No country has received more praise and criticism than China. For the last thirty years, China has become the second largest country in the world. With its surprisingly high growth, it has captured much attention. To some outside of China, it is rather difficult to understand the rapid development. This economic success, however, did not occur by chance.

This country’s improved economy has a much to do with its reform process and opening to the world. When stepping in front of the global economy, china astonished the western world with the abundant resources and inexpensive labor force.

Owing to technology revolution, many multi-national enterprises were able to relocate their production to China. In turn, China quickly became the optimal area for manufacturing. Due to our lower costs, international companies gradually transferred their workshop across the ocean.

During the progress of globalization, china has become increasingly sophisticated in the use of foreign capital. In the year 1980, the total foreign direct flow inward and outward of China was $1.6 billion at current prices and current exchange rates, while the number in 2010 increased to $124 billion.(1)

At the beginning, china only could make basic textiles. Now, however, we produce all kinds of goods for the entire world — from luxury clothes to complex electronics. Research shows that the export technology complexity has increased greatly.

Lower-priced goods from china have benefited the world.

Becoming the world’s factory has helped china to grow. The average national income has jumped to $4,940 (2), nearly thirty times the level in 1980. Modern cities are no longer new and exciting. Traffic on the highways linking small towns from area to area is extraordinarily convenient and busy, especially in the eastern costal districts.

The country’s huge economic and social progress is built with the aid of foreign advanced knowledge in manufacturing, and management and technological research. But the industriousness of the Chinese people are the very reason for the prosperity.

The journalist Peter Hessler described the change in China’s eastern factories in his book entitled Country Driving: A Journey Through China from Farm to Factory. These factories attract many young men and women from the middle and west of China interested in pursuing a beneficial and financially rewarding future. And they work many hours to obtain greater pay. It may be difficult for foreigners to understand why the Chinese people are willing to spend so much time at work. But this Chinese work ethic is one of the many reasons why the country attracts so much foreign investment.

In The Spotlight

China has played an important role in the global economy. This cannot be ignored. Both Chinese wages and the exchange rate between the U.S. dollar and Chinese currency, the renminbi (RMB), have provided a comparative advantage in terms of the price of Chinese goods. Lower-priced goods from china have benefited the world.

According to specific research, from 1995 to 2006, merchandise from china saved a total of $600 billion in American consumption expenditures. With the outsourcing of manufacturing functions to China, America and other developed countries have focused to a greater extent on technology, innovation and finance. And through advances in the global value chain, along with technology and finance, developed countries have gained more value than China.

Also, with a population of 1.36 billion (3) and tremendous consumption potential, China is an increasingly attractive destination for foreign investment. In fact, a recent PricewaterhouseCoopers LLP survey indicated that China is the world’s top choice to invest foreign capital. According to the survey, 56 percent of 227 CEOs of multi-national companies surveyed said they see China as the top investment destination, while 52 percent see Brazil as the top destination, 37 percent India, and 34 percent the United States.

However, the dramatic economic rise of china has been accompanied with problems. Chinese extensive economic growth has gradually incurred drawbacks, and as a result, must be reformed. The large gap between the wealthy and poor, an unbalanced capital account, and the over-dependent fiscal deficit pose threats to china’s development.

China is no longer strictly pursing a high national growth rate or world exports.

But, environmental pollution might be the biggest problem. And there is no getting around the fact that the polluted air, water, and soil in some locations are extremely severe. Nevertheless, the Chinese government has made progress on this. For example, moving forward, we will restrict foreign investment that will result in damage to the environment.

In addition, China is no longer strictly pursing a high national growth rate or world exports. A more balanced economic approach is our new focus. In addition, China has shifted away from the global production of lower technology goods and is now focused on higher technology products.

China’s transformation is vital to its economy, and to the world as well. Thanks to the irreversible process of globalization, every improvement in every sector of global producing carries a benefit, even though there will always be competition.

Footnotes: (1) United Nations, UNCTAD data. (2) World Bank database. (3) 2013 National Census.

Sylvia Chen
About The Author Sylvia Chen
Sylvia (Simeng) Chen is an assistant researcher at Jiangsu Provincial Academy of Social Sciences in China, and a doctoral candidate in Nanjing University. Majoring in international trade, she focuses on the global economy and china’s reform.

Jiangsu Provincial Academy of Social Sciences

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