China and America Economic Analysis

Table of Contents China and US Economic Indicators US and China’s Capitalism impact on Economic Growth Internet impact on US and China’s Economic Growth Personal Freedom impact on economic growth Democracy impact on economic growth Bibliography Footnotes China and US Economic Indicators There has been a lot of comparison of China’s economy with the United States due to the economic growth China has been experiencing in the recent years. The United States however still remains quite ahead of China in terms of economic indicators such as employment and GDP. The GDP of the United States in 2009 was nearly $15 trillion while the China’s GDP was $ 5 trillion.Advertising We will write a custom research paper sample on China and America Economic Analysis specifically for you for only $16.05 $11/page Learn More The income levels for the average American was ten times more than for the average Chinese individual. These measures of GDP and income levels may not show the gains made by the Chinese economy. The purchasing power of the Chinese has been increasing yearly. A higher number of consumer goods are cheaper in China enabling the people to purchase more with their income. The purchasing power is therefore a better measure since the same amount of money should be able to buy the same types of goods in any place in the continent. The GDP of China adjusted by the current purchasing power shows that the country’s GDP is nearly $10 trillion. The gap of $5 trillion could be closed in the next few years considering the high GDP growth of the China[1]. The inflation in China has been increasing at a faster rate than the US causing the World Bank in 2005 to adjust the PPP measure of the country downwards by 40%. The inflation rate has continued to be higher than the United States even after 2005. The GDP growth of the United States over the period 1981 to 2010 increased 4.7 times however the Chinese GDP incr eased by over 30 times over the same period. In the area of trade, China has been able to surpass the United States in the area of exports. China is the biggest world exporter. In the period 1998-2000, there was a significant gap between the two countries however in 2006, China caught up and in 2010 and there is a gap with China leading. The export industry has shown significant progress. In the area of foreign debt, the United States over the years has been increasing its debt at a fast rate. It has made the experts and scholars in the country to be concerned as it currently stands at $4.45 trillion. China’s foreign debt on the other hand is a lower level of $785.17 billion. In light of all the economic indicators discussed, the world is watching China and it is expected in the next few years it be the world leader in the economy. US and China’s Capitalism impact on Economic Growth China’s capitalism is different from the United States since it practices state capitalism. The government controls the economy in a vertical economic structure. At the top there are monopolistic state companies which control the key industries while at the lower end, the government has allowed the state companies to face private competition[2].Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The state controls the petroleum and natural gases, electricity and power, banks, transport and information technology industries. The trade liberalization policies adopted by the country especially when the country joined the WTO in 2001, caused a lot of expansion in private competition at the lower ends which caused high demand of the products sold by the state owned corporations in the key industries. The structure combined with labor abundance and openness has helped the state corporations to perform better than the non-state owned corporations. The vertical structure enables the country to increase its economic growth despite the disadvantages attributed to state controlled capitalism. State capitalism has caused the country to perform well as its GDP rose pushing the country from position six to position two in the world. In the period 2001 to 2011, the GDP had an average growth rate of 10.5%. The United States operates on a political system of free-market capitalism. There is high liberalization of the economy with competition being highly encouraged. The government only interferes when there is a need to do so. The free market structure has caused the economic growth of the country to increase. There has been increased innovation, research and development that have positively affected the GDP. However, there are dangers of free market economy as corporates may take advantage of investors. Due to unethical practices, the United States faced a financial crisis that forced the government to come up with economic stimulus to help these companies and ensure that individuals are still able to live their lives comfortably. There had been declining employment, business investment and personal consumption therefore the economic stimulus really helped the country. The financial crisis did not affect the Asian countries. It mainly affected the countries in the western world. Internet impact on US and China’s Economic Growth There is a lot of control on internet access in china by the government and there have been concerns on the adverse effects of these actions on the economy of the country. The people are only allowed to access the internet sites that they need. The strategy is meant to protect the people from outside influences that would cause the people to challenge its leadership. The main national party, the Chinese Communist Party wants to enhance the country’s national sovereignty. The internet restriction has not had high adverse effect as the country implemented an â€Å"open door† policy in econom ic activities that caused the country to grow economically[3]. The country became more involved with the internet in the 1990s and registered its use in 1994. China’s use of the internet has increased and in 2008, it replaced the United States as the biggest internet user in the world.Advertising We will write a custom research paper sample on China and America Economic Analysis specifically for you for only $16.05 $11/page Learn More The country has enjoyed the benefits of internet technology as they have global accessibility to conduct their businesses. The telecommunications and internet sector has grown tremendously contributing highly to the country’s economic growth. The censorship on the internet encouraged the development of indigenous IT development. The censorship has therefore not discouraged the development and growth of information technology. In the United States, the internet is not restricted in any way and the people are a ble to access all sites and get the information that they want. They are therefore able to question the government and leaders on the economic decisions that they make at a particular time. The leadership is put to task to explain the economic decisions they have taken. Internet freedom helps in protecting individual and human rights. There is however certain income that America gets that China may not get through the internet through internet censorship. In America with the internet freedom given to the users, in 2011, it was noted that 247.2 million people spent time on the internet which is double the amount of people in 2010. These people spent an average of 81 billion minutes on social networks and blogs. A lot of Americans transact online, purchasing goods and services with a high percentage of the products promoted through the blog sites and social sites. In the United States, it was noted that internet activity accounted for 4.7% of the GDP in 2010, which is approximately $6 8.2 billion. The internet therefore contributes more to the national economy than industries such as information and technology, education, agriculture, construction and recreation. 5% of all the country’s retail activities are conducted over the internet. In China, on the other hand, in the period 2004- 2009, the internet contributed 3% to the country’s GDP which is lower than the 4.7% of US internet contribution. The United States has also put appropriate measures in place to ensure that information technology in the country grows in order to contribute to the overall economic growth. There have been substantial innovations in the information technology sector. Personal Freedom impact on economic growth The censorship of the internet and control of government in businesses has caused scholars to study the impact of personal freedom on the economic growth of a country. Are the countries with more personal freedom wealthier than the less free ones? There was a study ca rried out on 150 countries to test this hypothesis. The 150 countries were divided into four categories of free, mostly free, mostly unfree and repressed countries. The researchers were looking at variables of freedom as level of government intervention, level of property rights and level of foreign investment barriers. The variables which would be assessed to assess the economic growth were inflation rate, balance of the current accounts and the gross domestic product. For a free country, there would be little or nil government intervention in business and the economy.Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More To determine the government intervention, the researchers also looked at the share of government ownership of the businesses and the percentage of government consumption in the economy. In looking at property, the focus was on whether the private property was legally granted or forbidden by the government. Does the country have few barriers to foreign investments or the barriers are quite high? Inflation and balance of current account were used as a control as they influence GDP and the interest in the study was the impact of personal freedom on economic growth. The data for the analyzed countries showed that the countries with more personal freedom had a higher rate of economic growth. In choosing to restrict personal freedom, china was reducing its rate of economic development. Furthermore, of the 25 competitive countries as ranked by the World Economic Forum, it was noted that 80% of the countries were in the free countries category. Democracy impact on economic growth Another co ncept that has interested scholars is democracy and its impact on economic growth. United States is a democratic country while China is under authoritarian rule. Democracy has been noted to have a significant positive effect on economic growth. An analysis of the effects of democracy on economic growth was undertaken which focused on four countries. The four countries chosen were China, authoritarian rule, America, democratic rule, Botswana, democratic since the time it attained freedom and Chile is classified as intermittently democratic. The researchers were interested in the impact of democracy over a relatively long period of time. The period chosen for the study was 1950-2000. The GDP was found to have a significant positive relation with democracy. It increased significantly as the country’s political democracy increased[4]. The countries that have experienced high levels of industrialization in the last 50 years have been located in Asia. The Asian countries were Singa pore, Thailand, Philippines, South Korea, Taiwan, Indonesia and Malaysia. However, for the economic development to occur, the countries had to transition from socialist, closed economies to more democratic and open societies where foreign investment and market competition was encouraged[5]. They also instituted political reforms that increased political and personal freedom and with these actions, the country’s political growth has continued to expand. There have been higher levels of domestic consumption and the services industries have matured. In analyzing the countries that are politically unfree, it is noted that aside from the oil producing nations, all the other countries’ GDP are at lower levels compared to the free countries. China is growing at a very fast rate however it would grow at even a faster rate if it increased the personal and political freedom of the people. The United States on the other hand should have strategies to deal with the challenges it i s facing economically. It has however put great systems in place such as internet accessibility, personal and political freedom that will enable economic growth to continue and offer stability. Bibliography Gerring, John, Philip Bond, William Barndt and Carola Moreno. â€Å"Democracy and Economic Growth: A Historical Perspective.† World Politics 57(2005): 323-364. Li, Xi, Xiuwen Liu and Yong Wang. â€Å"A Model of China’s State Capitalism.† Social  Science Research Network Working Paper (2012): 1-65. Minteh, Binneh. â€Å"Internet Censorship and Economic Growth in China.† Global  Vision Institute Working Paper (2011): 1-14. Scissors, Derek. â€Å"The United States vs. China- Which economy is bigger, Which is better.† The Backgrounder 2547(2011): 1-10. Tisdel, Clem. â€Å"Economic Reform and Openness in China: China’s Development Policies in the Last 30 Years.† Economic Analysis Policy 39, no 2, (2009): 271-294. Footnotes Scissor s, Derek. â€Å"The United States vs. China- Which economy is bigger, Which is better.† The Backgrounder 2547(2011): 3. Li, Xi, Xiuwen Liu and Yong Wang. â€Å"A Model of China’s State Capitalism.† Social Science Research Network Working Paper (2012):3 Minteh, Binneh. â€Å"Internet Censorship and Economic Growth in China.† Global  Vision Institute Working Paper (2011): 8. Gerring, John, et al. â€Å"Democracy and Economic Growth: A Historical Perspective.† World Politics 57(2005): 350. Tisdel, Clem. â€Å"Economic Reform and Openness in China: China’s Development Policies in the Last 30 Years.† Economic Analysis Policy 39, no 2, (2009): 274. This research paper on China and America Economic Analysis was written and submitted by user Natasha Montoya to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.