Economics & the Rest

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BSB 113 Economics Semester 2 2011

Assessment 2: Research Summary

Submission date: Friday 23rd September

Name: Michael Andrew Smith

Lecturer: Louisa Coglan

Tutor Name: Wasantha Athukorala

Student Number: N7408625

Word Count: 1086

Introduction
The purpose of this research report is to provide an overview of China’s economic growth in relation to the long term economic growth drivers. Critical assessment will be made on the growth drivers to determine whether they lead to long term economic growth. China’s Economic Growth

Since the market orientated economic reforms were introduced in 1978 (Khan, Hu (1997, P103) China’s economy has seen a 10% increase in Gross Domestic Product (GDP) Per year (Vincellete, Manoel, Hansson, Kuijs, (2010, P 4) which is extremely impressive considering all other developing countries have experienced a 4% increase annually (Vincellete, Manoel, Hansson, Kuijs, (2010, P 4). Prior to the global financial crisis in 2005, the economic growth had averaged 9.5% over the past 2 decades (Economic Surveys: China 2005, (September 2005, P2) During the global financial crisis in 2008-2009, exports shifted from 20 percent annual growth to an annualized contraction of more than 25 percent in early 2009 (Vincellete, Manoel, Hansson, Kuijs, (2010, P 4) However, prompt and vigorous policy actions, as well as swift adjustment in the labour market, helped growth pick up by the second quarter of 2009, putting China in the lead of the global recovery (Economic Survey of China 2010: Achievements, prospects and further challenges, ( February 2, 2010) The success of the Chinese Economy recently, especially during the economic , crisis has been speculated to be the cause of the popular government owned companies. Registered private businesses grew at a rate of 30% annually from 2000 to 2009 affecting different industry sectors from oil to banking (Entrepreneurship in China: Let a million flowers boom (March 10, 2011) and has been the foundation for the slight decrease of the GDP during the global financial crisis. China relished on the global financial crisis and saw themselves sitting at second for the world’s largest economy not to mention contributing to one third of global growth (China’s Emergence as a Market Economy: Achievements and Challenges, (March 2011, P4). In an attempt to further strengthen their domestic demand, China have imposed a new 5 year plan to tackle further growth and strengthen the social security system (China’s Emergence as a Market Economy: Achievements and Challenges, (March 2011, P4).

Figure 1 - China: Medium term scenario 2010-15 (Vincellete, Manoel, Hansson, Kuijs, (2010, P 26)

The following table illustrates the ‘Real economy’ of China from 2000 to the potential changes in 2015. Innovation, technological catch‐up, and increased TFP will be critical factors in China’s slight economic decline in growth throughout the medium term. The decline of GDP in China can also come down to the booming Indian Economy where predictions have been made that the Indian economy will be of a similar size to that of China by 2013 (India’s Surprising Economic Miracle (September 30, 2010).

Key Economic Drivers
Gross Domestic Product (GDP) is the main measure economists use in order to calculate the size of a countries economy and so the factors that make up the GDP are also seen as key economic drivers (Frijters, Dulleck, Torgler, (2010). These main principles are Consumption spending, investment spending, government spending and exports minus imports (Frijters, Dulleck, Torgler, (2010). Consumption can include energy consumption, food consumption, fuel consumption and many more. If a country wishes to increase its GDP then it will be encouraging consumption spending which can lead to an unhappy nation. Investment spending relates to all forms of expenditure that are meant to increase production in the future (Frijters, Dulleck, Torgler, (2010, P 152). This...
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