Economics Hsc China Essay free essay sample

For an economy other than Australia, explain how government development strategies have responded to the process of globalisation. Globalisation refers to the process of increased integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity. Since 1978, the Chinese â€Å"tiger† economy has embarked on a process of social and economic reform designed to improve the quality of life of the population and open the economy to global integration. These strategies designed to promote economic growth and development include the Five Year Plan, FDI and trade policy, microeconomic reforms, welfare policy, environmental policies and macroeconomic policies. China’s Five Year Plan forms the basis of the government’s economic and social development efforts in the short and medium term. The plan is essentially the Government’s acknowledgement of the importance of having a prosperous society in an all-around manner. The GFC revealed the inherent structural weakness in Chinese domestic consumption and thus, the FYP is the focus shift from export-led sectors to increasing domestic consumer demand through raising nation-wide incomes to promote growth. We will write a custom essay sample on Economics Hsc China Essay or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This process has already begun, with over 300 000 people lifted out of the ‘$1 a day’ income level, ensuring development improves by reducing the income inequality between the developed east and the rural west. These increasing incomes will contribute to greater levels of domestic consumption and thus growth, however, there is a risk of cost push inflation. Therefore, China must find a balance between inflationary threats and increasing domestic demand whilst maintaining export-led sectors. Economic growth and development in China is heavily dependent on two of the three engines in the â€Å"tiger† economy – exports and investment. In 2009, China’s exports suffered as the nation’s largest markets fell into recession. China’s subsequent stall in economic growth was not caused by restrictive government policies, rather it was the result of an inefficient growth model and an unbalanced economic structure. It is this that has sparked China’s vulnerability to external shocks. In 2011, China’s exports amassed almost $2 trillion, however in Feb 2012, China recorded a $31. 5 billion trade deficit as a result of the European sovereign debt crisis in which China’s main trading partners plunged into recession. China’s severe BOGS decrease is an attempt to control growth and a sustained level of 7. 5%. Investment policies are also critical for China to achieve economic growth and development. Foreign Direct Investment (FDI) in China is being sought primarily in the redesign of State Owned Enterprises (SOE’s) and in the development of interior provinces. Between 75-80% of World Bank loans to China in 2008 were directed to the central and western regions, the most economically disadvantaged. This promotes increased wealth within China, leading to higher levels of development due to a more positive Human Development Index (HDI), which currently sits at 0. 687, up from 0. 677 in 2010. Thus, trade and investment are critical factors in ensuring that China’s growth remains sustained at 7. 5% whilst still encouraging increases in development. Microeconomic reforms serve to make the chinese economy more responsive, productive and competitive in a global economic environment, ensuring growth and development. There is a need to upgrade chinese industry and limit development in capital intensive industries, and seek high value added industries rather than those without a competitive advantage or ability to innovate in order to encourage investment. The financial system continues to undergo considerable reform to encourage this investment. Major trading banks now must meet requirements to organize loans and credit facilities for SME’s. This access to credit is vital for economic growth as it encourages the domestic consumption engine of the economy. This will become increasingly important for growth as increases in domestic consumption must counter the fall in exports as a result of the European debt crisis.