China's economy Essay Example | Topics and Well Written Essays - 500 words

China's economy - Essay Example When per capita income is measured in terms of purchasing power, it has gone up by three times – as per the International Monetary Fund, from $2800 in 2002 to almost $9100 in 2012. That is certainly a commendable achievement by any standard! China is now no more a poor country but is placed in the middle-income bracket. China became a member of World Trade Organization in 2001 and that gave a big boost to Chinese exports. Chinese exports grew by average 30% between 2002 and 2007 making it the worlds largest exporter then. In exports, China holds 10% of the global market. Real estate contributed significantly in the GDP growth after 1998 when the establishment opened the market. Between 2002 and 2010, real estate of China registered average growth of 17%. That has now gone down to almost 12 % due to controls enforced by the government. All said and done, the moot question is whether China will be able to maintain such spectacular growth in the years ahead. China is more poised to follow a well-known economic principle – the law of diminishing returns that with each unit of fixed investment, the marginal return declines meaning each fresh unit of capital will produce less output than the previous one. In other words, to maintain same growth, the country needs to invest higher and hiher capital each year. China is now integrated with the world economy. Post 2008 financial crisis, China is unable to push more exports to the developed world due to large scale unemployment that prevails with stagnating GDP numbers . Export growth rates for China will be declining in the years ahead compared to what has been registered in the first decade of new millenium. That leaves little scope for China to maintain 10% GDP growth in the years ahead. Chinas cost advantage in the world market is declining rapidly because its average wage rates have gone up four times since 2000. Moreover,