China’s Journey to the West Case Study

China’s Journey to the West Case Study

Introduction

With the opening of its economy, China has pursued an export-led rapid economic growth development leading to benefits and challenges. The primary benefit was job creation, resulting in 215 million people entering the workforce in the first decade alone due to the labour-intensive nature of producing exports. Tens of millions of workers have still added annually due to changing demographics. By becoming an export powerhouse, China was able to achieve recognition on the global market and generally become competitive via technology and production practices. Finally, by being a primary exporter and maintaining a trade deficit, China had accumulated foreign currency and capital account surpluses creating significant national reserves reaching $3.66 trillion by 2013 (Chutikamoltham et al. 2).

The primary negative effect was a low level of domestic consumption, driven largely due to low real wages and slow growth of nominal wages, particularly in the manufacturing sector, to make production cheaper in the country. China also maintained an artificially low value for its RBM currency as the undervalued currency benefited the export competitiveness. However, with importers paying with foreign currencies, RBM was overflowing the domestic economy, decreasing household purchasing power due to inflation. The currency manipulation by China alongside its overall rise in the international market and political arena has caused significant tension in international relations, particularly with China’s expansion policies.

Finally, there were a range of social and environmental repercussions, with uneven national development and increased wealth gaps, as well as mass migration from rural communities to urban centers since it was the only means of survival. In turn, the exponential growth of urban cities alongside uncontrolled manufacturing growth has caused high levels of environmental destruction and pollution in many areas, also affecting public health (Chutikamoltham et al. 3).

China’s goals under the 12th Five-year Plan were focused on sustainability of its economic growth and greater distribution of wealth. This included to reduce the annual GDP growth rate to 7%. In turn, sustainability of economic growth could address aspects of pollution, energy use, and resource depletion. Another goal focused on inclusive growth to counter wealth disparity, with another objective aimed at developing specific industries and underperforming regions.

Specific plans focused on development of Western regions of the country and increasing urbanization levels by 4% to 51.5%. A wide variety of social program plans were laid out to improve welfare of citizens with affordable housing, social security, healthcare, and education with aims of increasing life expectancy by 1 year. Economic related plans focused on 7 priority industries which also met the sustainability and innovation goals for China in increasing the value-chain proposition. Other economic initiatives include transitioning the domestic economy from export-focused to consumption-driven and capping inflation rates at 4% (Chutikamoltham et al. 4).

The Xi Yong Industrial Park was constructed in Western China with the aid of the municipal government and other government-owned investment companies. The industrial park has strategic geographic location which provides easy access to various means of transportation by being in nearby vicinity of transportation hubs. Therefore, products manufactured in the industrial park can be easily distributed worldwide with well-established logistics channels. Xi Yong was also the beneficiary of the Development of West Regions Policy, so the municipality has the ability to develop and regulate its own tax, finance, and investment policies.

This has attracted massive domestic and foreign investment of 38.6 billion RBM and $3.6 billion, as well as major international technology firms due to favorable tax rates of 15%. The companies establishing themselves in the industrial park are able to grow and expand, establishing multiple facilities at times and vertical integration in the region or country for its whole manufacturing process. Finally, the establishment of the industrial park has provided a significant boost in employment regionally, including high-education level positions which attracts graduates. In turn, the quality of life and wages have risen locally without impacting costs of living, overall providing multiple socioeconomic benefits for the city of Chongqing (Chutikamoltham et al. 5-6).

Work Cited

Chutikamoltham, Sinwan et al. China’s Journey to the West: Xi Yong Micro Electronics Industrial Park, Chongqing. 2014, The Asian Business Case Centre, Nanyange Business School.

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