Case Study China Economic Growth

Case Study China Economic Growth-35
" Beginning in 1979, China launched several economic reforms.The central government initiated price and ownership incentives for farmers, which enabled them to sell a portion of their crops on the free market.

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This in turn has made China a major commercial partner of the United States. In 2017, the Trump Administration launched a Section 301 investigation of China's innovation and intellectual property policies deemed harmful to U. Such measures have sharply decreased bilateral trade in 2019. However, the emergence of China as a major economic power has raised concern among many U. Others contend that China's growing use of industrial policies to promote and protect certain domestic Chinese industries or firms favored by the government, and its failure to take effective action against widespread infringement and theft of U. intellectual property rights (IPR) in China, threaten to undermine the competitiveness of U. The Chinese government views a growing economy as vital to maintaining social stability.

On May 10, 2019, President Trump announced he was considering raising tariffs on nearly all remaining products from China. This report provides background on China's economic rise; describes its current economic structure; identifies the challenges China faces to maintain economic growth; and discusses the challenges, opportunities, and implications of China's economic rise for the United States. Treasury securities (which totaled $1.1 trillion as of April 2019 have enabled the federal government to fund its budget deficits, which help keep U. However, China faces a number of major economic challenges that could dampen future growth, including distortive economic policies that have resulted in overreliance on fixed investment and exports for economic growth (rather than on consumer demand), government support for state-owned firms, a weak banking system, widening income gaps, growing pollution, and the relative lack of the rule of law in China.

However, from 1958 to 1962, Chinese living standards fell by 20.3%, and from 1966 to 1968, they dropped by 9.6% (see Figure 1).

In addition, the growth in Chinese living standards paled in comparison to those in the West, such as Japan, as indicated in Figure 2.

A protracted and escalating trade conflict between the United States and China could have negative consequences for the Chinese economy. firms, its incomplete transition to a free-market economy has resulted in economic policies deemed harmful to U. economic interests, such as industrial policies and theft of U. hina's rise from a poor developing country to a major economic power in about four decades has been spectacular. The Chinese government has acknowledged these problems and has pledged to address them by implementing policies to increase the role of the market in the economy, boost innovation, make consumer spending the driving force of the economy, expand social safety net coverage, encourage the development of less-polluting industries (such as services), and crack down on official government corruption.

growing global economic influence and the economic and trade policies it maintains have significant implications for the United States and hence are of major interest to Congress. From 1979 (when economic reforms began) to 2017, China's real gross domestic product (GDP) grew at an average annual rate of nearly 10%. The ability of the Chinese government to implement such reforms will likely determine whether China can continue to maintain relatively rapid economic growth rates, or will instead begin to experience significantly lower growth rates.In addition, China's economy suffered significant economic downturns during the leadership of Chairman Mao Zedong, including during the Great Leap Forward from 1958 to 1962 (which led to a massive famine and reportedly the deaths of up to 45 million people) and the Cultural Revolution from 1966 to 1976 (which caused widespread political chaos and greatly disrupted the economy).From 1950 to 1978, China's per capita GDP on a purchasing power parity (PPP) basis, a common measurement of a country's living standards, doubled.Prior to the initiation of economic reforms and trade liberalization nearly 40 years ago, China maintained policies that kept the economy very poor, stagnant, centrally controlled, vastly inefficient, and relatively isolated from the global economy. Such reforms are needed in order for China to avoid hitting the “middle-income trap,” when countries achieve a certain economic level but begin to experience sharply diminishing economic growth rates because they are unable to adopt new sources of economic growth, such as innovation.Since opening up to foreign trade and investment and implementing free-market reforms in 1979, China has been among the world’s fastest-growing economies, with real annual gross domestic product (GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as “the fastest sustained expansion by a major economy in history.” Such growth has enabled China, on average, to double its GDP every eight years and helped raise an estimated 800 million people out of poverty. The Chinese government has made innovation a top priority in its economic planning through a number of high-profile initiatives, such as “Made in China 2025,” a plan announced in 2015 to upgrade and modernize China’s manufacturing in 10 key sectors through extensive government assistance in order to make China a major global player in these sectors. Treasury securities, which help fund the federal debt and keep U. The Chinese government has embraced slower economic growth, referring to it as the “new normal” and acknowledging the need for China to embrace a new growth model that relies less on fixed investment and exporting, and more on private consumption, services, and innovation to drive economic growth. As China’s economy has matured, its real GDP growth has slowed significantly, from 14.2% in 2007 to 6.6% in 2018, and that growth is projected by the International Monetary Fund (IMF) to fall to 5.5% by 2024.Economic control of various enterprises was given to provincial and local governments, which were generally allowed to operate and compete on free market principles, rather than under the direction and guidance of state planning.In addition, citizens were encouraged to start their own businesses.On May 10, 2019, President Trump announced he was considering raising tariffs on nearly all remaining products from China. This report provides background on China’s economic rise; describes its current economic structure; identifies the challenges China faces to maintain economic growth; and discusses the challenges, opportunities, and implications of China’s economic rise for the United States. Treasury securities, which help fund the federal debt and keep U. The Chinese government has embraced slower economic growth, referring to it as the "new normal" and acknowledging the need for China to embrace a new growth model that relies less on fixed investment and exporting, and more on private consumption, services, and innovation to drive economic growth.A protracted and escalating trade conflict between the United States and China could have negative consequences for the Chinese economy. firms, its incomplete transition to a free-market economy has resulted in economic policies deemed harmful to U. economic interests, such as industrial policies and theft of U. Prior to the initiation of economic reforms and trade liberalization nearly 40 years ago, China maintained policies that kept the economy very poor, stagnant, centrally controlled, vastly inefficient, and relatively isolated from the global economy. Such reforms are needed in order for China to avoid hitting the "middle-income trap," when countries achieve a certain economic level but begin to experience sharply diminishing economic growth rates because they are unable to adopt new sources of economic growth, such as innovation.

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