China has one of the leading economies in the world. In terms of GDP, China has the second-largest economy in the world. Chinas purchasing power parity, on the other hand, is the largest in the whole world. China operates a socialist market economy that is characterized by public ownership and state-owned enterprises within a market economy (Rawski, 2001). However, for a long time, some economists have argued that china represents a capitalist economy rather than a socialism. Claim for this began towards the twenty-first century, where the nation experienced various economic and industrial reforms.
The Chinese government operates the same way as private institutions operate where they keep total profits. For an economy to be regarded as a socialist economy, the profits should be distributed in ways that benefit the population. In response to the argument on capitalism by some economists, the government came up with a reform program. The government now encourages enterprises owned by the state to ensure that they submit dividends to the central government. The government also transferred some of its assets to the social security funds that are designed to provide that funds aid in social programs that affect the livelihoods of its population.
Economic liberalization can be defined as a state where the government loosens its restrictions and regulations in an economy to allow greater participation of the private entities. As countries grow economically, they have to adapt to challenges that are associated with the changes. Chinas liberalization is based on the relaxation of its government on restrictions set in different areas such as political, social, and economic policies.
The Chinese liberalization began with economic reforms. The first reforms in the country were on agriculture. Chinese farmers were now allowed to keep a share of their output without having to submit it all to the national government. The introduction of this policy ensured that the production levels in the country increased and assurance that china was no longer in a position to repeat the 1959 famine disaster.
The country also began offering policies on pricing where freer pricing policies were introduced. Government controls on businesses reduced, and it at least opened up to having foreign investments in the country. The economic liberalization in the country also saw the reduction of tariffs, together with the decline of barriers to trade. With liberalization came reforms in banking that ensured that the country was better in terms of banking policies and convenient for the business entities to showcase their products in various markets through adequate financing by the banks (Brandt and Zhu, 2001). The state focused on its ability to regulate and supervise banks, ensuring that it fosters good governance practices within the banks.
Economic liberalization, in a significant way, has changed the economy of China. The currency of China is now used in trading in various companies, increasing its scope in the market. The continuance change in policies has aided the country in terms of business growth and opening up to the rest of the states (Li and Zhai, 2000). The reforms have also assisted in changing the position of China in economic strength. A good example is the sanctions that had been put on china, affecting the rest of the world economy due to its impact on trade.
With the growth of the economy over the years, China as a nation has set itself among the largest importers and exporters in the world. Most of the countries in the world association with china over trade make them liable to slowdowns or impacts on the Chinese economy at any given time. An excellent example of the importance of China’s growth to the world economy is its association with the United States, which would not have been possible without China’s economic liberalization. China and the United States share the second biggest partnership when it comes to the trading of goods and services. The United States, as a nation in a significant way, is affected by the cheap labor and costs associated with china. This makes the products of China more affordable and thus having a larger market share. The state’s business interactions with china made it the largest creditor to the United States. With the exports decreasing from china, it means that other nations that get products from them will have a large deficit and affect the smooth running of the different economies.
The Chinese economy has generated various revenues to different parts of the world due to the availability of cheap essential products. Change in the marketplace at any given time will lead to many employees losing their jobs if the Chinese economy would, in any way, be affected (Ranta et al., 2018). The different companies’ impact on business will be primarily affected as similar sourcing products will be at a higher cost and only leaving the companies having to offload workers to remain relevant and profitable in their respective markets.
A negative shift in china’s economy, though, would not only bring detrimental damages to respective economies. Worsening of their economy in a big way would lead to an increase in products. Countries such as the United States and other oil exporters may highly benefit from such an occurrence. The slowdown of its economy will ensure that the oil prices are mitigated, leading to lower production costs that amount to higher returns to their respective economies.
In conclusion, china’s growth over the years due to economic liberalization has had a significant influence on the different economies in the world. The countries though that will be most affected by the operations in China are those that are related to China. The decrease in the domestic demand in china will automatically mean that most of the country’s exports will not work, leading to wastage plus a reduction in the respective economies’ growth. Economic liberalization, in a substantial way, has aided in the improvement of the economy. As China opens up, more associations are made and with different views estimating that china with time will be both the largest importer and exporter of products in the whole world.
Brandt, L., & Zhu, X. (2000). Redistribution in a decentralized economy: growth and inflation in China under reform. Journal of Political Economy, 108(2), 422-439.
Li, S., & Zhai, F. (2000). The impact of accession to WTO on China’s economy. Development Research Centre, The State Council, People’s Republic of China, mimeo.
Ranta, V., Aarikka-Stenroos, L., Ritala, P., & Mäkinen, S. J. (2018). Exploring institutional drivers and barriers of the circular economy: A cross-regional comparison of China, the US, and Europe. Resources, Conservation and Recycling, 135, 70-82.
Rawski, T. G. (2001). What is happening to China’s GDP statistics?. China Economic Review, 12(4), 347-354.