Will U.S. Be Overtaken by China Research Paper Example | Topics and Well Written Essays - 1000 words

Will U.S. Be Overtaken by China - Research Paper Example The assumption and expectation that China would one day become the world’s richest country is not a new one. The country has enjoyed massive economic growth and expansion of its global presence which have made it to economically surpass tens of countries within the last 20 years to sit at the second place. The current and future economic growth of China is as fast as it is diverse, while the US is facing a lot of financial challenges2. The fact that China’s economic and socio-political performance is only expected to be better while that of the US remains shaky makes China more likely than not to overtake the US in the next few years. Important Indicators for China’s Growing Superiority For the last thirty years, China has reported impressive economic growth3. The country has in fact been the fastest growing economy in that period of time. Economists have put the economic growth of China to be 17 times what it was in 1980. An interesting fact is that China was ra pidly growing while most of the rest of the world was not doing that well financially. About ten years ago, the United States’ economy was 10 times bigger than that of China. Today, China’s economic superiority cannot be refuted and its place as a world economic power was sealed after overtaking world’s number two spot from Japan. After a long time of what seemed to have been economic slumber, China finally woke up to its potential in the eighties. Other countries including the United States started to adopt and implement neo-modern policy changes. This included opening up to unrestricted capital flows and external trade. The countries also developed policies that enabled their central banks to be increasingly independent. They also adopted tighter cyclical monetary and fiscal policies and abandoned many of the development strategies that had previously been highly successful. China on the other hand, did not adopt these policies, many of which were promoted by world financial bodies such as the IMF, World Trade Organization and the World Bank whose decisions were heavily influenced by decision makers and economic planners based in Washington. China was not a member of the WTO up until 2002. Although China’s economic acceleration involved the expansion of foreign investment and trade, its financial decisions and management were carried differently from the rest of the world4. The most outstanding difference was that China’s economy was largely controlled by the state, unlike in the US where it was liberalized. State control was meant to ensure that trade and investment decisions were in line with the development goals of the government. One of these goals was to develop and make products intended for the external or international market. China’s policies also promoted the use of enhanced technology. The aim was to transfer high level technological competence from foreign investors to the local economy. The government w as also keen on hiring Chinese for jobs at the managerial and technical levels. This meant that foreign enterprises could not compete at the same level with many domestic businesses. The economy of China is still largely controlled by the government. The state controls a huge percentage of the exchange rate and other financial systems. A substantial amount of industrial assets are also under the control of the government. When other countries were struggling under the pressure of the recent worldwide recession, China’s economy was not affected. The state-led economic system can be and should be credited for this. The country enjoyed an enviable 9.8% GDP growth though this was a fall of 3.7% mainly due to the poor performance of the international mar