HSC Economics - Economy other than Australia (China) PDF

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Summary

(HSC Eco Topic 1 - The Global Economy) - Notes about Chinese Economy

Strategies to achieve --> Economic growth & development.
- Environmental impact, etc....

Description

Undertake a case study of the influence of globalisation on an economy other than Australia, including an evaluation of the strategies used to promote economic growth and development in this economy. Chosen country

China

Current government/political leader

President Xi Jinping Leader of the Communist Party of China

Type of economy

Emerging economy The system is based on the predominance of public ownership and state-owned enterprises within a market economy.

How globalisation has affected the chosen country (positive and negative)

Globalisation has had a multitude of effects on China, both positive and negative. Prior to globalisation, China was a centrally planned economy where it was heavily controlled & isolated. The Chinese government undertook many economic reforms to take advantage of globalisation, shifting to a more market-based economy and resulting in its large economic growth. Positives: -

Major economic growth.

China saw double-digit growth in the early-mid 2000s, reaching 15% growth in 2007. China’s growth was hit severely by GFC, but still having a yearly growth rate of 6% in 2008. Since then, it has been growing at a decreasing rate, of about 6%, highlighting it’s a shift from emerging to an advanced economy, with a lower growth rate but being more stable.

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Economic development

Due to globalisation having a large impact on the economic growth of China, the increased revenue was able to contribute to the improvement of HDI in China. As seen in the graph above, in 1995, the HDI of China was 0.580, having risen to 0.752 in 2018. This steady increase in HDI is an extremely positive effect of globalisation on the nation. We can see the monthly average wage has increased significantly since globalisation took place in China, seen below. This increase in wage would have contributed to the increasing HDI of people in China, among other things.

Negatives: -

Environment severely affected

Air Pollution A 2015 study from the non-profit organization Berkeley Earth estimated that 1.6 million people in China die each year from heart, lung and stroke problems because of polluted air. The impact of globalisation saw the heavy influx of manufacturing plants in China open, this led to large amounts of polluted air (mainly from coal) that led to these deaths. Often characterised by a thick layer of smog, the pollution is often visible in many cities in China. However, the Chinese population working to combat this, such as Millions of homes and businesses are switching from coal to natural gas, Afforestation measures (Plating trees) and Being the world's number one in the use of electric vehicles. Soil Pollution 100,000 km2 of China’s cultivated land have been polluted, with contaminated water being used to irrigate further 21,670 km2 . And another 1,300 km2 have been covered or destroyed by solid waste. The affected area accounts of one-tenth of China’s cultivatable land. An estimated 6 million tonnes of food grain are contaminated by heavy metals every year, causing direct losses of US$2.57 billion -

The exploitation of labour.

Many workers are in poverty working extremely long hours. - See the case study on Foxconn worker’s committing suicide by jumping out windows. There were 18 reported suicide attempts that year alone and 14 confirmed deaths. Twenty `more workers were talked down by Foxconn officials. Government policies/strategies used to promote economic growth and development

Economic Growth ●

Greater trade liberalisation

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China became a member of the World Trade Organization (WTO) on 11 December 2001.

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Required significant changes to the Chinese economy. These changes were mostly of financial deregulation, allowing for a more open stance to foreign economies, opening itself up to the rest of the world for trade.

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This lead to massive economic growth, seeing growth of exports, and a reduction in tariffs both on imports into China and tariffs placed on Chinese products. An expanding export market and looser investment restrictions led to growth in the Chinese capital. Net exports as a share of GDP increased by 5.1% from 2002 - 2009 China brought the nation into a period of greater trade liberalisation, weakened state-run enterprises, and giving more power to private interests. ●

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Entry into various trade agreements

ASEAN

A regional intergovernmental organization comprising ten countries in Southeast Asia, which promotes intergovernmental cooperation and facilitates economic, political, security, military, educational, and sociocultural integration among its members and other countries in Asia. -

APEC - Forum for economic talks across Asia Pacific

China's membership has boosted its own development and greatly contributed to regional and world economic integration progress. China has actively participated in the wide-ranging cooperation within the APEC framework. Chinese presidents have attended all APEC Economic Leaders' Meetings, and the positive, balanced and rational proposals they made at those meetings have won wide acclaim. Among the APEC summits, China has successfully held two -- one in Shanghai in 2001 and the other in Beijing in 2014. ●

Special Economic Zones (SEZs)

Between 1980 and 1984 China established special economic zones, SEZs have multiple tax benefits, especially ones that are aimed at foreign investments. One of the most famous tax benefits is the elimination of corporate tax under losses which means if you fail to generate a profit, you do not have to pay taxes. Once a company does start to generate a profit, then there are reduced tax rates until 5 years from the start of profitability. There is a decreased income tax level, being as low as 15% as in Hong Kong special economic zone, whereas in mainland China this rate is normally as high as 33%. With China’s economy being incredibly reliant on exports, there is also regulation aimed at encouraging exports.

Economic Development ●

Educational Policy

In 1986 the Chinese government passed a compulsory education law, making nine years of education mandatory for all Chinese children. Today, the Ministry of Education estimates that above 99 per cent of the school-age children have received universal nine-year basic education. ●

Healthcare Policy

The government launched the New Rural Co-operative Medical Care System (NRCMCS) in 2005 in an overhaul of the healthcare system, particularly intended to make it more affordable for the rural poor. Under the NRCMCS, some 800 million rural residents gained basic, tiered medical coverage. By 2011 more than 95% of the total population of China had basic health insurance. ●

Green Energy Subsidies to combat pollution

China’s Action Plan for the Prevention and Control of Air Pollution issued by China’s State Council in September 2013, illustrates the government's desire to increase the share of renewables in China’s energy mix. Unlike oil, coal and gas, the supplies of which are finite and subject to geopolitical tensions, renewable energy systems can be built and used wherever there is sufficient water, wind, and sun

Relevant economic data

- Third-quarter 6% growth (27 year low) as of 10/11/19 - Reached a high of 16% in 1995 and 14% in 2007 - 6% during the GFC...