The cost of China’s economic miracle

13 Feb

Following the first stages of economic reform in 1978, China has seen its economy go from outside of the top 10 economies in 1980 to the second largest as of 2005. With this economic growth comes the usual perks; on average a higher standard of living as is evident in the increase in real disposable income of rural and urban households per annum. A fall in unemployment. 

However as is with everything this “miracle,” comes at a price. Although the economic growth has led to a large increase in disposable income, this has not translated well to wealth accumulation, this can be attributed to China’s development model, continuous replacement of capital. In this instance it refers to the large scale construction and destruction of buildings. Thereby making it difficult to accumulate wealth. For instance in the UK the majority of wealth is tied down in the housing market, if however these houses are constantly being replaced storing wealth in such a manner becomes very difficult. Another issue is that while China accounts for around 20 percent of global manufacturing, it is clear to see that this quantity does not necessarily equal quality as is shown by China’s reputation for the production of cheap knock off goods, this poor quality aspect was made especially evident in the 2008 milk powder scandal, highlighting to the world. Other problems include the high level of Government enterprises, foreign direct investment is a necessity for any economy, however due to the high level of government owned enterprises a barrier is created that makes foreign investment in Chinese firms harder, than it would be in a more free market.In addition China will soon suffer from an ageing population a problem common to many other countries, however unlike the other countries this problem has been exacerbated in China by the enforcement of its one child policy.

This is not to say that these are the only problems faced by the Chinese economy, but that these are among some of the most substantial.  If China wants to secure its place as the world’s dominant super power such issues will have to be addressed.


Emma Wall 2013 Investing in China: the pros and cons

Zhang Jinming 2012 The negative effects of China’s development model

The Economist 2013 Keeping Watch

BBC news 2012 China’s economic miracle

International Monetary Fund







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