Why China or Chinese economy is the fastest growing economy

Chinese economy is the fastest growing economy among all the developing economy. It is the biggest exporter of goods and services to the richest economy of the world i.e. united states of America. The Chinese economy is said to be the next most powerful economy of the world. Foreign direct investment of China is highest among all the developing country. Her export is greater than import. Chinese mobile, Chinese toys, computers, and many electronic items is the center of attraction in every market. “CHEAP AND BEST” CHINA IS THE BEST.

For a country to be powerful, she should have better technology, better resources, war equipments, skilled laborer, less corruption and many other things. These things are not only with china but also with India which has huge natural resources, huge number of professionals, India is the biggest buyer of arms and ammunition amongst all the developing countries, but even then why is India lagging behind and why china is ahead of every developing country? What makes china a more powerful economy?

Here are some of the basic reasons for china to be the most fastest growing economy: – (these reasons are not copied but based on extreme research or say a logical outcome of my psychological approach)

1) SPECIAL ECONOMIC ZONE [SEZs]

A certain specified area is especially reserved for industries to undertake the production of goods and services. Those who set up the industry in these areas are given some tax benefit or electricity at lower cost and many other things which encourages industrialization. That is called SEZs. The concept of special economic zone was first introduced by china. It was the Chinese who initiated this program.

In India there are more than three thousand SEZs but even then industrialization process is slow and weak. But china have only total of four special economic zones. But even then Chinese industrialization is fastest amongst all the developing country. There is a reason for the success of Chinese SEZs. In case of china all those industries whose plants are located in the SEZs are not allowed to take help from the industries of their home country. For example – if an American industries plant are located in any of the Chinese SEZs and they need electricity, raw- materials, labour, is all provided by Chinese industries. And thus those small industries which provide help to foreign or Chinese industries themselves benefit. This increases the revenue of the Chinese industries which provides subsidiary help. Moreover industries located at SEZs are asked to employ maximum worker belonging to china.[In case of India all these things are given the blind eye]

2) STOCK EXCHANGE

The Beijing and the shanghai stock exchange is world famous stock exchange. FDI investment through these stock exchanges is highest among all the developing country. Notable point in case of Chinese stock exchange is that all the money which is invested at the Chinese stock exchange is not allowed to flow outside the country. In other words money generated through these stock exchanges is not allowed to invest outside of china. In case of India, foreigners and domestic investors who make money at Bombay stock exchange and national stock exchange, use the money generated through BSE and NSE to invest outside India. This is not with china and this saves Chinese capital by huge margin.

3) CASINOS

As per the Chinese law, the people of china are not allowed to play at casino. It was found in research that every year people lose their handsome amount, million and billions of dollars in casino. If this money is used for some productive purpose, it can be fruitful to economy. So keeping these things in mind Chinese government has declared gambling at casino as illegal, if played by Chinese. Most of the casinos in china are owned by Chinese and foreigners are allowed to play. There is no restriction over gambling in casinos to foreigners. Every year foreigners come and play thereby win and lose their handsome money. Thus money worth of million and billions of dollars is lost by foreigners and not Chinese. And thus Chinese money remains in china and foreigners lose money, canny china J

4) TIWAN POLITICS

It is the aspiration of most of economies to have some market of their own. This leads to colonization. Before the World War 2 colonization was very much common. India itself was a colony of Britain or say market. In the same manner china too wanted to have some colony to sell her goods and use the same for the upliftment of their economy. So china attacked over TIWAN and brought it under their control and declared it be their colony. This angered the United States of America. America could not bear this. They did not like Chinese control over Taiwan, how come china, whose people are hungry and dying from malaria, can have a colony? America ordered china for the evacuation of Taiwan. If denied china will have to meet US on the battlefield. Time was not in favor of china; they accepted this order and evacuated Taiwan. But after some years china began sending labour, raw materials, and money to Taiwan on the ground of upliftment of Taiwan economy. China said that it is the responsibility of china to bring back Taiwan economy on the path of growth as they have devastated their economy by war. She invited American industry to set up their plant at Taiwan where maximum aid will be given by Chinese government. Taiwan government need not worry about plant establishment expenses. All expenses will be met by china. America accepted this step of china and praised china for their contribution towards the upliftment of Taiwan economy. Everything was well planned. China again attacked over Taiwan, Sent their troops, helicopter, and fighter planes in Taiwan. This time America again ordered for the evacuation of Taiwan. But canny china declined this order. And said to America now if you attack not only ours military will be killed but your dear industry will be ruined in Taiwan. At present more than hundreds of American industries are operating in Taiwan. American industry forced American government to take back their order as this would have lead to huge losses to America itself because maximum industries located at Taiwan is American brand. Now china charges corporate tax and supply raw material for these industries located at Taiwan and thus their industries which supplies raw materials to American industry at Taiwan is also growing. If you search on Google the country with letter ‘c’ you will find the names of all country with letter ‘c’ and Taiwan under china.

5) TIANANMEN SQUARE MASSACRE :1989

An unforgettable and unbelievable massacre of 1989 is like a black spot on the international peace. A heavy blow to democratic protest. With the globalization, competition between the industries grew by leaps and bounds. Chinese education rate was picking up at a fast rate. A Number of graduates and PHDs or say intellectuals were rising in china. Graduates and PHDs and PG students began realizing that Chinese economy needs more liberalization i.e. less restriction by government over private and foreign industries. They demanded reform at stock exchange market and many other sectors of economy. And so in order to get their demand fulfilled, students from different university and colleges designed the democratic protest and lakhs of student gathered at TIANANMEN SQUARE. Chinese government asked their students to go back to their colleges. These things cannot be dealt by chewing-gum eating boys and girls. These are the work of government. Student and government are two different concepts. Student comprises of inexperienced groups while government comprise of seniors and experienced. Reform and different sector problems will be looked by government. Government gave them ultimatum to vacate and shun down protest but students gave a deaf ear to the order. And when the water was over the neck, the Chinese government sent troops with tanks and helicopter and ordered for the shoot. More than ten thousand students were killed on the spot. Government banned the coverage of killing by domestic and international media.

If government would have bowed down to demands of student’s then today multinational companies and other economies would have controlled the growth rate of economy. In case of India and many other countries MNCs invest money at their terms and condition but in case of china MNCs come and invest money at the terms and conditions laid down by the Chinese government.

A long run effect of massacre of 1989 proved beneficial for the growth of Chinese economy. And china today talks of human right. Development at the cost of life of thousands of students killed at Tiananmen Square. Though some, (including me) may think this barbaric, but still strategically, development and maintaining their own command was the motive behind the China massacre.

Written by,

ADEEB AHSAN.

MBA-IIPM DELHI

This article has been contributed by Mr Adeeb Ahsan who is studying MBA at IIPM and is a guest author at Marketing91.com.