Question

For this assignment, you will

(1) Find a chart showing the economic growth of an economy in long run.

(2) Briefly discuss the history of economic growth of that economy.

(3) Finally talk about the factors driving economic growth.

Please find below the sample assignment.

Hong Kong GDP per capita (1961 - 2018)

In general, we observed the rising trend of GDP per capita of Hong Kong from 1961 to 2018. Modern history of economic growth of Hong Kong can be broadly divided into 3 phases.

1940s to early 1990s - Rapid industrialization

industrialization accelerated after 1945 with the inflow of money from Mainland China. Immigrants from Mainland China developed textile industry of Hong Kong. Hong Kong’s industry was founded in the textile sector in the 1950s and gradually diversified to clothing, electronics, plastics and other labor-intensive production mainly for exports.

Textile sector was the prominent industry of Hong Kong in 1950s

Early 1990s to early 2000s – Surge in service sector and reintegration into Mainland China

Manufacturing moved out of Hong Kong during the 1980s and 1990s, there was a surge in the service sector. Hong Kong’s economy transformed from manufacturing to services. Furthermore, Hong Kong’s integration with the mainland accelerated and Hong Kong became the main provider of commercial and financial services. From 1978 to 1997, trades between Hong Kong and the PRC grew at an average rate of 28% per annum.

Handover of Hong Kong from UK to China in 1997. This highlights the integration of the economy of Hong Kong with Mainland China.

Early 2000s to 2010s - Deepened reliance on China

Over the recent 20 years, Hong Kong economy has transformed from enhanced integration with China to deepened reliance on China. The four key industries, including financial services, tourism, trading and logistics heavily depend on the businesses with Mainland China. Hong Kong can maintain its economic growth during the global financial crisis primarily due to the help from Mainland China.

Is the economy of Hong Kong nowadays too reliant on the help from Mainland China?

Key factors driving economic growth:

Institutions: Low taxes, lax employment laws, absence of government debt, and free trade are all pillars of the Hong Kong experience of economic development.

Education: The government also pursued an ambitious public education program. By 1966, 99.8% of school-age children were attending primary school, and free universal primary school was provided after 1971. Secondary school provision was expanded in the 1970s, and from 1978 the government offered compulsory free education for all children up to the age of 15.

Answer 1

1.

2.China’s meteoric rise over the past half century is one of the most striking examples of the impact of opening an economy up to global markets.Over that period the country has undergone a shift from a largely agrarian society to an industrial powerhouse. In the process it has seen sharp increases in productivity and wages that have allowed China to become the world’s second-largest economy.The first two decades following the founding of the People’s Republic of China in 1949 was marked by periods of substantial growth in per capita GDP growth, the growth of output per person, followed by sharp reversals.

Chinese Foreign Equity Joint Ventures was introduced, allowing foreign capital to enter China helping to boost regional economies although it took until the mid-1980s for the government to gradually ease pricing restrictions and allow companies to retain profits and set up their own wage structures. This not only helped to boost GDP from an annual average of 6% between 1953-1978 to 9.4% between 1978-2012 but also increased the pace of urbanization as workers were drawn from the countryside into higher-paying jobs in cities.

This process of market liberalization led to the establishment of China as a major global exporter. It eventually allowed for the reopening of the Shanghai stock exchange in December 1990 for the first time in over 40 years and, ultimately, to China’s accession to the World Trade OrganisationThese reforms had a significant impact both on per capita GDP and the pace of the falling share of the labour force working in agriculture

3) Following are some of the important factors that affect the economic growth

a)Natural Resources:

Affect the economic growth of a country to a large extent. Natural resources involve resources that are produced by nature either on the land or beneath the land. The resources on land include plants, water resources and landscape.he resources beneath the land or underground resources include oil, natural gas, metals, non-metals, and minerals. The natural resources of a country depend on the climatic and environmental conditions. Countries having plenty of natural resources enjoy good growth than countries with small amount of natural resources.The efficient utilization or exploitation of natural resources depends on the skills and abilities of human resource, technology used and availability of funds. A country having skilled and educated workforce with rich natural resources takes the economy on the growth path.

b)Technological Development:

Technological development helps in increasing productivity with the limited amount of resources. Countries that have worked in the field of technological development grow rapidly as compared to countries that have less focus on technological development. The selection of right technology also plays an role for the growth of an economy. On the contrary, an inappropriate technology- results in high cost of production.

c)Capital Formation:

Involves land, building, machinery, power, transportation, and medium of communication. Producing and acquiring all these manmade products is termed as capital formation. Capital formation increases the availability of capital per worker, which further increases capital/labor ratio. Consequently, the productivity of labor increases, which ultimately results in the increase in output and growth of the economy.

d) Social and Political Factors:

Play a crucial role in economic growth of a country. Social factors involve customs, traditions, values and beliefs, which contribute to the growth of an economy to a considerable extent.