5 Reasons Why China’s Economy is Booming Lately
With all the recent interest and attention that China’s economy has been getting, it can be a bit difficult to keep track of the basic facts and the real reasons behind its consistent and impressive growth. But to understand how exactly China came to have expansion levels that western nations can only dream about, it’s important to have a look step back in time some.
Back in 1820, China stood proudly as the largest economy in the world hands down. However, it stands as the second largest economy today after falling behind due to the 19th-century compounding of Western industrial revolutions. Presently, many claim that the Republic’s economy has reached its limits, but the facts say otherwise. Here are 5 reasons why China’s economy is booming lately and why it will continue to do so.
#1: Poverty Eradication and Equal Resource Distribution
As we speak, China is the only country on the planet that has lifted more people out of poverty than any other country in the world. Common sense dictates that when you take more and more citizens out of squalor and give them better living standards, then there are no limits to what an economy can achieve.
Back in 1978, it was pretty evident that much of China was poor with a GDP per Capita similar to that of Zambia today. That’s lower than half that of Asia’s and even lower than two-thirds of Africa’s average. However, China achieved what western countries have failed by distributing resources equally and lifting more than 800 million people out of poverty by 2014. This is an unparalleled achievement with poverty being virtually eliminated in China. Some countries with less than 100 million people have not even been able to achieve such a feat. The fact that China excels at resource distribution and poverty eradication means that its economy will keep on booming.
#2: Constant Growth
As a direct result of poverty eradication, China has seen an astronomical rate of both economic and population growth. Official figures show that the Republic’s economy is growing at an impressively high rate of 7% per annum with several ups and downs. In some notable peaks, China’s economy actually hit the 13% mark according to IMF. This is the sort of expansion that western nations can only dream about. With better standards of living, improved health, less poverty, diminished crime and plenty of opportunities, it’s no wonder that China has the largest population on the planet.
#3: Carved a Niche as The World’s Manufacturing Hub
Ask any business where they source materials and components and chances are that they get them from China. From developing African countries to superpowers like the USA, most companies rely on products and commodities made from the East.
What most people do not know is that this is no simple coincidence; China worked for decades specializing in labor-intensive, export-led production of cheap goods. This led to a growth strategy based on researching, assembling and selling the cheapest goods on the planet to the rest of the world. So with literally hundreds of countries all over the world importing billions of dollar worth of products and equipment, is there anywhere else for China’s economy to go but up?
For a quick overview, you can simply take a look at all the biggest retail websites in the world and you will see that many sellers are importing from China, if they are not already a Chinese company. The online retail sector got so large that we can now see companies working with seller accounts in China and offering custom transactional deals to lower the costs of money transfers or providing better currency exchange rates.
#4: Robust Private Sector
Like many developed countries, the presence of a strong private sector is essential for any economy. In China, private sector firms produced over two thirds of the country’s entire GDP, making it the primary driver of growth. The private sector also accounts for over 90% of China’s large-scale exports. And that’s not all; the private sector is also the largest source of employment in China (36%) and is responsible for more than 80% economic profit according to the republic’s National Bureau of Statistics.
#5: Development of Middle Class Consumers
As with any other country, the growth in services is reflected in the growth of wealth as well as disposable household income. Aside from the fact that China is now the second largest importer and largest exporter of merchandise goods, there’s also a boom in middle-class consumption.
Today, lots of Chinese consumers are spending more and more on lifestyle services as well as experiences moving towards premium segments. This has seen a spike in the happiness and balanced lifestyles thanks to more people climbing up the income ladder. With a happier, healthier and more content population, China’s economy will keep on booming for decades to come.