Why Can China No Longer Continue To Grow Along The Past Track Of Relying On Exports? Essay

According to the statistic available it is agreeable that the People’s Republic of China is the most populated country around the globe. China is located in the East Asia with an estimated population of about 1.35 billion. Apart from being the world most populous, china has the largest and most complex economies in the world. Over the years the country has witness tremendous growth in all sphere of the economy from the service sector to the heavy industrial sector. This has enabled the country to realize high revenue and offer employment to its big population. The cycles of prosperity and stability of the country has seen china competing well in the global market through exporting products to every corner of the globe. Through this, China has become one of the world’s fastest growing economies. As of 2013, it was the world’s second largest economy by both nominal total GDP and purchasing power. Additionally, it is also world largest exporter and importer of goods. China excelled by throwing tons of resources into the modernizing its economy. These resources have been utilized in building factories, infrastructures, apartment’s towers and auto industry. However, for proper growth, development and alleviating the living standards of the china citizens, there is need for china not to rely solely on export for the growth and development of its economic. The china government should be attention to the domestic markets and try to meet the demand of the local consumers.

What does china exports?

In 2014 exports from the republic of china amounted US$2.343 trillion, up 48.5% since 2010 (International Trade Centre, 2014). China’s total GDP was US $17.632 trillion in 2014.Therefore, exports accounted for about 13.3% of China’s total economic output. Some of the product group that top china export list are; electronic equipments, furniture, clothing, medical equipments, iron, steel products, machines, engines, pumps, gems and precious stones.

Why china should no lo longer grow on exports

China should no longer continue to relying on exports alone for it to realize economic development and growth. Notably, the world is worried about china growth, of course not for the right reasons but because the financial markets were roiled after china notched only 7.7% boost to her GDP in the first quarter. Currently, the world is debating the usual whether china will have a soft or hard landing but the reality is china is unlikely to witness those astronomical growth rates at least for some time. You find that 10% decline in the export growth has been associated with a 2.5% decline in the country GDP growth on average. This is because a decline in the export growth will have a negative impact on the job growth, expenditure and income growth. The reason being, exports have become a very important factor in directing resources in the economy (Yılmaz Akyüz. (2011).
The substantial changes across regions on the impact of exports on production and spill-over to domestic consumption also put the role played by china exports on economic growth at a perspective. China growth model is broken and it can not be easily corrected and it is widely agreed that China's very large export surplus represents a serious problem and is probably not sustainable for very long. The short-run effect of too much export-dependence is that the impact of a serious global recession on a country's economy, passed through a decline in the demand for the country's exports, is an increasing function of the share of exports in the country's GDP. The world economy is not free from problems, a good number of them are those created by the US and Europe so it will be good of china to change course in a big way. The question we should be asking ourselves whether china is getting the right kind of investment that it requires to spur economic growth because the government is concentrating so much in building factories in certain industries, real estates, build railways and other misdirected projects, often with borrowing funds from the state banks. However, it is common to find most of local citizens can not afford to live in those real estates and even buy train’s tickets which are beyond the purchasing power of most of the citizens. Export-led growth has also created structural problems that the government has to address in order to achieve balanced economy. Such problems include high savings and persistent current account surpluses. At some point china has been forced to export its savings to much richer countries and this has been the reason why we are witnessing a very slow growth in the domestic consumption and also a decline share of consumption in GDP. Therefore there is a need for china to encourage local consumption rather that concentrating so much on exports and fixed investments through the following ways:-

Increasing income of ordinary people at the same time income inequality should be reduced-

One of the ways the Chinese government can achieve this is by passing strict policy which will force the private firms to operate the same way the national firms operate. The firms which refuse to conform to the set stands should be nationalize and promulgated them. This will enable the government to be in a position to enforce strict labor regulations in the labor market (Andong Zhu et al., 2010). These policies will aim at preventing cash from falling in the hand of a few individuals or being sent abroad. Instead the funds will be distributed within the economy and through the working people. These measures will increase the bargaining power of the employees and cases of harsh working conditions will be abolished.

The government should also take a measure to lower the saving ratio

Lowering the saving ratio means increasing people confidence to consume rather than concentrating most of the time in saving to meet their daily needs such as healthcare, education and housing (Wong, 2010).. The government can achieve this by improving the welfare system by de-commercializing health care, education system and the process of providing citizens with housing should be less profit oriented. Although the Chinese government has carried out these policies, it has not been effective at implementing them. Upon implementing these measures, the country will achieve a harmonious society and hence realize its economic growth.

Establishing a democratic political system

Having a democratic political system will ensure that all the above measures are implemented effectively. Only a small margin of population has been benefiting from the current state of the economy and they receive protection from the current socialist government. Through the support of the government they have manage to prevent nationalization or change of economic system. However, having a democratic system where every person participate in the decision making, the country will be transit from export driven economy to export and domestic driven economy.

Government to increase taxes

The government should increase taxes so as to have adequate revenue. With large deposit in its pocket, the government will be in position to fund domestic initiative through disbursement of funds inform loans, grants and salaries.

References

Andong Zhu and David M. Kotz. (2010). The Dependence of China's Economic Growth on Exports and Investment. Retrieved from http://people.umass.edu/dmkotz/China_Growth_Model_%2010_09.pdf
Edward Wong. (2010). Log In - The New York Times. Retrieved from http://www.nytimes.com/2010/06/25/world/asia/25china.html
International Trade Centre. (2014). Top China Exports. Retrieved from http://www.worldsrichestcountries.com/top_china_exports.html
William kazer. (2015). China’s Exports Post Surprise Drop in January - WSJ. Retrieved from http://www.wsj.com/articles/chinas-exports-post-surprise-drop-in-january-1423369044
Yılmaz Akyüz. (2011). Export Dependence and Sustainability of Growth in China. Retrieved from