant growth of 17% in the Sixties, getting higher to 70% in the Seventies, and China rushed forward of other developing countries like India, enlisting an extraordinary growth of 63% in the unstable conditions in the Eighties and finally reaching a peak growth of 175% in the Nineties (Jianfa, 497-516).

The People’s Republic of China followed agricultural reorganization, taking apart the collective farm system and setting up the household responsibility system that endows with peasants greater decision-making facility in agricultural activities. The government also supported nonagricultural activities, such as the establishment of village ventures in rural vicinity, and endorsed more self-management schemes for state-owned projects, augmented competition in the market, and made straight dealings between mainland Chinese and foreign trading ventures possible. The People’s Republic of China also widely depended upon foreign sponsorship and imports. (Naughton, 118)

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During the 1980s, several reforms led to average annual rates of growth of 10% in agricultural and industrial output. Rural per capita real income became twice over. Industry positioned major profits mainly in coastal vicinities near Hong Kong and across the passage from Taiwan, where foreign investment assisted stimulate the production of both local and export goods. China became self-reliant in the production of grains. Rural ventures accounted for 23% of agricultural productivity, helping engross excess labor in the villages. The range of light industrial and consumer products enhanced (Xiaohua, 37-51). Improvements commenced in the economic, financial, labor, price setting, and banking sectors. During 1993, production and prices were sped up, investment outside the limit of the state budget was growing, and economic growth was boosted by the preamble of Special Economic Zones (SEZs) and the arrival of surplus foreign capital that was made possible by SEZs. Beijing endorsed other enduring reforms intended at enabling market-oriented institutions to play more and at the intensification of the center’s hold over the fiscal system. State enterprises continued to control many important industries in the economy that is termed as “a socialist market economy.” (Nyland, 49-73) The People’s Republic of China government called in provisional loans, inflated interest rates, and revaluated investment prospects. Economic growth picked up the pace again near the beginning of the new century, reaching 9.1% in 2003, 9.5% in 2004, and 9.8% in 2005 (Fleisher, 249-261).

Economics of Information Technology

China, at present, can boast in an exceedingly precise manner as being the principal destination of outsourcing for principally the American companies. The chief reason behind this phenomenon is that the country turns out with about a hundred thousand English-speaking IT dexterous professionals each year. But the subtle explanation is China’s low wage structure. Multiple studies have been carried out in this regard. Software improvement, expansion and maintenance, as well as business processing, and a substantial plus-point in back-office management like data analysis, accounting, call centers, and human resources, all contributed in this behalf for these are the foremost areas of outsourcing to China.

English-speaking IT professionals, gorgeous labor pools, and a low-down remuneration structure take China to the apex position ahead of other countries like India, Russia, the Philippines, Canada, and Ireland. These five destinations were also concluded for contention, but after comparing them with China, they were all found wanting. The summit, logically enough, went to the domain of China. China also was a cut ahead of the other strong contenders by dint of its Information Technology policies. While analyzing profiles of the probable countries, China was found to be enjoying the friendliest IT policies and obligations, and dedications towards it ensured the best possible amenities for its development of “Outsourcing” (Zhu, 133-156).

Outsourcing is so embedded in the framework of the economic structure here that the Chinese and Indian government has national ministers exclusively for IT. The top administrations of the countries are well in favor of IT ownership from overseas and compel with no export taxes. The future appears pink for China, and it could well be forecasted that China’s outsourcing occupation would increase over the passing time, and it would deal with more multifaceted and composite jobs. Straightforward pedestal staged back-office payroll and data entry will move to rock-bottom-wage countries over time, and countries like China and India will move up the pyramid and take over more complex software and product development services. It is expected that the US companies would outsource to China about three and a half million jobs by 2010, up from what it is about 300,000 nowadays. Thus, it is no wonder that every time there is a phone inquiry call to Bank of America, it is redirected to some parts of India or China where a Chinese or Indian satisfies the inquiry of the American Citizen (Fleisher, 249-261).

Ren Min Bi (Chinese dollars)

China’s National Bureau of Statistics in December 2005 recalculated its 2004 nominal GDP raised by 16.8% or Rmb2, 336.3 billion (US$281.9 billion), making China the 6th largest economy in the world, leaving behind Italy, with a GDP of almost $2 trillion USD. At the start of 2006, the People’s Republic of China officially proclaimed itself as the 4th largest economy, determined by the USD exchange rate leaving behind France and the United Kingdom. At the beginning of 2006, China arose as the second-largest economy in the world determined by domestic PPP (purchasing power) measure, at about $10 trillion USD, although such approximation must be taken with a great deal of warning as PPP estimation is very vague, more than ever in a huge country like China, Chinese acquiring capacity varies radically between Shanghai and Sichuan, and PPP is immaterial for imported products and overseas acquisitions. By the end of 2010, China foresees (determined by exchange rate) to go beyond Germany as the third-largest economy and to overtake Japan by the year 2015. Thus it is certain that China is fast becoming a global superpower, at least economically, and its logical transition into a political force to be highly recognized (Nyland, 49-73).

Discussion on Chinese economy

Upon close assessment, China’s record loses some of its sheens. China’s economic presentation since 1979, for example, is, in fact, less imposing than that of its East Asian competitors. Regardless of China’s distinguished economic progress, its per capita and total GDP growth have been overtaken by some nations. From 1999 to 2006, Russia’s minimal per capita GDP increased from $1334 to $6879 (515 percent), while that in the People’s Republic China increased from $870 to $2000 (229 percent). Similarly impressive are some oil-producing nations of Middle Eastern, such as Qatar, United Arab Emirates, Bahrain, Kuwait, and Brunei. Kazakhstan, Azerbaijan, Turkmenistan, and Angola had outpaced China in utilizing huge energy coffers at the same time. On the other hand, Equatorial Guinea, an African country, recorded 79% percent real GDP augmentation in 2004. Even some countries in Asia, such as Vietnam, have made GDP triple between 1999 and 2006 on an ostensible per capita dollar basis, astonishingly more than China (Xiaohua, 37-51). The main cause of this is China’s large labor pool, due to which inflation is held back, and its repudiation in increasing the value of the Chinese yuan, which could possibly have shown the way to faster escalation statistically, but may have lost some consistency in growth. The strength of the overall economy is a major determinant of political significance in the present time, and China is doing quite well in this prospect. (Adler, 88)

In adjunct, it must be kept in mind that per capita income in absolute dollars (not percentage) GDP per capita is ascending much rapidly in most of the developed nations of the world than China, on account of China’s very low foundation of income. The Central Committee of the Chinese Communist Party a short time ago permitted the draft for the 11th 5-year plan for 2006 – 2010. The plan is intended to achieve a comparatively conventional 45% increase in GDP and a 20% decline in energy intensity by 2010 (Jianfa, 497-516). Intriguingly enough, due to its vast population, China’s per capita share of world GDP can by no means accomplish the levels of the USA or Japan, or some European countries in the 1990s by economic progress alone. Avowed in another way, an average Chinese can never possess the same comparative economic power that was possessed by average Americans, Western Europeans, and some Japanese in the 1990s. This is demonstrated as Japan had 20% of world GDP in April 1995, with not more than 2% of its population. As China contains approximately 20% of the world’s population, it would require 200% of world GDP to compete with Japan’s level by this evaluation in April 1995, which is next to impossible. China’s share of the total population of the world would have to reduce in size to well below 10% for this to happen (Xiaohua, 37-51).

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Over the next 50 years, the BRIC economies, including Brazil, Russia, India, and China, are probable to become a much larger force in the world economy, with China being the most powerful of all. The velocity of Gross Domestic Product growth, profits per capita, and financial activities in the BRICs economies collectively shows the opportunity of their increasing superior to the G6 in US dollar terms in a lesser amount of 30 years. By 2025 they could attain over half the size of the G6. Of the recent G6, only the US and Japan are among the six largest economies in US dollar terms in 2050. The listing of the ten largest economies of the world may seem relatively dissimilar in 2050. The prevalent economies in the world (by GDP) may not continue to be the richest (by income per capita), thus making premeditated preferences for firms more intricate. In December, it was publicized that China substituted the United States as the world’s biggest exporter of technology products. (Gifford, 112) Many economists forecast that the Chinese economy will reach the second position as compared to the United States by 2020 and may possibly go beyond it by 2050. Western investors sleet China’s sound economic rudiments, such as considerably a high savings rate, vast labor pool, and strong work ethic and capability of glossing over its flaws. Among business people, China is popular for being concurrently the world’s greatest manufacturer and its big markets. Private equity firms are hunting the Middle Kingdom for achievements. Chinese Internet companies are obtaining prices of dot-com age on the NASDAQ. Some of the world’s foremost financial organizations, including Bank of America, Citibank, and HSBC, have invested billions on China’s fiscal prospects by attaining minority risks in China’s state-managed banks, although many of them are precisely bankrupt. Even every large global automobile company has built or is preparing plans to build new amenities in China, in spite of a swamped market and plummeting profit margins. (Fishman, 50)

The main aspects contributing to such profound economic growth are increasing external demand ensuing from enhanced world economic presentation. The export rebate system has facilitated optimizing the export product mix and thus inspired the expansion of exports. In October 2003, China transformed the export rebate system, with the central finance accountable for the rebate of tax payments in arrears in order to make certain that there would be no new short payments. The even RMB exchange rate has had a positive effect on export trade. Due to the effect of successive huge shortfalls in the current account of the United States and the poor equilibrium of international payments, the US dollar has, since the beginning of 2002, by and large, assumed a deflating tendency as, unlike other major currencies. China’s RMB has also deflated to a definite degree as China pegs its RMB exchange rate to the dollar. Moreover, as China has accomplished a double balance in its international expenses and its foreign exchange reserves have upsurged progressively, the voices calling for approval of RMB exchange rates have been running high during the recent few years, applying great stress on the RMB. The bang of the big hikes in raw materials charges on the international market. The prices of such goods as crude oil and metals on the international market have increased rapidly since the beginning of 2004. In addition, due to the impact of agitated investment growth, the costs of such raw materials as iron and steel and petroleum and energy have risen sharply. As these products have small demand suppleness, the rise in price has stimulated the growth of foreign trade. In all the indications, it is quite clear that China is becoming a great economic powerful nation, if not the most powerful nation, by 2030. (Fishman, 145)

Conclusion

In conclusion, it should be mentioned that China being one of the world’s ancient unremitting civilizations, has always left back the rest of the world with its intelligence and self-reliance. China has proved every analysts and analysis wrong who predicted China to become another failed state ruled by autocrats. Instead of all its backdrafts, China managed to pave its path to development. It could easily be predicted that in the nearest future, China would accomplish its ambition of becoming the most economically powerful nation in the world, and the world view of China that was 50 years ago would change, if not already changed, as the foremost cultural, political and above all, the most dominant power in the economy.

Works Cited

Adler, Solomon. Chinese Economy. Volume 1 of The Chinese Economy. LA: Taylor and Francis, 2008.

Fishman, Ted. China, Inc.: How the Rise of the Next Superpower Challenges America and the World. London: Simon & Schuster, 2008.

Fleisher, Craig S. ‘Examining differences in competitive intelligence practice: China, Japan, and the West’. Thunderbird International Business Review 51.3, (2009): 249-261.

Garnaut, Rob. China: Linking Markets for Growth. Hong Kong: ANU E Press and Asia Pacific Press, 2007.

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Gifford, Rob. China Road: A Journey Into the Future of a Rising Power. NY: Random House Trade Paperbacks, 2008.

Kynge, John. China Shakes the World: A Titan’s Rise and Troubled Future and the Challenge for America. New York: Houghton Mifflin, 2006.

Naughton, Barry. The Chinese economy: transitions and growth. LA: MIT Press, 2007.

Nyland, Chris. ‘Marketization, globalization, and social protection reform in China: Implications for the global social protection debate and for foreign investors’. Thunderbird International Business Review 47.1, (2008): 49-73.

Jianfa, Shen. ‘Understanding dual-track urbanisation in post-reform China: conceptual framework and empirical analysis’. Population, Space and Place 12.6, (2008): 497-516.

Xiaohua, Yang. ‘Internationalization of Chinese and Korean firms’. Thunderbird International Business Review 51.1 (2009): 37-51.

Zhu, Cherrie. ‘A retrospective and prospective analysis of HRM research in Chinese firms: Implications and directions for future study’. Human Resource Management 47.1, (2008): 133-156.

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