Econg

In the article “Two Twists in the dragon’s tail” in the January 2012 issue of The Economist, the article analyzes changes in China’s GDP for 2011. Although the economy still grew, the areas it changed in were new for China. According to the article China experienced large growth in consumption in both public and private sectors, this was the first time for this to happen in ten years. Foreign capital decreased compared to 2010, this decrease partly explains the decrease in foreign exchange capital China experienced, however they continue to export more than they import. This phenomena has red flagged the fact that potentially China’s rich are smuggling their wealth out of the country.

This article illustrates Gross Domestic Product or GDP and how it is used to measure the production in an economy in a one year period by using market values of final goods and includes only current production. There are four components in the GDP;(a). Consumption, (b). Investments,(c). Government Expenditures and (d). Net Exports. Consumption is comprised of public and private spending on durable goods, non-durable goods and services. Investments are measured by the spending by firms on expansion, and by households on new houses. Government expenditures is defined as spending by all levels of government on goods and services, and the final component of GDP is Net Exports which is the sum of all Exports minus the sum of all Imports.

Chinas’ economy is run by the government, they decide which goods and services are produced which would be expected from a central economy. With so much controlled by the government it is impressive to the rest of the world how the public and private sectors can amass wealth and increase their consumption of goods and services. When most economies in the rest of the world are contracting China is expanding.