Model Answer on Economic Grwoth and China

Evaluate the significance of four factors which have contributed to Chinese economic growth ( 20 marks)


June 2007 ; question 2 (a)

Plan

1) membership of the WTO has opened up markets EVAL over-reliance on exports with weak domestic demand

2) large population = cheap and plentiful labour EVAL are workers exploited?

3) Low environmental standards EVAL but this is not sustainable after Montreal agreement later this year.

4) urbanisation = export processing zones

The most significant factor which has contributed to China’s meteoric economic growth is its membership of the World Trade Organisation. This allowed it access to huge and rich markets all over the globe to the extent that it now supplies the world with 90 epr cent of its toys, 70 per cent of its photocopiers and a significant chunk of the world’s clothes. This would not have been possible without its joining the WTO as previously many developed nations refused to trade with China because of it continued despicable record on human rights abuses – a record which has not improved much. The benefits to China has been huge; the main one being the number of Chinese that have now been lifted out of absolute poverty as a result of improved earnings and living standards. However, there is a major problem with having such a reliance on exports and that is China is very vulnerable when that demand collapses because of a world-wide recession. Domestic demand is weak and so any collapse in demand impacts swiftly on Chinese manufacturers.

The ability to produce such huge quantities of exports is down to two factors. The first of these factors is that China has a massive supply of cheap labour. Owing to hitherto poor living standards and low lelves of income Chinese workers are willing to work for low wages. Low wages translate into low costs of production and hence Chinese exports are very price competitive. However, is this right? Some argue that these workers are being exploited; others argue that it is a process and that over time working conditions will improve. Nevertheless there are still many who are wary of trading with China.

The second factor is still with regards to being able to produce at a low cost, but this factor is to do with the low environmental standards. Heavy and large scale industry in developed economies across Europe and America have to meet a raft of environmental standards, breaches of which result in heavy fines. China has no such standards. Consequently many Chinese regions, especially those where much of the Export Processing Zones are based, have dreadful pollution of rivers, of the air and citizens suffer poor health. This is not sustainable. As the Montreal Summit approaches China faces increased pressure to clean up its environmental record. This could turn their advantage into a liability.

The last factor that has led China to achieve such a rapid growth rate is urbanisation. Rural peasants have left the countryside to move to the new urban areas on an unprecedented scale. They leave the rural areas to find work in the cities’ factories. One reason for this is the fact that there is such poverty in the rural areas that there is little to keep people there. Urbanisation brings its own challenges though with overcrowding, poor sanitation and poor living conditions resulting in a worsening of living standards. Arguably China’s economic growth has not brought about an improvement in living standards for everybody.



China’s economic growth has been stellar and it has been stellar because it has become the workshop of the world, supply many of the developed nations’ consumers goods. It has been able to do this because it has an abundant supply of cheap labour which means that it can be more competitive than virtually any other developing country in the world. However, this has not always been to the advantage of its citizens, many of whom work for low wages in poor living conditions in urban areas.