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Economic miracle: China

China’s remarkable economic performance over the last two decades has rightly been hailed as an economic miracle. It took China recent time to become from rural into high industrial country. What tools did the government use to reach so remarkable results? What are the strong and the weak sights of economic policy and reforms? What innovative solutions did the government apply to keep high economic position during the world crisis? All of these questions are to be researched to help other developing countries in improving their economy.

China is one of the developing countries, showing nowadays the outstanding results by its economic growth. This fact is proved by statistics:

GDP $7.301 trillion (nominal: 2nd; 2011 est.) [1]

GDP growth 9.5% (major economies: 2nd; 2011) [3]

GDP per capita $5,184 (nominal: 90st; 2011) [2]

GDP by sector industry (46.8%), services (43.6%), agriculture (9.6%) (2010 est.) [3]

Inflation (CPI) 5.4% 2011 est. [4]

Gini coefficient 41.5 [5]

Labour force 780 million (1st; 2010) [6]

Labour force by occupation agriculture (39.5%), industry (27.2%), services (33.2%) (2008) [6]

The measures, improving economic situation in China began with the registration law. According this law the population was divided into peasants and citizens. Those who were born in a family of peasants couldn’t change their social status. And the most part of population those times were peasants, as China was mainly an agricultural country. The peasants, who make together nearly 65 % of all population, became in fact very cheap labor force. The inner demand was very low and the government began the policy of openness, making stress on exporting goods.

Chinese government began the course of industrialization, involving not only cities but also rural areas. In the aggregate, the cheap labor force and wide abilities of production turned China into the workshop of the world’.

Better to understand the result of reforms and situation in China, let us make SWOT-analysis of the Chinese economic policy.


Cheap labor force, low cost of goods, high productivity through everywhere industrialization.

Low inflation rate.

Underestimating of local currency. By Chinese government was created an artificial course of national currency - Yuan. In comparison with real cost it is in 15-20 % lower.

Labour policy: The government established very low unemployment benefit that is why the unemployment rate is keeping also rather low.

In the aggregate, low cost of goods, high velocity of productivity, low inflation rate, low taxation, underestimating of Yuan made in China hothouse conditions for exporting goods and very attractive for foreign capital.

Weaknesses: while external economy indicators remain outstanding in comparison with other developing countries, there is such appearance as low standard of life inside the country and drastically difference between people, belonging to different social levels (this fact is reflected by Gini coefficient). The welfare of Chinese population leaves much to be desired.

Opportunities: until such conditions as low price, taxation and high productivity remain; China is still attractive for foreign investors. Meanwhile there is another opportunity for Chinese economy - to improve the quality of goods and to keep the leading positions in manufacturing.

Threatens: as it was earlier told, the standard of life in China is rather low. This fact causes the dissatisfaction of many people. There appears drastically difference between incomes of people; in China there is no ability to find the middle class. Another problem: environmental pollutions, that causes incurable diseases among people, who live in industrial regions.

Another important thing for research is the fact, that during economic crisis in the world the buying ability of many countries decreased. And there appeared danger for prosperity of export - orientated Chinese economy. But the government has implemented an innovative approach for solving this problem: they made stress on inner domestic economy. Substantial part of goods, produced for export now has been intended for Chinese people. Using this approach the Chinese government hit two targets: they avoided bankruptcy because of financial world crises and started to improve the inner market situation, increasing the needs of population. And the Chinese got the ability to make their standard of life higher and the wish to work more, reaching this aim. This step solved not only economic problems but also made a positive impact on social life.

In conclusion it is necessary to say, that many economists wanted to follow the example of Chinese economy as it could be really estimated as economic miracle. Some reforms can be implemented in experience of other developing countries, but it is necessary also to remember about the disadvantages of Chinese model and possible threatens, following this example.


National Economy Maintained Steady and Fast Development in the Year of 2011, China NBS, retrieved Jan. 17, 2012

“Report for Selected Countries and Subjects". International Monetary Fund. Retrieved Jan. 19, 2012.

"GDP - real growth rate". CIA. Retrieved Jan. 3, 2012.

"CIA - The World Factbook". Cia.gov. Retrieved 2012-02-28.

"CIA World Factbook" [Gini rankings]

"Theglobeandmail_com". Theglobeandmail_com. theglobeandmail_com/report-on-business/economy/more-than- meets-eye-in-chinas-advance/article1674031/. Retrieved 2012-02-28.

Vikas Shah (2011) Brazil: how to build a great country. In; Thought Economics online articles. Е А Кузнецова, Т. Б. Иванова Российский университет дружбы народов (Москва, Россия)

Управление интеллектуальным капиталом. Материалы Международной научно-практической конференции (Екатеринбург, 27 апреля 2012 г.) Екатеринбург: Издательство Уральского государственного экономического университета, 2012.


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