An Alternative Outlook on China’s Economy

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In this era of rising globalization we are learning more and more about the affairs of other nations and how it impacts us at home. The perspective of news outlets that report these issues shape and mould reader’s opinions on foreign affairs. In the past China has isolated itself from world affairs by imposing strict censorship and restricted its diplomacy in order to support domestic organizations. Chinese technology giants such as Tencent, Alibaba, and Baidu have benefitted greatly from this censorship [1]. In the past Chinese officials chose to isolate their people from world affairs for fear of Western news moulding and shaping their citizens. However, in this world, it might be important to reconsider censorship since now more than ever people should understand the bigger picture.

There are many myths and negative implications that are often reported through the news regarding the Chinese economy and its affects on North America. Many Western politicians paint negative portraits of the Communist Party by highlighting that the Chinese markets are not free as a result of government control under the CPC (Communist Party of China). The CPC who founded the People’s Republic of China as well as acts as the ruling party carries all the political power within the nation and is therefore responsible for all of China’s political movements within the nation and on the global frontier.  Many American news outlets also highly stigmatize China’s involvement in climate change with respect to their inaction or delayed action in decreasing contributions to greenhouse gas emissions. However it should not be forgotten that China is a developing country with a massive population [2]. In regards to energy consumption, the amount of energy used to support one American can support thirteen Chinese citizens.

Risky and Unstable Investments

In recent turn of events the Chinese composite Index especially the Shanghai Stock Exchange Composite Index experienced some dramatic declines which caused investors to reconsider the growth of the Chinese economy. Although growth has indeed slowed it should be noted that the decline in growth is not representative of the economy as a whole. The Chinese stock market is mostly comprised of industries related to construction which amount to one third of its entire GDP. Putting the construction sector aside: consumption, household income, and the service sector continue to have stable growth.

In June 2015 the Shanghai stock market peaked in part due to government support. Since then the construction industry has run into more stringent reforms like taking on environmental causes and sustainable development. Although Shanghai stock market have dropped 40% since their peak, it is roughly where it was one year ago. Since then the market has shown stable growth and – with the recent freedom of government control – it is showing promising signs [3]. The volatility within the stock market should not deter investors into believing all investments will be risky. Shanghai’s stock market continues to show stable growth without government involvement and this should be indicative that investments can be stable.

Manipulating Currency

Political leaders from across the world have been accusing the Chinese government of currency manipulation. In 2016, the Chinese government has finally allowed the renminbi more freedom. This came as quite a surprise to the Western world because the release of control of the renminbi would mean more volatility for the renminbi. American politicians and popular news sources expressed opinions that this act of allowing markets more freedom was planned by the Chinese government as a means to soothe the world’s accusations of currency manipulation. Whether or not they will keep their word and cease intervention is thought to be unlikely [4]. This is a misconception because China like all other nations protect their currency against external factors. Choosing an appropriate time to allow the market more control and choosing a time to intervene is only in China’s interest of self-protection.

Cheap export driving Economic growth

Despite being one of the largest exporters of manufactured goods, the Chinese economy is shifting from one economic model to another. What used to be an economic model based on cheap export goods and low wages is now transitioning towards a service based economy with rising wages.

The US has a bone to pick with China because it has a large trade deficit with China that has risen to more than 350 billion dollars in 2015 [5]. It is overlooked that despite the large amount of export, an even greater amount of imports are present in the form of raw resources. China is not a resource rich nation so it needs to import large quantities of raw materials for the development of infrastructure and factories. These developments account for more than half of China’s growth within the last 10 years. With the introduction of more sophisticated products, China is increasing the value of work added thus raising wages altogether. Along with the increase of wages is the shift from a manufacturing economy to a service based economy.

Overall these three highly talked about issues within Western media are often summed up to one or two sentences portraying a certain image of China. In reality these issues are extremely complex and have multiple viewpoints.

 

References
[1] http://www.economist.com/blogs/economist-explains/2013/04/economist-explains-how-china-censors-internet
[2] https://www.theguardian.com/business/datablog/2010/aug/03/us-china-energy-consumption-data
[3] http://www.tradingeconomics.com/china/stock-market
[4] https://www.wsj.com/articles/the-myths-of-chinas-currency-manipulation-1452296887
[5] https://www.census.gov/foreign-trade/balance/c5700.html

 

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