How China Became The World's Second Largest Economy ? | And The World Factory !

Today we see China as an economical superpower. You see this big cities, highways, airports and lifestyle. Yet it was not the same 40 years ago. China's journey from one of the poorest country to the 2nd largest economy in the world has been interesting. So today in this video we are going to see what china did to become the biggest manufacturing hub and also one of the biggest economy.
Let's start with history of economic growth.
In 1949 after the communist revolution, Chinese economy was badly hit by continuous civil wars. China was poorer than some of the African nations that time. Under the leadership of Mao Zedong china adopted Soviet economic model. Mao started a campaign called Great Leap Forward. Under this campaign Mao tried an industrial transformation of farming by communal system. But this campaign failed, and caused economic breakdown and death of tens of millions.When china opened its foreign trade and investment by implementing free-market reforms. All these reforms were made possible by Deng Xiaoping. Deng Xiaoping was known as the architect of modern China. Under his leadership china shifted its economic policies from socialist economy to capitalist economy. After 1979 the average GDP growth of china was 9.5% till 2018. China has lifted more than 700 million people out of poverty in last 40 years. China's share in global economy increased from 1.8% in 1978 to 18.4% in 2018.
1) Creating special economic zone (SEZ)
China's Special economic zones are intended to function as zones of rapid economic growth by using tax and business incentives. This was to attract foreign investment and technology.
The first four SEZ were created in 1980 in the south-eastern coastal China. Shenzhen, Zhuhai, Shantou and Xiamen are some of the first SEZ. In these areas, the local governments had permited to offer tax incentives to foreign investors and develop their own infrastructure without the approval of the central government. Business enterprises made most of their own investment, marketing and production decisions. These facilities attracted investors from the Western countries, Japan, Singapore and many more. As businesses grew more and more migrants came in these SEZ looking for a job. And rapid growth begun in china. SEZ contributed significantly to the national GDP, employment, exports, and to attracted foreign investment.
2) Infrastructure development.
Infrastructure development is the key factor in economic growth of any country. As china started to grow economically, the central as well as local government began to invest heavily in infrastructure projects. China’s infrastructure projects helped to make transportation efficient, fast for people as well as goods. This was an indirect help for economy to grow at much faster rate. From 1978 total highway length was nearly 12 million km now in 2018 it is 405 million km. So highway length increased 44 times in the last 40 years. Similarly railway length in 1978 was 50000 km to 130,000 km in 2018.
3) Educational reforms
Education plays an important part in development of any country. In 1978 China's total employed people were around 400 million yet in 2018 that number was 780 million. And as we know china is the largest population on earth. That means they don’t not have shortage of manpower, also their labour cost was very cheap. Yet in 21st century Companies do not need only labours, they need highly skilled manpower. Chinese government is continuously trying to fill the gap between what market demand and what is taught in the education system. This is done by introduction of internships for college graduates.
This is how china made its manufacturing empire and became the 2nd largest economy in the world.
But lately things are changing in china. Due to development of advanced robotics and automation, the labour job is now much easier and cost effective. So companies do not need huge amount of cheap skilled labour nowadays. So companies are preferring to move back to their country to save on the transportation cost. Also Chinese labour cost has increased in all these years and due to this china is no longer a low cost manufacturing hub. So those companies who still need a labour intensive manufacturing, they are shifting to different developing countries like Vietnam, Bangladesh or India for low labour cost.Also because of the economic growth China's global military power is big concern for west and the US. Similarly Trade war and the disputes in South china sea are making china’s economy more unsafe and unstable. So future of China's economy will be very different. Also china could lose big time to maintain its manufacturing segment and economic position in the future.

#chinamanufacturing #economy

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Видео How China Became The World's Second Largest Economy ? | And The World Factory ! канала Global Economics