China has shown an incredible pattern of swift development while
moving from a centrally planned economy to a market economy.
In the present day, China is a country whose majority of
population comes under upper middle-class income category.
China is a socialist market economy.
The socialist market economy is an economic model, which
has been put in place by People's Republic of China.
This model, introduced under Deng Xiaoping, is established
on a main state-run sector inside an open market economy.
From the time when market reforms were introduced in 1978,
China has shown quick economic and social development.
GDP rate is about 10% a year, one of the fastest rates in history
of economies, raising over 800 million people out of poverty line.
According to IMF, China is the second largest economy
of the world based on nominal GDP and the largest
economy of the world based on by purchasing power
parity, but China has not approved this fact.
Public sector industries haves major contribution in the
Chinese economy as compared to the flourishing private sector.
Overall, China comprises of the natural resources of $23 trillion.
Along with one of the largest and fastest growing
economies of the world, Chinese economy is
also the largest manufacturer and exporter of
products, and second largest importer of products.
Moreover, China is in free trade agreements with a number of countries, together
with ASEAN, Pakistan, Switzerland, Australia, South Korea, and New Zealand.
With the population of about 1.37 billion, China is quickly adopting the significant
role in growth of the global economy since the global recession of 2008.
Despite every contribution China is making in the world
economy, it is still considered as a developing nation.
Current Scenario
Under the leadership of General Secretary and President Xi Jinping, China has
not been able to make any noteworthy growth in its economic reorganisation.
Public-sector enterprises are leading the financial
sector, along with other basic industries.
The total national debt of China is approaching 300% of the total GDP.
While, the anti-corruption movement is quite popular amongst the common man,
it has bringing down the regional expenditures and economic development.
The way, economic growth rate of China is gradually slowing down, it is
lot worse than what is being exhibited by the recorded facts and figures.
It is emerging as a serious challenge for the
Chinese government, who is constantly trying
to upsurge the living standards all through the
nation with largest population in the world.
Development
With rapid growth, China has also faced many challenges comprising high disparity,
fast urbanization, environmental problems, aging and increasing population, etc.
According to experts, China needs to make substantial changes in their
policies in order to achieve and retain their sustainable development.
China’s 13th Five-Year Plan from 2016 to 2020 is addressing these challenges.
This five-year plan is highlighting the expansion of services and methods
that will help the economy is tackling the issues concerning environment
and social discrepancies by creating objectives to decrease pollution, increase energy
efficacy, improve education and healthcare
service availability, and grow social security.
The target growth rate for 13th Five-Year Plan is 6.5%.
Inflation
Rising inflationary burden in China possibly will get an encouragement
from increasing prices of one of the China’s main foodstuff, pork.
Food prices in China are one of the major aspects of consumer
inflation, and one of the main foods in China is pork.
Pork is a significant part of the Chinese economy with a per
capita consumption of a fifth part of a pound every day.
As stated by Citic Securities Co., the pork
makes up nearly 3% of the consumer price index.
On other hand, in non-food groups, prices have
moved up at a faster rate including, clothing,
household goods and services, education, and other
goods and services during last months of 2017.
In the meantime, transportation and communication,
and healthcare prices have gone down.
And inflation rate for rental, fuel and utilities haven’t shown any changes.
Foreign Investments
If you will look at the last two decades of reforms, the circumstances
for foreign investors in China has transformed greatly.
China, as a member of WTO, accepted to remove some
of the investment restrictions concerning trade
and to open up the identified sectors of the economy that
were previously were not opened for foreign investments.
A new set of rules, guidelines, and
administrative methods have been implemented.
There are still some major restraints on foreign
investment that consist of incompatible
rules and regulations and the presence of inconsistent legal infrastructure
due to which many foreign investors are still
wary about investing in Chinese economy.
One of the major benefits of foreign investment
is China's swift growth in world trade.
In addition, because of the increase in foreign investments, number
of jobs in urban areas of China has increased substantially.
Only in 2016, China has become the third largest destination for
FDIs in the world with the record investment of US$139 billion.
However, in 2017, foreign investors have
been more watchful about investing in China.
Expectations From Chinese Economy in 2018
Overseas Investment
In 2018, world will be expecting from Communist Party leader Xi Jinping to concentrate
on tackling some of its major economic obstacles like financial risks and threats,
increasing pollution and social discrepancies.
China is expected to continue to clear-out and tighten its hold on financial sector.
Chinese regulators have also given out 36-point guidelines on the code of conduct
for the country's private companies when they are investing in overseas markets.
According to the guidelines, private enterprises must finalise their deals
with the overseas parties based on their own situations and competencies.
They must also submit their investment plans with the Chinese
authorities in advance for recording-keeping purpose and,
in case the enterprises are planning to invest in sensitive countries or ventures,
they must submit their plans for the approval of the concerned authorities of China.
Moreover, private companies must not become involved in fraudulent
activities to attain foreign exchange, relocate their assets overseas,
and they have been cautioned against becoming
a part of money laundering practices.
The new 36-point code of conduct has been designed to bring some
control and order in China’s overseas investment prosperity.
In addition, 2018 must see the continuing expansion of China's economic
impact on the global level through various infrastructure and other projects.
Confronting Different Types of Pollution
The Chinese economy is now concentrating on bringing steadiness and minimizing the
risk in order to take economy from fast-rate development to high-quality development.
High quality economic growth means to build an economy
that is free from pollution and more users friendly.
The government is taking necessary steps to bring down the pollution.
They are making regulations to close down contaminating industrial units
and make local officers more answerable towards ecological damage.
Now, China looks determined not to rely on carbon-based
imported products from other countries including Australia.
Moreover, China is set on not accepting the importations of Australian waste.
Bringing Down Social and Economic Instability
Chinese government is beginning to see the impact
of social concerns of the Chinese economy.
The issues like online frauds, gender discrimination
at the place of work and an absence of
play-and-learn schools in certain parts of the
country are long existing problems for the economy.
To create a well-balanced and conflict-free society has always
been one of the major goals for various Chinese leaders.
The anti-poverty program of Xi Jinping is expected to speed up in 2018.
Government is planning to move millions of poor people in rural areas
to new accommodations with basic facilities of water and power.
The government has also introduced the social credit system (known as social credit
score) to keep track of behavior of both business organizations and individuals.
This system gives social credit points to organizations
and individuals for good social behaviour.
It can be in the form of corporate social responsibility or an individual
picking garbage from the roadside and dropping it in the dustbin.
However, the system also takes away the credit points for depraved behavior, like
breaking traffic rules, not making bill payment on time, or domestic violence.
While Chinese government is taking all the necessary
measures to attain the social stability in
the country, the main problems lies in the
implementation of those measure at the local level.
If the government manages to bring a balance
between transformation and maintaining steadiness,
they are going to be highly successful in their
social and economic stability endeavours.
In case the government’s attempts shows a successful
outcome, China's improved reforms will enable
the economy to take significant steps towards
moving the country into a more dynamic place.
Nevertheless, despite all the hopes and measures,
China is a huge country with largest population,
and while the utter size of its motivations on both national
and international level contains the great chance of success,
nobody can deny the amount of risks involved in
case the economy failed to achieve its targets.
It can lead to overwhelming effects.
The Chinese economy’s growth is expected to remain
slow and steady in 2018 as its politicians and
bureaucrats are constantly trying to bring the
desired balance in the economic model of the nation.
The strict rules and regulations in the property market and environmental
policies can bring a descending burden on economic growth rate.
IMF has estimated that the Chinese economy will show
the growth rate of 6.8% in 2018 and 6.4% in 2019.