China Investments and the Value of the Dollar

China's Investments and the Value of the Dollar

Before the 20th Century, when there was talk about the economy and economic powers, China was unheard of. Not until the middle of the century would China begin its journey to become not just a powerful industrial power, but a global economic supremacy. Many different factors came together to bring China from the brink of collapse to where the economic superpower they are now. Most of these factors include reforms in China's economic and foreign policies – reforms that came at a time when globalization was becoming a prevailing idea. Investments abroad helped amass big gains in China's GDP and entry into the World Trade Organization.

Economic analysts attached to the number one world economic power have kept an eye on China's explosive growth in the 20th century. The United States economy sat safely atop of world trade for decades. But with China quickly catching up, the United States must resolve its own economy woes during a recession, before the value of the U.S. Dollar becomes obsolete.

China's Economy Before its Ascension

After the War with Japan, a civil war, and World War 2, the Chinese people were weary of war and the economy was in shambles. A communist government was established and the market in China was nonexistent as all industries were state run. Banks and other infrastructure became government controlled after Japan had lost the war and left. Accelerated inflation set in as China printed more money to pay for the war.

A socialist policy was enacted in 1949 to try and re-develop the Chinese economy, called the Big Push strategy. The government invested many resources were used to construct new factories – so much resources that its investment rate was 26% of GDP (Naughton 56). Rapid industrial growth occurred nationwide, spurring and jump starting economic growth. The policy worked due to the state being the one making all the decisions, coordinating the resources, and controlling...