The Economy of China

The Increasing Influence of the Economy of China as a Contemporary Economical Giant

The economic history of the first half of the 21st century shows how China is changing the global economy. These changes have many advantages: there are millions of new consumers who promote global growth, and there are new opportunities for entrepreneurs, increasing demand for almost everything—from American corn to Australian iron ore. But not all effects are considered positive.

Low-skilled workers in the West are facing painful competition from the Chinese manufacturing colossus. The development of Chinese industry will create more serious problems of competition with the US, Europe, and Japan. As China’s economy continues to grow steadily, new threats to a sustainable economic order will appear.

One of the new challenges is related to the global presence of large state-owned enterprises in China. The global economy has never seen anything like it. Confronting the advantage they possess, which are often unjust and unfair advantages, states and private companies are extremely disadvantaged.

The comparison shows that China’s GDP growth rates were not only far above the averages for other low income countries, but they also exceeded those of large developing countries like India and Indonesia, as well as the two neighboring newly industrialized economies, Taiwan and South Korea, not to mention such developed countries as Japan and the United States (Chen, 2001, p. 70).

International trade theories can help to evaluate the reasons of such economic growth. China has the biggest internal market and a cheap labor force, so the means of growth is strong. Having one of the biggest populations in the world, China has an abundance of low-skill workers so it can specialize in labor-intensive industries producing commodities at lower prices. In fact, we can observe the events that confirm Absolute Advantage theory. Outsourcing is a result and at the same time the engine of globalization. During the recent decades, the bulk of industries of developed countries, including USA, have moved to China because of their cheap labor force. China exports labor-extensive products while it has absolute advantage in such manufacturing. China seeks not merely a competitive advantage, but absolute advantage. China’s trade strategy is to win in virtually all industries, especially advanced technology products and services. Such actions are undertaken by all countries who assert it is the essence of competition (Atkinson, 2012).

The leaders of the country started a course of reform aimed at revitalizing the economy, raising productivity, and delivering a rise in living standards that would prove the superiority of socialism. In spite of some disagreement among China’s leaders over the extent to which the central planning system should be modified, the reforms took the course of increasing individual and local initiative, and gave power to act on it by transferring some economic functions from the bureaucracy to market forces and increasing the role of the profit motive in economic decision-making. This was a gradual process of experimentation, rather than a sudden switch to a completely new program, but one reform led to another until, by the 1990s, the result had moved far beyond the limited horizons envisioned in 1978 (Young, 1995, p. 3). China is the most successful country with a centralized, planned economy in the world, despite the common view that socialism cannot be efficient.

As China expands its energy industry to meet future demand, it faces several barriers to success. The main energy source is coal, but there is not enough to supply the whole of China’s needs, as a large part of the energy resources are imported, making the economy dependent on the import prices and slowing down economic growth (Dorian, 2001).


1. Atkinson, R. D. (2012). Enough is enough: Confronting Chinese innovation mercantilism. The Information technology and Innovation Foundation. Retrieved from
2. Chen, S., and Wolf, C. Jr. (2001). China, the United States, and the global economy. Rand.
3. Dorian, J. P. (2001). Energizing China’s economy. Forum for Applied Research and Public Policy, Vol. 16, No. 2.
4. Young, S. (1995). Private business and economic reform in China. Routledge.