Why China Has Continued to Rise Economically and Her Impact on The World Economy

China's Transformation to Global Superpower

China is the world’s most populous nation located in East Asia. Chia stands out to be the world’s second-largest nation by Land area. Analysis by Yan, Wang, and Yao (98) rank China among the fast developing nations, enjoying a stable economy steered by the swift wave of civilization, industrialization, and technological advancements. The modern-day People’s Republic of China is registering among the highest gross development product. China also enjoys the fastest growing middle class. The paper takes into discussion the economic development of China over the years, a factor that has led to its development and transformation to the global superpower.

The history of the current economic status of China can be dated back to early 1900 (Cheung 12). During these times, China was among the underdeveloped nations that suffered under poor economic status. During these years, the GDP was little, with most of the population were unemployed. The few existing industries were under state ownership, with central control over the financial systems and the planning. There pas low technological advancements that lowered the productivity of the industrial sector. The economy suffered from limited resources in terms of skills and capital. Taking for example in the year 1978, 25 percent of the China’s GNP was invested back into production sector, giving an approximate return of US$111 billion. Giving a comparison of the same year, 16 percent of the US GNP was invested back to give an approximate income of US$345.6 billion. The fact that the US$111 billion income was serving a population 4.5 times larger than that of US been served by an income of US$345.6 billion gives a clear picture of what the economic status of China was like (Cannon 63).

Most of the equipment used in the industries were imported. There was gradual technological advancement, with most sectors of production employing the use of outdated equipment. A good example is an agricultural sector, which received a relatively small share of the national investment. The agricultural sector relied much on human and animal labor, with the little mechanization of pumps and tractors which were imported. The development was far behind the national standards of the time. There were not international markets for the products due to poor infrastructure. The local markets were not substantial since their basic customers were the industrial workers who on the other hand suffered low wages. The greater challenge to the economic growth in China between 1800and 1990s was the extensively growing population that exceeded the production levels. The rate of consumption was relatively higher than the rate of production, especially in agriculture. The low surplus undermined investment and the productivity per worker remained low (Kennedy 67).

According to Naughton (78), the turning point of the economic status of China from bad to better can be traced back to 1978. The leadership by Deng Xiaoping that began after the death of Mao Zedong’s changed the leadership structure and reshaped the entire economy of China. In his leadership, Deng Xiaoping pushed for reforms in the production sector which laid the foundation of the current economic developments in the country. These reforms were based on four modernizations in agriculture, science, and technology, defense and industry. The reforms led to reducing government control over the economy. This attracted the eruption of private companies. The collective farms were broken down and individualized to increase production. China was now opened to international markets, with the government promoting entrepreneurship. The joining of China to the International Monitory Fund (IMF) and World Bank in 1980 laid a significant foundation for capital to the production and business sector (Cheung 27).

When Jiang Zemin took over as the president of China in 1990, other major reforms were made. Among them was the privatization of most state-owned companies. This extended the role of the private sector in building the economy through the creation of employment and better remunerations for their employees to increase productivity per worker. In the same year1990, trade barriers such as heavy taxation were reduced. State planning in the industry sector was eliminated. Taxes were reviewed in favor of banks, which provided more capital at low interest to the business and production sector (Cheung62). A major step in economic development was the joining of the World Trade Organization in the year 2001. This exposed China further to the international markets, opening room for investors and new opportunities outside the country. Over those years, China has faced vast economic progress, with no taxations on the agricultural sector. The country enjoys booming exports, large-scale manufacturing and massive investments (Naughton pp.87-99).

Since the 1978 reforms, the nation has enjoyed progressive economic growth, shifting from being ninth in the nominal gross domestic product to the second in the world, with an estimate of USD 9.2 trillion. The secondary sector which included industry and construction registers the highest contribution to the China’s GDP until 2013 when the tertiary sector comprising of manufacturing industry represented the largest share of GDP. This change has been associated with the aspect of modernization, where the manufacturing sector has gained popularity due to embracing technology. Electronics and machinery form the largest share of exports from China, contributing to 55% of the export income. China enjoys the largest share in the international markets (Cannon 120).

Because of massive industrialization and increased business opportunities in China, the nation registers the highest number of working population in the world - 770.4 million people. However, over 90% of these have been ranked as middle class by Lin, Justin, Fang, and Zhou (25). The working class has adopted the middle lane trend. This has been associated with two factors, one being the larger population that is living in rural areas. The other key factor is the swift economic growth. In every growing economy, wealth depends on much more on capital than labor. As much as the China economy provides employment to a greater number of its population, the rising level of living does not give the working people a chance to accumulate wealth. As the nation enjoys the fastest growing economy, there is fear that the middle class is likely to grow in the coming years, which will generally lower the purchasing power and the incomes from the local markets (Farrell, Diana, Ulrich, and Elizabeth 124).

In 2013, China made another economic advancement, which creates a perception of China as the global superpower (Wu 146). Asian Infrastructure Investment Bank (AIIB) was initiated and launched by China in 2014. The bank runs a capital of over $100 billion. This is half that of the World Bank and two thirds that of the Asian Development Bank. The main objective of the AIIB is to support the construction of infrastructure in Asian-pacific. The bank currently has 56 member states, with 24aspiring to join and make a total of 80 members. However, there is much criticism from major states such as USA and Japan, who are not members of the AIIB. The criticism claims that AIIB may not meet the international standards like World Bank and Asian development bank. However, the AIIB is taking to the heights with other members promising to join, and this may turn things forever in China's economy. Since the establishment of the AIIB, the China's economy has grown drastically. There has been an increase in investment opportunities, infrastructure connectivity, new technology bringing about more efficient production methods and generally new business patterns. The bank will enhance construction of more infrastructures within outside China, opening up more industries and trade facilities. This will increase the level of production and business, increasing the gross development product and hence more growth in the China's economy. AIIB has financed manufacturing and innovation, making China stand out as the hub of technology in the world (Kennedy 62).

In an attempt to achieve similar economic progress, other nations have adopted what we may call the ‘china’s model’. Among such nations are Japan and USA. The two among others have embraced technology as the solution to production. They have also joined the international markets to expand their sales and the market share as a way of improving their economies. In conclusion, the aspect of civilization and modernization stands out to be the pillar of economic development. In the next five years, China will be probably the global superpower in terms of production and economic stability if the same trend is maintained.