Case Study Economics: China

Globalisation is the process by which each individual country and economy is converging into a larger global economy. Globalisation has many impacts both positive and negative. In recent decades globalisation has had strong impacts in China and thus is predicted to be one of the 4 largest economies by 2050(BRIC). China has benefited greatly from the onset of globalisation and their economy would not be the size it is today if it was not for globalisation, however globalisation has had some strong negative side effects on China.

Effect of the 2008 GFC

As a result of increased globalisation in China, it has been vulnerable to the Global Financial Crisis in 2008. In the period between 2006 and 2007 China was operating with high GDP growth rates, with an average of 12%. When the GFC hit in 2008, the impact was clear when:

* GDP growth rate had dropped down to 9% in 2008 and 8.5% in 2009. The decrease in GDP growth rate was due to worldwide demand for the Chinese exports decreasing and TNC’s closing down factories and putting millions out of work, leading to a stall in domestic industrial production.

* Inflationary rate was negatively affected. In 2007 China’s inflation rate was 4.7%, in 2008 it grew to 6%, and when the GFC hit, the impact was clear when inflation had dropped down to negative 0.6% in 2009.

* China’s unemployment rate had increased from 4% in 2008 to 4.3% in 2009.

* China’s government debt as a % of GDP rose from 16% in 2007 to 19.5% in 2008

In November 2008 the Chinese government introduced a stimulus package worth $586 billion, which was aimed at encouraging growth and domestic consumption. After 2009 China experienced gradual increases in GDP growth, 9% in 2010 and 10% in 2011.

Strategies to promote economic growth and development

There are many strategies that the Chinese economy is using to promote their economic growth and development. These include encouraging Foreign Direct Investment, lifting education standards...