China's Macroeconomy

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MACROECONOMICS ASSIGNMENT
SECTION 2, TEAM 5
DATE: 30TH JUl 2012

The current macroeconomic scenario of China:
China has been among the world’s fastest growing economies since opening up to foreign trade and investment and implementing free market reforms in 1979 with real annual gross domestic product (GDP) averaging nearly 10% through 2011.

In recent years, China has emerged as a major global economic and trade power. It is currently the world’s second largest economy, largest merchandise exporter, second largest merchandise importer, second largest destination of foreign direct investment (FDI), largest manufacturer, largest holder of foreign exchange reserves, and largest creditor nation. The global economic crisis that began in 2008 significantly affected China’s economy. But few major policies that the Chinese government implemented enabled China to overcome from the crisis situation. From 2008 to 2011, China’s real GDP growth averaged 9.6% while several of the world’s leading economies experienced negative or stagnant economic growth. China reported a Current Account surplus of 4 percent of the country's Gross Domestic Product in 2011. (The Current account balance as a percent of GDP provides an indication on the level of international competitiveness of a country. Usually, countries recording a strong current account surplus have an economy heavily dependent on exports revenues, with high savings ratings but weak domestic demand. On the other hand, countries recording a current account deficit have strong imports, a low saving rates and high personal consumption rates as a percentage of disposable incomes.)

There were some economic projections that China will overtake the United States, the world’s largest economy, within a few years. However, the ability of China to maintain a rapidly growing economy in the long run will depend largely on the ability of the Chinese government to implement comprehensive economic reforms that more quickly...
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