Challenges in the Economy of China

This report shows some of the growth drivers and challenges in the economy of china. China is among the highly rising country in the economic sector even to date hence my best selection for the report discussion. In four decades the economy of china had risen from a lowly developing country to a chief economic power. In the year 2019 as from the GDP (PPP) growth per capital, china was positioned 73rd, with a GDP of about $14.3 trillion.

The country was worth $23 trillion from their natural resources primarily core and other scarce earth metals. We are going to look on some of the drivers and challenges affecting the china’s economy over a certain period of GDP (Gross domestic product) growth. China’s economy as from the 2015 to around 2019 (when china’s economy growth rate was classified among the best in the word).

China’s GDP rose with an annual rate of around 10%. This step was defined by the World Bank as “Among the fastest unrelenting expansion in the history of economy’s growth and has raised approximately 800 million people from poverty”. From 2018, the economic private sector had accounted nearly 60% in the GDP; the sector was also liable to 70% of the innovation. Chinas swift rise in the economic sector has increased due to the bilateral economic association with the U.S.A (United States of America).

Our report will cover the background information of china in the economic sector. Discuss some growth drivers and challenges china and how they have affected the GDP growth rate in economic sector of china. We will later do our own analysis based on the data available in the report discussion to come up with some policy recommendations to the government. Background Back in the year 1979, when economic restructurings in China were introduced and China’s economy rose substantively faster.

On average china has doubled the size of the economy in factual terms in every 8 years. But global economic slowdown started in the year 2008 and which had some significant influence in the Chinese economic growth. This led to nearly 20 million migrant employees moving back to their home countries after losing their jobs. This was as a result of GDP growth and financial crisis which led to a substantial fall in GDP.

Growth performance in the economy of china as from year 2008 to 2014 As observed in figure below sourced from World Bank’s database in the year 2008 to 2010, china’s GDP growth rate averaged to around 9.7%. However, the GDP growth rate deteriorated slowly in the next years. Which led to many economists giving warning and predictions that the economy could go down further in the coming years. This could happen only if china and United States of America continued putting penal economic actions against each other, for example tariff hiking which resulted from U.S. measure under section 301 and making China to retaliate against their action.

Much of these droppings have occurred because the tailwinds which supported China’s quick convergence were gradually decreasing. Demographic dividend was diminishing for example the one-child strategy has caused their working age population to drop since 2010. The total factor productivity (TFP) has reduced substantially Comparing with the average in GDP growth of about 10% during the 1990s and 2000s.

Cross-country educations points to some threshold that may be leading China to an economic drop and at a certain time the GDP per capita is likely to decline. China may be approaching that threshold. Data analysis Growth performance for the period of 2015 to 2019 as from the World Bank database. Illustrating the GDP growth rate from 2015 to 2019 The above chart shows world’s bank measure for china’s GDP growth from the year 2015 to 2019.

The GDP again declines in year 2016 with a rate of 6.7%. That being an average decline of about 0.2%. in years 2017 and 2018, the growth rate increased by 0.1% ( 6.8% in 2017 and 6.8% in 2018). The decline in year 2015 was due to the economic unsupportive policies such as one-child policy that lead to decrease in labor source.

The government of china in 2015 (China, National Development And Reform Commission 2015) started to take important steps to reform in the economy hence rise in GDP in year 2017 and 2018 by 0.1%. the government issued guidelines so as to improve growth in microeconomic environment, this guidelines included issuing range of tools that firms could use, and the central bank tightened the macro-prudential measures for real estates sector and extended its coverage to off-balance sheet activity by including wealth management products (IMF 2017).