Question

China has maintained a per capita income growth rate of over 7 percent for more than three decades. Explain why this is considered to be very important.

Answer 1

Dear Student,

Please find below answer to your question

Abstract

Let us understand the reason behind how china has maintained a per capita income growht rate of over 7 percent

China have taken a lot of efforts to encourage the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce.

While pre-1978 China had seen annual growth of 6 percent a year with some painful ups and downs along the way, post-1978 China saw average real growth of more than 9 percent a year with fewer and less painful ups and downs.

Prior to the 1978 reforms, nearly four in five Chinese worked in agriculture; by 1994, only one in two did. Reforms expanded property rights in the countryside and touched off a race to form small nonagricultural businesses in rural areas.

Decollectivization and higher prices for agricultural products also led to more productive (family) farms and more efficient use of labor. Together these forces induced many workers to move out of agriculture.

The resulting rapid growth of village enterprises has drawn tens of millions of people from traditional agriculture into higher-value-added manufacturing

Per capita income has nearly quadrupled in the last 15 years, and a few analysts are even predicting that the Chinese economy will be larger than that of the United States in about 20 years.

Although capital accumulation the growth in the country's stock of capital assets, such as new factories, manufacturing machinery, and communications systems-

It was also important that he number of Chinese workers, a sharp, sustained increase in productivity that is, increased worker efficiency was the driving force behind the economic boom.

Significant role for capital investment in economic growth, and a sizable portion of China's recent growth is in fact attributable to capital investment that has made the country more productive.

In other words, new machinery, better technology, and more investment in infrastructure have helped to raise output.

Therfore despite a huge expenditure of capital, production of goods and services per unit of capital remained about the same.

The labor input--an abundant resource in China--that lead to Productivity increase.

Foreign Direct Investment

By welcoming foreign investment, China's open-door policy has added power to the economic transformation.

This foreign money has built factories, created jobs, linked China to international markets, and led to important transfers of technology. These trends are especially apparent in the more than one dozen open coastal areas where foreign investors enjoy tax advantages

If you like the answer, Kindly up vote

Thank You!!