Why china grows so fast

This has been seen over time and also in industry initiatives like the implicit approval for foreign investment in technology. Chinese entrepreneurs are keen on hiring overseas staff as it helps them build stronger links between international markets and Chinese companies. From common entrepreneurs to Nobel Laureates, China is becoming a preferred destination for business ideas. This has been extremely effective in driving technology and business growth in the US.

In the last two years, he has continuously worked on developing the Chinese think tanks. In one of his speeches in April , he even talked about the readiness of the Chinese government in recruiting party leadership from the think tank community. This has lead to a fresh wave of appreciation among the think tank community and their will to stay and promote the Chinese business landscape and as a major reason why China is growing so fast.

The Chinese economy has grown at a faster pace than the global markets. Successful execution of this policy has not just put China at par with the global economies but has left the country with surplus resources and products to share with the world. In its quest for development, China is attracting talent and businesses from the world. Nils Pihl, originally from Sweden, tried his luck in the Silicon Valley and the New York and then finally moved to Beijing to set up a tech startup.

There are enough examples of such young minds from developed and developing nations who are ready to make China their home. A policy like this is helping the country encourage the exchange of ideas among its youth. According to a study by economist Angus Maddison, China was the world's largest economy in , accounting for an estimated However, foreign and civil wars, internal strife, weak and ineffective governments, natural disasters some of which were man-made , and distortive economic policies caused China's share of global GDP on a PPP basis to shrink significantly.

By , China's share of global GDP had fallen to 5. The adoption of economic reforms by China in the late s led to a surge in China's economic growth and helped restore China as a major global economic power. Even with continued rapid economic growth, it would likely take many years for Chinese living standards to approach U. China has emerged as the world's largest manufacturer according to the World Bank. Figure 8 lists estimates of the gross value added of manufacturing in China, the United States, and Japan expressed in U.

Gross value added data reflect the actual value of manufacturing that occurred in the country i. In , the value of China's manufacturing on a gross value added basis was Manufacturing plays a considerably more important role in the Chinese economy than it does for the United States.

In , China's gross valued added manufacturing was equal to Figure 8. In its Global Manufacturing Competitiveness Index, Deloitte an international consulting firm ranked China as the world's most competitive manufacturer out of 40 countries , based on a survey of global manufacturing executives, while the United States ranked second it ranked fourth in The index found that global executives predicted that the United States would overtake China by to become the world's most competitive economy, largely because of its heavy investment in talent and technology e.

As a result, China was projected to fall to the second-most competitive manufacturer by More broadly, the World Economic Forum WEF produces an annual report that assesses and ranks based on an index the global competitiveness of a country's entire economy, based on factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can achieve.

The decline in China's working age population may have contributed rising wages in China. As indicated in Figure 9 , China's average monthly wages converted into U. S levels. In , China's unit labor production costs were Figure 9. Notes: Because data are listed in U. However, such data may reflect average labor costs in dollars that U. Figure Notes: The labor cost of producing one unit of output, indexed to U. China's trade and investment reforms and incentives led to a surge in FDI beginning in the early s.

Such flows have been a major source of China's productivity gains and rapid economic and trade growth. There were reportedly , foreign-invested enterprises FIEs registered in China in , employing That level rose from 2. At their peak, FIEs accounted for The sharp increase in China's global FDI outflows in recent years appears to be largely driven by a number of factors, including Chinese government policies and initiatives to encourage firms to "go global.

Table 2. A key aspect of China's economic modernization and growth strategy during the s and s was to attract FDI into China to help boost the development of domestic firms. Investment by Chinese firms abroad was sharply restricted. However, in , China's leaders initiated a new "go global" strategy, which sought to encourage Chinese firms primarily SOEs to invest overseas.

One key factor driving this investment is China's massive accumulation of foreign exchange reserves. Traditionally, a significant level of those reserves has been invested in relatively safe but low-yielding assets, such as U. Treasury securities. On September 29, , the Chinese government officially launched the China Investment Corporation CIC in an effort to seek more profitable returns on its foreign exchange reserves and diversify away from its U.

Investing in foreign firms, or acquiring them, is viewed as a method for Chinese firms to obtain technology, management skills, and often, internationally recognized brands, needed to help Chinese firms become more globally competitive. Table 3. Note : Ranked according to the top seven destinations of the stock of Chinese FDI outflows through These data differ significantly from official U. Economic reforms and trade and investment liberalization have helped transform China into a major trading power.

China's rapidly growing trade flows have made it an increasingly important and often the largest trading partner for many countries. According to China, it was the largest trading partner for countries in However, China's exports and imports fell by China's trade recovered in and , with export growth averaging However, since that time, China's trade growth slowed sharply.

From to , China's exports and imports grew at an average annual rate of 7. From to exports and imports fell by an average rate of 4. However, in , China's exports and imports rose by 6. Exports and imports in rose by 9. However, during the first three months of , China's exports grew by 1. In , China overtook Germany to become both the world's largest merchandise exporter and the second-largest merchandise importer after the United States.

In , China overtook the United States as the world's largest merchandise trading economy exports plus imports. As indicated in Figure 17 , China's share of global merchandise exports grew from 2. Table 4. China's Global Merchandise Trade: China's Merchandise Trade: Note : Data are in U. Note: Data are in U. China's Share of Global Merchandise Exports: Table 5 lists official Chinese trade data on its seven largest trading partners in based on total trade.

China's trade data differ significantly from those of many of its trading partners. These differences appear to be largely caused by how China's trade via Hong Kong is counted in official Chinese trade data. China treats a large share of its exports through Hong Kong as Chinese exports to Hong Kong for statistical purposes, while many countries that import Chinese products through Hong Kong generally attribute their origin to China for statistical purposes, including the United States.

Table 5. China's Major Merchandise Trading Partners in Note s : Rankings according to China's total trade in China's bilateral trade data often differ from that of its trading partners. China's abundance of low-cost labor has made it internationally competitive in many low-cost, labor-intensive manufactures.

As a result, manufactured products constitute a significant share of China's trade. A substantial amount of China's imports is comprised of parts and components that are assembled into finished products, such as consumer electronic products and computers, and then exported.

Often, the value-added to such products in China by Chinese workers is relatively small compared to the total value of the product when it is shipped abroad. China's top 10 imports and exports in are listed in Table 6 and Table 7 , respectively, using the harmonized tariff system HTS on a two-digit level. Major imports included electrical machinery and equipment; 44 mineral fuels; nuclear reactors, boilers, and machinery such as automatic data process machines and machines to make semiconductors ; ores; and optical, photographic, medical, or surgical instruments.

China's biggest exports were electrical machinery and equipment; nuclear reactors, boilers, and machinery; furniture; plastics; and vehicles. Table 6. Major Chinese Merchandise Imports in Optical, photographic, cinematographic, measuring checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof.

Note : Top 10 imports in , two-digit level, harmonized tariff system. Table 7. Major Chinese Merchandise Exports in Source: World Trade Atlas , using official Chinese statistics. Note : Top 10 exports in , two-digit level, harmonized tariff system.

China is currently undergoing a major restructuring of its economic model. Policies that were employed in the past to essentially produce rapid economic growth at any cost were very successful. However, such policies have entailed a number of costs such as heavy pollution, widening income inequality, overcapacity in many industries, an inefficient financial system, rising corporate debt, and numerous imbalances in the economy and therefore the old growth model is viewed by many economists as no longer sustainable.

China has sought to develop a new growth model "the new normal" that promotes more sustainable and less costly economic growth that puts greater emphasis on private consumption and innovation as the new drivers of the Chinese economy. Implementing a new growth model that sustains healthy economic growth could prove challenging unless China is able to effectively implement new economic reforms.

Many analysts warn that without such reforms, China could face a period of stagnant economic growth and living standards, a condition referred to by economists as the "middle-income trap" Several of these challenges are discussed below. Despite China's three-decade history of widespread economic reforms, Chinese officials contend that China is a "socialist-market economy. According to the World Bank, "China has become one of the world's most active users of industrial policies and administrations.

Fortune's list of the world's largest companies includes Chinese firms compared to 29 listed firms in Of the 28 other Chinese firms on the Fortune list, several appear to have financial links to the Chinese government.

China has become a major global producer of steel. From to , China's production of raw steel rose from million metric tons to million metric tons, an increase of Chinese economy continues its pandemic bounce back.

China takes new foreign investment top spot from US. Image source, Getty Images. Related Topics. Published 15 March. Published 5 March. Per capita income data are somewhat lower because of population growth. China is the latest case, the largest in terms of population, and the fastest. India is entering a period of high growth. While it remains to be seen whether it will be sustained and for how long, the essential ingredients are being put in place, and the general sense of optimism seems justified.

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