ECONOMICS

China: Country Economic Analysis Report

China: Country Economic Analysis Report

Introduction

Having previously lain dormant, China is now beginning to realize its economic potential and make its mark in the global arena. Through the course of the last three decades, governmental reform has transformed the Chinese economy from a Soviet-style centrally planned economy to a more market-oriented version with a rapidly growing private sector. With an abundance of resources, significant foreign investment, and a favorable business climate, China is one of the fastest growing economies in the world.

Discussion

Economic Analysis

GDP growth in China averaged around 10.14% during the period 2001-10, which was significantly higher than the growth rates achieved during the 1980s and 1990s. Real GDP growth came down to 9.1% in 2009 from 12.8% in 2007 as a result of the global economic crisis, but the economy then bounced back to a growth rate of around 10.4% in 2010. The government has taken a series of measures to develop the capital markets and reform the insurance sector to spur investments (Chow, 2010). A significant problem faced by the country is the domination of the economy by state-owned enterprises and another serious issue is increasing unemployment. However, the declining fiscal deficit is a major positive to the Chinese economy as the country had targeted keeping its budget deficit within 3% of GDP for 2010 and achieved this target. The fiscal deficit is expected to come down further in 2011. A major risk facing the economy is the low level of private consumption and its sharp decline during the past decade.

Increase in life expectancy and decrease in infant mortality

Over the years, China's average life expectancy has risen from 32 years during the 1950s to 73.4 years in 2009, while the infant mortality rate has dropped from a rate of 32 deaths per 1,000 births to 20.25 deaths per 1,000 births over the same period. Economic reforms initiated in the late 1970s fundamentally altered the methods of healthcare used and the collective medical care system has been gradually replaced by a more individual-oriented approach.

Decline in Poverty

Since economic reform began in 1978, China has seen long-term growth, which has reduced poverty levels in the country by increasing the per capita income. The percentage of the population below the poverty line has come down from around 64% before the reforms to around 10% in 2004. This indicates that around 500 million people were lifted out ...