China's Economy: Production Output Performance Analysis (Term Paper Sample)

China’s Economy
Institution
Date
Introduction
We will study the China. China is a rapidly developing country with a very big population. Over the recent years in the influence of economic policies enacted between 2005 and 2014, it has experienced rapid changes in their economy. The real GDP, The GDP pa capita and growth rate of the real GDP give us the level of income averagely each member of the economy has. The average income will help us to gauge their standard of living and level of their economy. Unemployment is a greater indicator of the economic status of the country. It reveals the disparity between the rich and the poor. Unemployment also leads us to understand the causes of poor GDP of a country. Finally, we will study the inflation rates of the economy. Inflation is a sensitive issue when monetary policies are insufficient. We will, therefore, study the money supply and the strategies that have been employed by this country to stabilize its economy through controlling GDP growth rate, unemployment, and Inflation. The rate of increase in the real GDP of China is stable but gently coming down. Unemployment in China is very high, and the government is doing everything to control it. The inflation rates too are high based on the economy’s dependence on foreign currency. China is a strong economy but faced with critical issues that can disrupt their economic growth.
We will use the real GDP, Real GDP growth rate, and Real GDP per capita income. Real GDP is the inflation-adjusted measure of all goods and services produced that year by an economy. It differs from the nominal GDP because it can account for price level changes and gives a more accurate figure of the growth rate of an economy. The rate of change of the Real GDP which is adjusted for inflation and presented as a percentage is called Real GDP growth rate. The Growth rate shows the rate at which the economy’s real GDP is rising. The Real GDP pa capita helps economists to understand the average GDP per one person in the economy. It is the total real GDP divided by the population of the economy.
In evaluating the economic status and rise of an economy, we will also use Unemployment to measure the health status of the economy. Unemployment is measured as the rate of unemployed people to the total population. There are three main types of employment. First, we have the cyclical un unemployment. This happens when unemployment results from the cycles of the economy depression and boom. When there is an economic recession, unemployment that results from that is called cyclical unemployment. Secondly, there is frictional unemployment. This is unemployment created by the general turnover in the labor market. Normally, employee change companies they work for, the time between leaving their current employers and finding new employers, they are unemployed. This unemployment is called frictional. Finally, there is structural unemployment that results from a change of the structure of the economy. This includes skills becoming obsolete, or the economy stops to demand their skills.
We will finally use inflation to determine the economic growth of a country. The rise of the price of goods generally or across all goods is what is defined as inflation. It means that an economy’s currency is losing value. Inflation rate measured as a percentage shows the rate at which a country is losing the value of its currency.
Production Output Performance Analysis
GDP Rmb billion at current prices   

GDP per head Rmb

Real annual GDP growth rate (%)

2005

18,493.7

14,259

11.3

2006

21,765.7

16,602

12.7

2007

26,801.9

20,337

14.2

2008

31,675.2

23,912

9.6

2009

34,562.9

25,963

9.2

2010

40,890.3

30,567

10.6

2011

48,412.4

36,018

9.5

2012

53.412.3

39,544

7.7

2013

58,880.9

43,320

7.7

2014

63,613.9

46,629

7.3

2015

67,700.0


6.9

China’ real GDP is shown to grow annually. The currency is in Chinese Rmb. In 2005, the Chinese Rmb converted to $2785.80. The 2014 recorded GDP is Rmb63, 613.9 which is equivalent to $9582.50. Growth from $2785.80 to $9582.50 is substantial. The GDP per capita also shows a steady growth for the past ten years. The GDP per capita in 2004 was recorded as $2147.91. It grew steadily to $7023.97. Meaning averagely each person in China was making $7023 per year. China has a huge population that also has increased over those years. In 2004 China had 1.298 billion people as compared to the 1.369 billion people in 2014. During the decade, The population increased by about 71 million people. Before 2005, the growth rate of the GDP was recorded at lower than 10% but in 2005, the economic experts put into account growth of the services sector and realized that the economy was growing at over 10% (Chinability.com, 2016).
China was at its peak of growth in 2007 recording 14.2% growth. However, in 2008 they faced the economic recession. Previously they were trying to cool down an overheating economy. In the face of the recession, the government foresaw a dangerous situation whereby the school leavers could be more than the rate of employment opportunities in the job market. The government decided to pump 0.60 trillion dollars to the economy. They did so through fixed infrastructure development and human capital. This prevented a dramatic fall of the economy in 2008 and 2009. The economy fully recovered in 2010 recorded normal growth rate of 10%. Since 2010, however, the economic growth of China is dropping gently hitting 7.3% in 2014. The dropping economic growth rate is worrying the rest of the world because China is a major component of the world economy. Dumping of China products and steel is threatening the survival of many industries in other parts of the world like the UK. Even the investors in China are worried about a possible drop in demand in China. According to the economist (2015), the rate of China’s drop in growth rate threatens their economic stability and creates debts as time goes by.
China is doing all it can to improve the rate of growth of GDP per annum. They are encouraging consumption of local good to boost demand for the products and also employment. They are also controlling CPI carefully not to affect the GDP in the process. The country is changing the structure of the market to encourage free trade and private sectors. It is improving infrastructure, to facilitate for more growth economically (Focus Economics, 2016).
Labor Market Analysis
The unemployment rate in China stands at 4.1%. The tale below shows few changes in the unemployment rate of China.
According to the Economist (2015), China is performing wonderfully in the unemployment rates. They have managed to be stable since 2010 at 4.1%. The last time the percentage of unemployment went lower than it was in 2008. Otherwise, largely it has been between 4.0% and 4.3%. The Economist argues that the stability of unemployment rate at 4.1% is not a positive indicator of the economy. According to a working paper done for the National Bureau of Economic Research, Feng Shuaizhang conducted a research and alleged that the unemployment rate of China is more than twice the recorded rate. The research points to the several state-owned industries that were closed in the 1990s. According to the research, there was a 3.9% unemployment rate before the state-owned industry close down. Unemployment then shot up to about 12%. The research was conducted by the National Bureau of Statistics from household survey making the data more credible. The economist argues that the 4.1% of unemployment is not any better since the data is taken from the people who apply for unemployment benefits. The unemployment benefits are very meager, and so not very many people are motivated to apply for them.
According to Nadia (2015), China’s labor force accounts for 26% of the total labor population in the world. The Country's natural resources and capital resource are less than 10%. China underwent a transition to change from the center planned to market-oriented economy. The number of unemployed people outstrips the number of open positions. At the same time, many companies cannot find the talent they are looking for. According to Nadia fresh graduates make the bulk of people suffering from frictional unemployment. There are 3 million fresh graduates in the Urban China making 23% of the 13 million urban populations. There is a substantial lack of employment that results from lacking the skills needed in the job market. Most of their jobs are held by imported talents. Structural unemployment is, however, not as rampant as frictional unemployment. China employment rates have been in the past affected by cyclical unemployment. In 2008 and 2009, many people lost their jobs as a result of economic recession. When we compare both the GDP statistics and the unemployment rates, we can notice that up to until 2007, the economy performed very well reaching the peak of 14 % in 2007. These resulted in substantial decrease in Unemployment rates. Then in the wake of the economic recession in 2008 and 2009, the unemployment rate shot up to about 4.3%. The govern...