China’s Voyage: From an Overpopulated Country to an Economic Hub

What the world knows of China is completely different from what we would have seen just a few decades, precisely 4 decades ago. China, which is now a consolidated country on the map, has seen various phases from ancient china to imperial china to a now modern China and this is surely a  major transformation. Now questions and speculations arise like, “Was the country always as it seems to be now- a soaring production hub” and “How has China coping up with the Pandemic?”, the questions around the ever-growing economy are seemingly endless. In trying to understand modern China’s rise as an economic superpower, beating Japan in 2010 as the second-largest economy and in 2020 becoming the largest economy in the world.

We must also understand that before the implementation of policies that caused rapid economic growth, there were policies that caused the economy to be extremely poor, stagnant, were completely held onto by the center, and even not linked to the global economy to expand trade. This continued till the year 1978 when it remained one amongst the least developed countries across the globe. China, to date, has been able to get about 800 million people above the margin where they would be considered experiencing poverty.

In 1979, the national government opened up foreign trade and implemented reforms moving from centrally planned economies to a free-market economy. Due to these policies, at the brink of the fourth decade in 2018, the World Bank described the Chinese economy as “the fastest sustained expansion by a major economy in history” and on average has a doubled GDP every 8 years. But this is just a part of how the economy grew, this major change cannot be brought through only one change in their economic practices.  Chinese have been famous for mass production being the production hub and dumping of all the products in various countries as its markets (India is a major one). Since they produce the products, they have also been putting a competitive price up over the years for getting sales. They also practice the principle of reverse manufacturing wherein they instead of spending time on research and development, borrow from the existing and build on it. The country offers cheap but skilled labor to the companies that plan to have FDI (Foreign direct investment). The labor, however, was not always skilled. The government of the Republic of China along with the industries came together so that skill development could be induced.

China, along with being successful to curb the ever-growing spike in the population through policies, has done the very same to help citizens flourish through the education system( this system too underwent reforms). The corporate sector associated with the country and the government work hand in hand and deliberate on ideas that may help the country grow further. All this comes as the answer to the question of how China has become what it is present day. It is believed by the World Bank that in adjusting to purchasing power parity(PPP), the Chinese economy has been the largest for the last 6 years. Adjusting PPP would mean that we take into consideration the difference in how people live across countries. It was earlier estimated that China would supersede the American economy by 2030 but has achieved this feat a decade earlier.

Coming to the methods of calculation that are used to make this list, two of them are most often used. They are PPP or the Purchasing Power Parity and the MER or the Market Exchange Rates. The International Monetary Fund(IMF) uses the PPP method of calculation which helps us understand how much can be brought from our money in various countries. However, this method has come to light in recent times. Earlier, economists used the Market Exchange Rate method which is known to not reflect the real values. This method is believed to undermine the value of the currencies of most countries resulting in the currencies being undervalued against the dollar that is used as the benchmark. The IMF released a statement explaining, “eliminates differences in price levels between economies” and hence is used to calculate the indices of national economies. Recently, a new method has been created by economists called the Big Mac Index and is used to understand if the currencies are at a correct level.

Looking at the present condition of the pandemic that we experience, China is ahead of every other country on the globe in the process of recovering its economy based on their reports on the country’s GDP. At the beginning of this year, China’s economy slumped, succumbing to the pandemic early on by 6.8% when the production was halted. This was the first time China’s economy shrunk since 1992. Yet, China has been able to bounce back, not with full force, but still in a much better place with the lockdown measures as well as government stimulus has worked well. The economy of the country has a growth rate of 4.9% which is a little below the expectations from the country.

Another reason holding the economy back in its ongoing trade war with the United States of America as well. What China has done seems commendable and it seems extremely difficult for any country to replicate their graph. With them being the largest economy and the largest human resource than any other country, the heights their economy could achieve seem permanent and unfaltering.