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Macroeconomic convergence, financial development and economic growth: CHINA - Literature review Example

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Macroeconomic convergence, financial development and economic growth: CHINA

This paper reviews several articles which focuses on the economic growth of China and the impact of all the internal and external factors. The Economic Rise of China: Threat or Opportunity? In this article the author has focused on the international aspects of economic development in China. China has changed its foreign trade policies since 1978 when it encouraged free trade and abolished trade restrictions. The government encouraged private companies to engage in foreign trade. The gross domestic product (GDP) of China has increased substantially and in 2002 China’s GDP was more than eight times than that of 1978. Globally, China had the fastest long-term rate of growth from 1978-2002. China’s growth was steady and fast even during the global growth recession in 2001. The author has pointed out that foreign direct investment has also been largely responsible for the growth of China’s economy. Since the economic reform in 1978, China’s perspective has changed on foreign investment. China now considers foreign investments as causes for its own economic development. China created many opportunities for foreign investments in 1980 and although in the beginning the flow of capital was modest, in the early 1990s the inflows increased to more than $25 billion. This expansion continued even in 2001 and 2002 when foreign direct investments in other countries dropped substantially. In 2002, China became the first preference of foreign investors. In spite of this positive scenario of China’s economic development the author speculates that such remarkable economic growth does not guarantee future success. The challenge is on the leadership of China to maintain the fast growth of economy and also provide high living standards to the people. China needs to reduce tariff levels to meet its commitments to the World Trade Organization. This will increase foreign competition and for this changes in the economic structure will be needed. This will further lead to unemployment causing social unrest. China also needs to face the challenge of reforming the financial system especially its weak banking system. Since most of the state-owned banks suffer from capital deficit their levels of profits remain extremely low compared to the international structure. The author has also commented on the implications of the economic growth of China on the United States. Since China has rapidly increased its international trade volume, it has become a huge market for the U.S. firms. As far as trade relation between U.S. and China is concerned, it has been seen that exports from China have been proved to beneficial to many Americans as they can now afford high quality consumer goods at low prices, but this has also caused resentment among many manufacturers and workers of America. Americans industries that produced similar products that are imported from China have suffered. This has caused temporary unemployment in the labour market but in the long run as new industries develop many displaced workers are hired. (Lardy, 2003) Why has China Survived the Asian Crisis so well? What Risks Remain? In this article the authors have explored the features of the economic system of China that helped the country survive the Asian crisis in 1997 and 1998. The crisis however strongly affected the international trade relations of China and foreign investments. Nevertheless China did not face severe economic depression ...Show more


Macroeconomic convergence, financial development and economic growth: CHINA Literature Review Introduction China began its economic reform from the year 1978. Since then the nation has experienced steady and rapid growth of per capita economic growth which is among the highest rates in the global economic history…
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Macroeconomic convergence, financial development and economic growth: CHINA essay example
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