Analyzing the Chinese Economy: Growth, Currency, and Debt Challenges

This essay delves into the intricacies of China's economic system, highlighting its unique Socialist Market Economy guided by the Communist Party. It examines the transition China has undergone, shifting from a manufacturing-based economy to a service-led industry, and the resulting growth. The essay identifies key trends driving economic growth, such as the shift from mining to dining investments, two-way capital flow, consumer leverage policies, and the rise of online shopping. It also critically analyzes China's currency manipulation through the People’s Bank of China, its impact on global trade, and the challenges posed by significant debt levels across various sectors, potentially leading to economic stagnation and national failure. The essay concludes by referencing potential future outcomes if the debt crisis continues, drawing parallels with Japan's past economic struggles.

Chinese Economy 0
Chinese Economy
Student’s Name

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Chinese Economy
Q1
China’s economic system is guided by the communist party of China that follows the
Socialist Market Economy. The Communist Party runs the country with a vision. It is
influenced by various factors such as market forces and also it includes the involvement of
capitalists, although the Party does not support the capitalist run. A country loses many of its
financial and technical advantages by isolating itself economically from the rest of the world.
Therefore, China's Deng Xiaoping opened the Chinese economy for the world; he invited
foreign companies to invest in the Chinese industries (Spence, 2011).
Q2
China has undergone through a transition process in the last decade, a number of the
initiative was undertaken and various new policies were introduced. China has been well
known for its manufacturing units, it now wants to expand its horizons in the service led
industry.
The change in the economic model brought a more-than-respectable growth rate of
6.5 percent in China’s economy, which was impressive after an extended period of slow
growth. This recovery in the economy played a critical role in the growth of export demand
and revenue. For facing the slow growth for 6 years China started putting extra effort with
greater momentum in designing and executing essential policies and reforms that help in
promoting growth that is based upon quality, sustainability, and efficiency – factors that now
trump speed and size in their importance (World finance, 2019).
Q3
China has adopted various methods or derivative to stimulate growth in the economy.
Some of the trends that drive the economic growth of China is mentioned below (Forbes,
2019 a):
 China has now shifted the focus of investment from mining to dinning
 Instead of the flow of capital in one-way china now, follows the two-way flow of
capital.
 Designing policies that work in the direction of consumer leverage such as car
policies

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Chinese Economy
 One of the sections that have boosted the Chinese economy is a change in the
shopping pattern from retail shopping to online shopping.
Q4
Chinese policy currency is known as the renminbi, the value of which is controlled by
People’s Bank of China (an extended arm of Chinese Government), unlike the other countries
that rise and falls with the free market trade.
China has manipulated both the global and Chinese economy by devaluing its
currency. By doing so China had undercut its competitor as by devaluing the currency the
exports have become cheaper. Whereas, it had made difficult for high priced imports to
compete in the markets of China. This has resulted in boosting the local venture but
negatively influencing the foreign countries market (Forbes, 2019 b).
Q5
The Chinese industry faces a serious problem as many business venture, families and
different levels of communist government are in serious debts, which can be difficult to
payback without enough cash flow in the economy. We can observe a realistic graph in the
free flow market environment, the annual growth of the has been diminishing below 7%. We
can estimate even slower growth percent such as 5% in the near future (Washington Times,
2019).
This can result in severe outcome such as loosing of job, bankruptcy. This could end
up putting stagnation in the Chinese economy the similar situation is also faced by Japan in
the recent past. If the debt crisis still persists that could eventually result in potential national
failure (Spence, 2011).

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Chinese Economy
References
Forbes. (2019 a). The Four Trends Driving China's Future Growth. Retrieved from
https://www.forbes.com/sites/kenrapoza/2014/07/30/the-four-trends-driving-chinas-
future-growth/#4a14450b754e
Forbes. (2019 b). China's Currency Manipulation Is A Response to Trump's Tariffs.
Retrieved from https://www.forbes.com/sites/charleswallace1/2018/07/21/chinas-
currency-manipulation-is-a-response-to-trumps-tariffs/#5148a3b6663b
Spence. M, (2011). What are China’s next steps? Retrieved from:
http://blogs.reuters.com/great-debate/2011/05/19/what-are-chinas-next-steps/
Washington Times. (2019). MADISON GESIOTTO: The negative effects of China’s currency
manipulation explained. Retrieved from
https://www.washingtontimes.com/news/2015/nov/13/madison-gesiotto-negative-
effects-chinas-currency-/
World finance. (2019). China’s transitioning economy. Retrieved from
https://www.worldfinance.com/markets/chinas-transitioning-economy