China. Economic Analysis - Essay Example

? Economic Analysis China: China one of the major stake holders in present day Asia, has revamped its economic structure since the days of socialist era. They have reformed their structures and centralized their economy around a global pattern oriented economy. Amongst the top three economies of the world, and just after United States has more stable condition after the international recession as the world recovers from it five years after the biggest slump hit the entire globe. The trade partners stretch far and wide and its industries are strong enough to manufacture all kinds of stuff, with specialization in electronics in modern times. China has the largest population bench in the world, and thereby resources are needed to accommodate the citizens. Energy sources are a serious concern, for this purpose the government in recent years has started focusing on energy sources besides the conventional sources. Nuclear power plants and other renewable energy sources are in line for this purpose. Only recently did China become the world’s largest exporter to all parts of the world. This despite being the recession that has hit the entire world with its storm. While the period from 2008 to 2011 marked severe lows in the world market, china has shown better performances in terms of their economic growth, their exports and other variables. They have devised policies that ensure minimizing the deficit and losses due to recession. Though it would be a biased statement to say that it was not hit by the recession, it’s wise and safe to say that the policies crafted by Chinese helped resisting the global recession in a better and organized manner. Government has contributed in the field of state owned organizations and with its efforts has aimed at revamping the entire structure to strengthen this sector. In recent times, the G.D.P growth has come down slightly to a single digit value (Mundi). This has to do with the international recession, the domestic demand increase and various other factors. Still considering the nature of recession all over, this is considerable resistance with regard to the G.D.P decrease. Down slide on Chinese graph of economy and G.D.P will definitely effect the other pats of the world and their economies since its economy, exports and investments are spread are spread all over in the local markets(The Economist Online). Chinese exports find a large market in Europe and considering the inter dependence, with Europe still strangled deep into the economic crisis and with Euro issues looming dark over their markets, being a global player China is, it is bound to feel the heat from the Europe side and this could impact its G.D.P and overall economy’s progress. China’s success can be attributed to its separation of currencies on local and international front. Without any surprise people are advocating this form of approach for the euro crisis as well. After the policy change from 1980s, China’s policy depended largely on the private sector organizations, however having stabilized that pole, their forte in recent times has been the governmental organizations. They have regularized them, brought about necessary changes and provided them with the necessary security that would be demanded for the investors who are willing to invest in the state owned organizations. This is aided by the incentives attached to the investments in the government sector by both the local investors and the foreign investors. Having identified the achievements and the pluses that are there, there are obstacles at the same time that are being faced by the Chinese government and economy. One of these is the small domestic demand; this has largely got to do with the low capita income in domestic. The per capita income zone has the margin for improvement as it is relatively lower compared to other parts of the world and especially those countries that are in the rank and have some say and command over the international markets. Other problems and challenges faced include the handling of the large number of immigrants that head towards China every year; this is increasing the competition and resulting in the saturation of jobs for the locals. Though they are helping the economy and resulting in various options availability, yet it at the same time is suffocating the option of jobs for the locals who are the top priority of the government. Their joblessness has a direct impact on the economy in terms of the per capita income factor. The G.D.P growth in present day is the highest since the times of 70s decade. This has largely got to do with the revaluing of its current by a certain fixed percentage in comparison to the American dollar. Europe: Europe is facing the worst crisis of its time. Ever since Euro zone was established, this is the worse it has faced. With so many countries in the league facing unemployment, unstable internal economic conditions, bail out schemes, all in all a looped circle that revolves with no visible solution in sight and dependence on each other and on loans and bail outs. Greece, and recently Germany are few of the examples that have suffered severe blows in recent times under the umbrella of European Union. With first two quarters of the year gone down in negative, the third does not promise any improvement and the experts are quite cynical of the improvements and don’t see them happening as yet. France, Germany, Spain, Greece, all are faced with unemployment fears and with constant dip in the G.D.P. The recent strikes and protests across Europe gives an idea of how stable the situation is inside. Recession and unemployment is at a staggering high rate. Various solutions are being proposed in this regard, the first and foremost is to reduce and restrict the borrowing percentage, followed by reducing the costs and spending of various kinds (BBC). Indices are on the fall and the current standing was around 85 which is the lowest (the recent lowest was a percent above that observed in Aug this year) (Strupczewski) The problems arose due to the fact that multiple economies, each quite different in nature aimed at sticking to on strong currency, which led to loans, bail out schemes and with no standardized policies that could take into account the longer run repercussions, all these factors have contributed to the challenges and crisis that are at hand. Greece is the worst effected and is barely able to cope with. There were high speculations about the fact that Greece would back out of the entire Euro scheme. However according to many experts on the subject, backing out and going to old currency would not solve the problem. Probable solution: Many people recommend a new currency implementation as a standard to be monitored and governed by The I.M.F and hope that it would solve the problems of unevenness and recession considerably smoothly. The recent recession has been the hardest since the Great Depression that took place in the early decades of twentieth century. The concept of distinction between the internal and external currency can help overcoming the situation that is at hand currently. This is the solution proposed by the gurus from the field. For many China survived the worse recession courtesy this policy. Use the international currency when dealing with a respective country and use the local currency when dealing with the local trade and businesses or perhaps a too simple a rule that can’t be comprehended by the euro zone for now (Cabannes). Too much borrowing has caused the problem. Germany recently came up with the proposal of limiting the borrowing quota, with aim to reduce to crisis and avoid such obstacles in future. The major offenders in this regard are Italy, Spain and France who have a large percentage of borrowing compared to other countries in the zone. Japan: Like rest of the world, Japan is no exception to the recent lows of the market. It was more devastated by the earthquake that hit the country in June-July 2011.All the manufacturing plants had to be closed, power stations went down, many thousands were left homeless, all these did not contribute to the improvement of the economy in any case. Japan’s market and economy is strongly driven by manufacturing and technology enterprises, complemented by the good strategies by the economist and a perfectly suited atmosphere for the investors. Japan is amongst world’s biggest economies in line with China and United States of America. The G.D.P fell down by nearly one percent due to the massive earth quake that hit the country in 2011. Trans Pacific partnership project with United States is one of the notable points of its partnership and good trade relations with the United States. Besides this, Japan enjoys cordial relations with the European nations in terms of trade and exchange. There are number of memorandums being signed in form of free trade agreements with European countries and most importantly European Union. Historical impact: Since the World War 2, Japan has exhibited a transcendental improvement. It had to rebuild the entire infrastructure and focus on certain areas of strength, as a result sixty years later, Japan serves as a role model economy for rest of the world with smooth sail and great growth. Though it is faced with certain problems like any other nation, yet it has kept well with the recent recession of the global nature. A contrary to Chinese’s issue faced, Japan is facing the population down growth as a result decline in the domestic growth. For this purpose the country has promoted programs that ensure and encourage foreign investors and foreign labor in the country. Government debts are another issue that is hindering the free flow of economy and subsequently the progress. The good sign is the low percentage of population rate being below the poverty line, and that is less than 20 percent of the entire population. Unemployment rates are in the single figure yet the recent mishap ( earth quake ) did shake a few units. U.S: Like any other nation, United States is faced with the biggest crisis. The Wall Street campaign in recent times is an example of the internal unrest caused by the economic crunch. Being the world power, it’s down slope in economic position effects rest of the world. In simple words, when America sneezes, rest of the world catches cold. The factor that differentiates American market from that of Europe and rest of the world is its flexible nature in terms of the investors and investment. Technological giants like Coca Cola, Intel, Microsoft, Star bucks, and various other players make up a rich market. The second quarter of current year saw comparative improvement in the G.D.P rate although the challenges still persist in form of unemployment and recession with the unemployment rates staggeringly alarming at nearly double digit. Banks going default, companies suffering from slump are few of the cases. The current G.D.P rating stands at roughly 15 trillion U.S Dollars. United States finds its largest trading partners in China and European Market; therefore it is equally worried with the situation faced in Euro Zone. Large percentage of imports come from Chinese markets especially in the electronic industry with china being dominant all over. The wars initiated in Iraq and Afghanistan has served a serious blow to its economy. The crude oil prices going up in the international market as a result of it is an equal consideration. In such atmosphere of recession, reduction in trade deficits is suggested as order of the day. Trade policy along with internal policies like health, education should be re visited. Conclusion: Hence the present day serves a serious challenges to all the nations, what needs to be done is a collective effort to ensure that quick recovery is being made and economies both local and international are set on upward improvement at earliest. Trade should be encouraged; bail out schemes should be dealt with in careful manner. References: BBC. Eurozone crisis explained. 19 june 2012. 22 Oct 2012 . Cabannes, Andre. The European monetary crisis explained. Feb 2012. 22 Oct 2012 . Mundi, Index. China Economy Profile 2012. 19 July 2012. 22 Oct 2012 . online, The Economist. If China catches a cold. 24 Aug 2012. 22 Oct 2012 . Strupczewski, Jan. Euro zone economic outlook darkens with fall in confidence. 27 Sep 2012. 22 Oct 2012 . Read More