Question

In: Economics

There are any number of factors including keep inflation low, maintain maximum employment, development of human...

There are any number of factors including keep inflation low, maintain maximum employment, development of human capital, use and application of natural resources and Rule of Law. Illustrate the importance of and combination of inputs which has triggered and sustains Chinese economic growth.

Solutions

Expert Solution

China plays a pivotal role in the global economy today. China has pursued an export oriented path to industrialization and this has helped China in sustaining its economic growth rate over the years. Some of the factors responsible for the China's economic success are as follows:

a. Labor Supply: China has an abundant supply of cheap labor as it has the highest population in the world. This has reduced cost of production in China not only for the domestic firms but also for the foreign firms establishing their units in China. This has made the production process efficient and helped in sustaining the growth rate in the economy.

b. Export Led growth: China has always focused on increasing its export level because the price of goods produced in China is low as compared to the price of goods produced in other parts of the world. This increases the demand for Chinese goods in the foreign markets.

c. Special Economic Zones- They have developed various SEZs in which a relaxation of regulation and government control created an attractive business environment and Transnational Companies were offered incentives for tax relaxation. This has attracted foreign investment on a large scale in the country.

d. Investment in Infrastructure: There are various roads, an improved rail system and rivers are navigable all the year round. It has five of the ten largest container ports in the world.

e. Education: Literacy level in China is around 95 per cent and the country has abundant supply of both skilled as well as unskilled labor and this has helped in sustaining the economic growth rate of the nation.

The above combination of factors have played an important role in sustaining China's economic growth rate over the years.


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