The Export-Led Growth Model - Essay Example

The Export-Led Growth Model Export-led growth has been a viable strategy for boosting the economic growth of the nation after the global economic crisis that impacted the demand in major marketing economies. Export-led growth is defined as the trade and economic policy that aims in speeding up industrialization activities in an economy in order to achieve comparative advantage. The extensive adoption of export-led growth has enabled many economies to achieve and sustain rapid economic growth. This model has also enabled many economies to sustain rapid growth in the competitive global marketing economies. The emerging economies have tremendously relied on manufactured export-oriented growth models in order to improve their economic growth. China is one of the emerging economies that significantly improved because of the export-led growth model. China’s model is rooted in the double transition of demographic and structural transformation. China economy has tremendously managed the double-digit growth rates from the period when it began economic transformation. This enabled the country to move from a planned to a mixed economy where the market plays the significant roles in resource allocation. Thus, despite the political, social and economic problems associated with the rapid growth in China economies, export-led growth has tremendously enabled China to increase their profitability levels, balance their finances, exceed their debts and trigger their export growth rate. Export-led growth model have been successful in many economies that employ this model for creating economic transformation. The export-led model is significant because it has enabled many economies to increase their profitability levels, balance their finances and exceed their debts. China has benefited from the export-led model since they started using it because this model has enabled them to increase their profitability levels. China was ranked the second largest economies that have emerged and improved in terms of economic performance in the global market. This model has not only enabled them to increase their profitability level but also to balance their finances; thus enabling China to emerge as the successful economies in Asian markets. It has also triggered export growth rate in the China market; thus creating higher export levels in a rising spiral cycle. For instance, the GDP (Gross Domestic Products) in China market expanded by 2%, in the year 2012 and indicated in figure 1 below. Historically, the GDP average rate was 2.06% from 2011 and the record indicated the 1.50 % low in 2012 as indicated in figure1 below. China is one of the second economies after the United States that has improved their export rate in the global market. China has varied industries that export multiple products to diverse countries across the globe. The rise of population growth rate has enabled them to improve their economic performance because of rich markets because of both rich markets both in the domestic and the international markets. For instance, the National Bureau of Statistics of China reveals that the GDP for the China economy was 51,932.2 billion in the year 2012; thus contributing to economic expansion of 7.9 percent. Figure 1: GDP Growth Rate in China markets The implementation model of export-led growth has significantly contributed to increased rapid growth in the China markets. For the last three decades, China economy has grown to the average rates, which exceed 9%; thus, it is widely admired by other nations (Razmi 2008, p. 1). Furthermore, the growth has been accompanied by the reduction levels in poverty; thus enabling the China market to be ranked among the leading and emerging economies in the Asian nations. However, the trajectory of rapid growth in China has created political, social made economic problems, which may be deemed as an obstacle to the underpinning Chinese growth in the future. Yueh (2010, p. 45) argues that the developing policies of trade in a country is effective because they enable the country to manage successfully their integration into the global trading system. Many countries have implemented trade policies that enable them to conduct their business successfully in the global market. These policies arise from the export-led model whereby nations lower the trading barriers to create the trade balances. Frieden (2006, p. 36) argues that development policy have been dominated by the export- led growth paradigm, which have been part of a consent among economists. The export-led strategy has enabled many economies where China is among them; thus contributing to increased economic activities. It has created a new consensus in varied economies and many of them have achieved varied benefits since its implementation, in the 1970s. The economists argue that export-led model presents a win-win resulting in developing nations and also in industrialized countries. However, the benefits this model have been realized in the application principles of comparative advantage where emerging economies and also developing nations have gained extra benefits from an external focus (Razmi 2008, p. 4). The export-led is one of the key determinants of economic growth. The research study indicates that export-led growth does not only hold the overall growth of economies through increasing the amount of labor and capital, but also expand the country export rate (Dash 2009, p. 305). The exports and growth have been attributed to the possible externalities for domestic countries participating in the global markets such as the existing resource reallocation, economies of scale and labor force training activities. The extensive literature reveals the concerning linkage among the trade and economic growth as the consequences for diverse change in the economic development and international trade policy fields (Tortella, Quiroga and Palgrave Connect 2012, p. 51; Dess 2012, p. 136). Haddad and Shepherd (2011, pr. 1) argue that many developing nations have relied on export-led model as their viable strategy for increasing economic growth. This is because the export-led strategy has enabled many economies to improve their performance in the midst of economic crisis. This model remains the only and significant strategy, which has enabled economies to increase their profitability; thus achieving an economic advantage in the global competitive market. The model has contributed to new consensus of economic openness and growth with other varied benefits. Many countries in the Asian economy have been able to survive and sustain their business in the global competitive markets. Haddad and Shepherd (2011, pr. 2) assert that there is no single economy that has sustained their economic growth nor increased per capital incomes without considerably expanding their imports and exports. The research study reveals that the future export-led growth is likely to change. This is because of the global rebalancing between the export surplus and deficit economies. The avid appetite for imports in the United State might slacken off further even though, the macroeconomic fundamentals would mean the persistence of global imbalances in the medium term (Haddad and Shepherd (2011, pr. 4). The data indicates that export-led has been a strategy used in many economies for over than 15 years. In most developing nations, export-led strategy has been widely adopted and particularly the BRICs are becoming highly significant in the world import and export growth. The imports in countries like in the US have been gradually declining, but economies like China have implemented successful export-led models for improving the economic performance level ((Haddad and Shepherd (2011, pr. 5). The figure 2 below is an indication of the level at which shares of the world imports increase by importer income group. The use of export-led trade in developing economies has become significant because of the need to achieve economic growth; thus policymakers have remained committed to the advancing the markets. There are still problems of whether the adoption of export-led model is successful. The empirical research was carried out in order to deter mine as to whether China is successful case of employing the export-led model (Dash 2009, p. 306). The scholars used the empirical analysis in order to determine whether the export-led model is successful towards the contribution of the economic growth of China. China is an export-led economy and the growth of export rate is connected with the GDP of the China economy. Thus from the empirical analysis, it was found that China being the largest emerging economy in the developing nations with the largest populations, it has highest export values. This has enabled the economy to become successful; thus ranked among the largest export economy across the globe. However, despite the success that China has experienced from using the export-led model, some few social, political and economic consequences have been associated with this strategy. First, the export-led model have created serious structural imbalances and also contributed to slow investments. Dash (2009, p. 126) provides the way global imbalances should be tackled in order to create a balanced economic activities in an economy. The cause for economic imbalances dates back to the double transition strategy employed in the China economy. One of the policies includes the one-child policy and the second one is the rapid pace of industrialization process, which is accompanied by rural-urban migration. The double transition strategy results due to growth of trade, which is mostly accrued from the government taxations and accrued balances in form of capitals and revenues. Although China has experienced tremendous growth rate, the development activities have been achieved with some costs. Razmi (2008, p. 45) argues as to whether the export-led model employed in China markets is sustainable. This is because of the rising concerns of the economy such as structural imbalances, which is an inevitable, weak financial sectors and also alteration of factor prices. Sustainability of china economy lies upon the export-led growth, which depends upon the double transition strategy. China will continue to use this model in sustaining their rapid economic growth rates; thus enabling it to become the largest economy across the globe. However, the structural imbalance problems that are rooted from the double transition strategy will eventually ease over a long-time of about 15-20 years (Yao and Peking University, 2011 pr.8). This will contribute to social, economic and political unrest that may create a disruption in the growth trajectory of China economy. In conclusion, despite the political, social and economic problems associated with the rapid growth in China economies, export-led growth has tremendously enabled China to increase their profitability levels, balance their finances, exceed their debts and trigger their export growth rate. Export-led growth model have been successful in many economies that employ this model for creating economic transformation. China is one of the economies that increased the export growth rate; thus improving their economic performance level. The implementation model of export-led growth has significantly contributed to increased rapid growth in the China markets. This model has enabled many economies to improve their performance in the midst of economic crisis. However, despite the success that China has experienced from using the export-led model, there are some few social, political and economic consequences that have been associated with this strategy. It has contributed to serious structural imbalances and also contributed to slow investments. The development has been achieved with some costs; thus, the arguments remain as to whether the export-led model in sustainable and effective policy for creating success in an economy. References Dess, G. G. (2012). Strategic management: Text and cases. New York: McGraw-Hill/Irwin. Dash, R. (January 01, 2009). Revisited Export-Led Growth Hypothesis. South Asia Economic Journal, 10, 2, 305-324. Haddad, M. & Shepherd, B. (April 12, 2011). Export-led growth: Still a viable strategy after the crisis? Retrieved on March 4, 2012 from http://www.voxeu.org/article/export-led-growth-still-viable-strategy-after-crisis Frieden, J. A. (2006). Global capitalism: Its fall and rise in the twentieth century. New York: W.W. Norton. Tortella, G., Quiroga, G., & Palgrave Connect (Online service). (2012). Entrepreneurship and growth: An international historical perspective. Basingstoke: Palgrave Macmillan. Razmi, Arslan. (2008). Is the Chinese Investment- and Export-Led Growth Model Sustainable? Some Rising Concerns. ScholarWorks@UMass Amherst.. Yueh, L. Y.-C. (2010). The future of Asian trade and growth: Economic development with the emergence of China. London: Routledge. Yao Y & Peking University. (February 27th, 2011). China’s export-led growth model. EastAsianForum.org. 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