The Impact of Terrorism from Chinas Point of View - Assignment Example

Terrorism has been a menace in more than one ways and has severely affected the world economies all over. If we look at economically, terrorism has had 4 main affects globally. Firstly, it has severely impacted the capital stock. We look at the impact of terrorism from China's point of view, which has been the biggest market leader in world economy in more than one ways. Introduction: China is stipulated to be one of the fastest emerging economies of today's time and age. The roots of its economic development date back to 1978. Before 1978, all the assets were state owned but post this era government set forth on a major economic reform program. To trigger development, it encouraged the formation of rural enterprises, liberalized foreign trade and investment, introduced education reforms, and invested heavily in industrial production. In several peak years, the GDP hit as high as 13 % and today the per capita income has quadrupled compared to what it was 15 years and if the predictions by various analysts hold true, the Chinese economy will cross that of United States in another 20 years. (Khan 2007) According to a research conducted by IMF in an attempt to find the key sources of its growth, it was found that the increase in the number of Chinese workers has been one of the major factors of its growth. At the same time capital accumulation through the growth in the overall assets of the country, new factories, manufacturing machinery and development in its communication systems have also marked its growth. According to most theoretical and empirical analysis conducted, more than 42 percent of china's growth has to do with productivity gains since 1979-94 but after 1994 capital took over as the most significant and primary source of growth. This marks an avid departure from the more traditional views on development wherein capital investment takes the lead. In most cases, economists studying Chinese Growth have faced lots of theoretical and empirical issues most of which crop up from central planning and strict government control. This has led miss allocation of resources and distorted prices. The fact that Chinese accounting system differs from the American accounting system does not sit well with the analysts as well. There are many ways of modelling economic growth but the most common and viable one is the neoclassical framework approach. It elaborates over the link between productive factors such as capital and labour to output. This model is mostly applied to market economies but can also be used for command economies. In addition, finding from such empirically modelled data has led to the conclusion that in recent year's capital investment in goods and technology have led to increase in productivity. (A Measurement of the Contribution Made by Foreign Investment 2005) India: India has shown remarkable economic growth for the past three years of its running. For a decade, it has been registering an economic growth of 7% plus which has led to reduction in poverty by 10 %. However 60% of India's population continues to thrive on agriculture which makes a poverty alleviation a major economic channel. The fact that droughts and floods are still common in the nation, does not sit too well with the agents of economic growth. According to a hypothetical analysis that was recently conducted, one main reason behind India's economic growth has been the structural transformation that has been adopted by the national government. India's economic growth has been oft conceived as directly related to that of its performance in the service sector in particular. Its growth rate was above 11 % in 2007 and contributes to 53 % of GDP today. Investment in industrial sector has been another key component of its growth and it contributes to 29% of its GDP where as agriculture is 17 % of its economy. Manufacturing sector has emerged rapidly and has shown remarkable progress between 2005 and 2006. It grew by 12 % during this time where as communication and storage sectors grew by 16 %. (Indian Economy overview n.d.) Other factors that have contributed to this robust environment include sustained investment and high saving rates. However, this is not where the problems end. As stated by an economic analyst, "are still major issues around federal vs. state bureaucracy, corruption and tariffs that require addressing. India's public debt is 58% of GDP according to the CIA World Fact book, and this represents another challenge's Impact of terrorism: Terrorism has severely impacted the world economy through China. Food prices have gone up and inflation has been taking a toll. Inflation, is essentially the rise in general price of goods and services over a period of time in economics. It is more commonly referred to as price inflation in now. It can also be understood as the decline in the real value of money and consumer's purchasing power. As inflation starts taking its toll, each unit of currency can buy less goods and services compared to what it used to. The primary measure of inflation is the "inflation rate" which represent, Beijing stood under immense pressure from all sides of the coin to raise prices. China has been a victim of inflation in its own right and doubts had been raised by various sectors of the probable inability of the government to control inflation in the concurrent year. In the article choosen, Wen, assured of immediate policies and reforms to counter the aforementioned. Even though the government has increased the interest rates to level the impact inflation out but there is more that needs to be taken care of. China has been witnessing one of the fastest growth rates ever. It was 11.4 % percent in 2007 and it has targeted another 9% in 2008, a target which can be severely affected provided inflation due to food commodities are not dealt with the appropriate reforms and policies as pointed out by Wen. He stressed on the importance of dealing with inflation as early as possible, failing to do which may cause severe implications on the economy. China has the resources and tools to deal with them, thanks to its oversupply of industrial goods and grains for which if policies are put on board inflation can be cooled down. Wao also tried to alleviate fears exercised by various quarters who felt the targeted 4.8 percent is highly unrealistic as whole sale prices have been witnessing persistent rise and its likely that most companies would pass down the impact on the consumers. This form of inflation has been explained by Robet J Gordon in his built-in inflation theory. According to Gordon, inflation can also be a result of workers and companies trying to keep their wages high while the high prices are transferred to the consumers. This is what he termed as the vicious circle and are more reflective of the events of the past. bidHe was of the view that the stipulated goal is a mark of government's resolve to control inflation and promised market style reforms to help the situation. The Keynesian economic theory stipulates that money stands transparent to the real forces in economy. Inflation is most caused by various aspects of the economy translating themselves into higher prices. This is apparently what can be seen in China where high food prices have been the primary cause of inflation. He believed that by successfully allocating market resources and introducing bank reforms which could help improve inflation. Sources: "A Measurement of the Contribution Made by Foreign Investment." Chinese Busines review, 2005: 28. Bhagwati, J. 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