China is the nation which was able to transform its economy from an isolated nation to a nation that is opened to the world on a global basis. The famous Chinese revolutionist Deng Xiaping took initiatives to improve the trade relations between China and all other nations. It is then that the relevance of foreign trade was felt by the country. Deng Xiaping, also helped the economy of China by attracting relevant foreign investors. The interest of the foreign investors in the economy of China was the advantage of low cost production that dwelled within China. Thus, this step by China enhanced the chances of the growth in the country which was export and investment led growth. The investment and export led growth was possible only with commitments made by the government to initiate capital investment and bring technological advancement. But it was not too late that China finally realized that the investment and export led growth strategy was unsustainable and the economy slowed down. The GDP of the country dropped to 7.5% and the share of consumption in the GDP of the China also declined. This led to a situation where the government of China decided to switch over the growth strategy from investment and growth based to consumption based growth. (Poon, 2014)
For the last two decades, China was dedicatedly investing in the infrastructure and capital formation which made the country the exporting house of the entire world. The growth in China is dependent on the production unit and factories of the other nations which are believed to be of low cost. The low cost benefit of China enables the congregation of a lot of nations in this country thereby attracting a lot of investments within the economy. (Xu, 2010) The increased in the economic growth of China uplifted the global position of China. The higher dependence of China on its export resulted in a situation of low wage which declined the consumption spending of the Chinese citizens. The GDP growth in China has declined and the share of consumption in the GDP is stands out to be just 35% as against the US economy which is about 70%.(Sector, 2015) This situation led to the introduction of a new sustainable strategy which will enhance growth. The reason of the low consumption share cannot wholly be attributed to the change in the industrial phase but also other several factors that affect the economy of China. The factors that led Chinese economy to swap towards a more sustainable and reliable growth strategy are the problems related to the capital equipments being underutilized, environmental sustainability issues, increasing inequality, migrat5ed labour forces being exploited, problems of unemployment and several other issues concerning the health of the Chinese economy. Many economists were of the opinion that the investment and export led growth is not sustainable in the long run and there should be a structural change in the growth strategy of China towards domestic market consumption expenditure. (Chi, 2012) Thus, I agree to decision taken by the government of Chinese to switch over to consumption led growth strategy.
The share of the consumption spending being low in China, its effectiveness is increased by numerous structural factors. The reasons that are identified behind the decision of china to change from an investment growth to a consumption based growth are multidimensional. One of the main reasons is prevalence of underdevelopment in the capital market. Without the operation of effective capital and efficient allocation of capital, no growth can be initiated in the economy. If the capital market is underdeveloped then investment will not take place which caused a hindrance to the growth of China. The next factor that hinders the investment led growth is the availability of credit. Consumer credit is an important aspect that will enhance the consumption spending of the individuals but with the low availability of such credit, the people are not able to increase their consumption spending. Unemployment in this regard also plays a very crucial role. With rising unemployment, disposable income of the people will decrease and they would not be able to make purchases lowering the rate of consumption. Another way to explain the low consumption share is that China has witnessed a high savings rate directed towards the old age citizens and children for their education and also for precautionary reasons. (Du, Fang & Jin, 2014) Thus, an immediate policy was required by the Chinese government to implement strategies which would reduce the savings rate, increase the household income and thereby expand the consumer spending. An emphasis must be made on the reforms that must be brought in the financial sector which eventually smoothed the capital operation within the economy. Hence, China took the decision to adopt the consumption oriented growth strategy in order to increase the consumption share in its GDP. (Fulin, 2012)
The benefits associated with the new transformed growth strategy are several. But the government of China took steps to decrease the rate of savings by extending easy and smooth availability and access to consumer credit, increased the expenditure of the government towards the development of the economy along with incorporation of social protection. (Campbell & Brown, 2007) Government also reformed the ‘HOKOU’ which is a social welfare scheme where fair distribution of education, healthcare services and generation of employment are included. This benefits the interest of the citizens and reduced the savings rate. The unemployed youths was shifted to the service sector which created employment and increased the disposable income, thereby increasing the consumer spending. The service sector in China is believed to offer high pay and since it is a labour intensive industry, labour force is absorbed on a huge scale. Another way to stimulate the consumption share is by reforming the financial sector by smooth availability of credit to the consumers as well as the SME which will eventually generate jobs and increase the consumer spending. The overall benefit that is acquired from the adoption of the consumption-led growth strategy is by maintaining a sustainable growth which is characterized to be long term and stable. (Lardy,n.d.)This can be explained by the Production Possibility Frontier (PPF).
Here X1 and X2 are two goods in the Chinese economy. Before growth, an individual was at the PPF1 and was able to attain the point A which is the combination of X1 & X2 but could not attain the point B which is comprised of increased quantity of X1 & X2. Now as the Chinese Economy witnessed growth, the PPF shifted outward to PPF2 which caused the individual now to attain the previously unattainable point B. Thus, it is clear that with growth the consumption spending has increased. (Arnold, 2001)
The cost associated with the new transformed consumption-led growth strategy is that it doubted the issues related to environmental sustainability. This is because with the development of the heavy scale industries like the iron and steel, manufacturing sector, cement tend to exert pressure on the natural resources and causes them to deplete. With the rapid urbanization and the advent of energy based industries the greenhouse gas emission also increased which adversely affect the lives of the human beings. Another drawback of this strategy is that China is no doubt the second largest economy among all other nations but in terms of average income it lags behind which aggravated the inequality in the country. With the adoption of consumption-led growth strategy, a serious threat is posed by the inefficient investment and the increase in the debt which can hinder the economic growth of the Chinese economy. (Lee, Syed & Xueyan, 2013)
Chi, F. (2012). Consumption-led growth. [Beijing?]: China Intercontinental Press.
Du, J., Fang, H., & Jin, X. (2014). The “growth-first strategy” and the imbalance between consumption and investment in China. China Economic Review, 31, 441-458. doi:10.1016/j.chieco.2014.09.002
Fulin, C. (2012). Consumption to lead growth_Publications_China Institute for Reform and Development(CIRD). Chinareform.org. Retrieved 18 March 2015, from https://www.chinareform.org/publications/reports/201202/t20120228_135281.htm
Lardy, N. China: Toward a Consumption-Driven Growth Path. SSRN Journal. doi:10.2139/ssrn.2126152
Lee, I., Syed, M., & Xueyan, L. (2013). China’s Path to Consumer-Based Growth: Reorienting Investment and Enhancing Efficiency. https://www.imf.org. Retrieved 18 March 2015, from https://www.imf.org/external/pubs/ft/wp/2013/wp1383.pdf
Poon, D. (2014). China’s Development Trajectory: A Strategic Opening for Industrial Policy in the South (1st ed.). UNCTAD. Retrieved from https://unctad.org/en/PublicationsLibrary/osgdp20144_en.pdf
Sector, E. (2015). China’s Shift to a Consumption-Driven Economy | Cornell Current.Cornellcurrent.com. Retrieved 18 March 2015, from https://www.cornellcurrent.com/2014/11/12/chinas-shift-to-a-consumption-driven-economy/
Xu, Y. (2010). China's Export-led Growth Strategy: An International Comparison. China & World Economy, 18(4), 18-33. doi:10.1111/j.1749-124x.2010.01202.x
Arnold, R. (2001). Economics. Cincinnati, Ohio: South-Western College Pub.
Campbell, H., & Brown, R. (2007). Benefit-cost analysis. Cambridge: Cambridge Univ. Press.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2016). Consumption-Led Growth Strategy Of China. Retrieved from https://myassignmenthelp.com/free-samples/consumption-led-growth-strategy-of-china.
"Consumption-Led Growth Strategy Of China." My Assignment Help, 2016, https://myassignmenthelp.com/free-samples/consumption-led-growth-strategy-of-china.
My Assignment Help (2016) Consumption-Led Growth Strategy Of China [Online]. Available from: https://myassignmenthelp.com/free-samples/consumption-led-growth-strategy-of-china
[Accessed 29 March 2020].
My Assignment Help. 'Consumption-Led Growth Strategy Of China' (My Assignment Help, 2016) <https://myassignmenthelp.com/free-samples/consumption-led-growth-strategy-of-china> accessed 29 March 2020.
My Assignment Help. Consumption-Led Growth Strategy Of China [Internet]. My Assignment Help. 2016 [cited 29 March 2020]. Available from: https://myassignmenthelp.com/free-samples/consumption-led-growth-strategy-of-china.
MyAssignmenthelp.com delivers assignment help to millions of students of USA. We have in-house teams of assignment writers who are experts on wide ranges of subjects. We have appointed teams of native writers who provide assignment help to students in New York City and all over the USA. They are skilled assignment writers who successfully cater to search terms like do my assignment in the USA
Answer: Degree To Which Stakeholders Trust Those Leading The Change Unitech is one of the leading academic aspirants in contemporary and applied learning and it need to change with time and situations to enable better futures to students, enterprises and communities as a whole Carnall (2018). Though change is a complex process but still it is obvious for Unitec. The company stakeholders should rely on communication for managing the changes...Read More
Answer: Introduction Marketing is considered to a fundamental part of a business. It is founded on searching the suitable customer after the creation of an attractive statement regarding the product of service. The marketing of a product requires proper designing, researching and advertising in order to guarantee the success of the business. It is rather a combination of few strategies which are designed to broaden the capacities of the produ...Read More
Answer: Introduction The scope of effective communication in business is massive. In the unit we learnt about various concepts of effective business communication. I have elaborated about the significance of the concepts that were discussed. I have stressed on the importance of public speaking as it holds great importance in my future career path. Along with that I have provided a literature review of the same, in addition to another concept ...Read More
Answer: Competitive forces facing Qantas, using the Porter’s ‘five forces’ framework Porters’ five forces model consists of five components which will be analyzed to understand the current state of competition in airline industry of Australia. Bargaining power of Buyer: Australian airline industry is highly competitive offering service to customers maintaining a competitive pricing strategy. In most of the cases, they p...Read More
Answer: The dairy industry in Australia is one of the major rural industries of the country. On the basis of the farm gate value of production, industry has been ranked at third place falling behind beef and wheat industries. The 6,128 dairy farmers of Australia produce nearly 9.5 billion litres of milk. Out of this production, approximately 35% of it is exported. In this way commit includes a wide range of value added and innovative dairy pro...Read More
Just share your requirements and get customized solutions on time.
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
I had a good mark was done professionally and referenced ...
A very good job done. However, it took the expert so long to get it right. Remember my due date for this project was 22nd of March, 2020 and I got the right delivery on the 28th of March,2020.
They are genuine. And respond to all the queries quickly .And I received my assignment within specified time.
Unable to provide the full feedback now as Lecturer have not responded. As of now, I am satisfied with the service provided and hope to have a good response from Lecturer. TQ