THE ECONOMIC DEVELOPMENT OF THE NEXT GLOBAL SUPERPOWER

China is currently the world’s second largest economy. This article explores the timeline of major Chinese economic policy and the prime effects they have had in boosting economic growth by record levels.

Mao Era (1943-1976):

From post-World War II to 1976, Mao Zedong was the Communist leader of China. During his time in office millions of Chinese people died because of failed economic plans like the Great Leap Forward Why was this?

Up until 1978, 80% of China’s population lived rurally and the Chinese government operated a command economy. This meant that the government had complete control over the prices of goods and services produced by Chinese workers Furthermore, land owned by farmers were seized and controlled by the state known as the People’s Commune. The People’s Commune was detrimental to China from the 1950s to 1960s because many resources produced by workers were misallocated and basic necessities were seized by the government

This had created widespread famine by 1959 causing 15 to 55 million Chinese people to die in just several years. Another widespread famine was predicted to occur in the 1970s because of how deficient productivity and resources were. This was a huge problem coupled by the fact that in 1981, 88% of China’s population were in poverty.

The GDP in China at this time was only 150 billion dollars, 6% of America’s GDP When Mao passed away in 1976, Deng Xiaoping became the leader of China founding the new one-party state. His party was determined to succeed where Mao had failed, developing China’s economy into prosperity.

By studying the economic growth of Singapore under Lee Kuan Yew. Deng was equipped to release his party’s economic reforms which paved the way for China to become the second largest economy in the world.

Deng Era (1978-1987)

In 1978, the Chinese government led under Deng Xiaoping launched major economic reforms The first main reform was in agriculture. The largest sector by far in China’s economy was agriculture with only 20% of Chinese people living in urban areas. For thousands of years, agriculture was the life and blood of China’s economy, but Deng’s reforms would turn China’s economy on its head

Decollectivisation and Privatisation

The government halted the failed system of the People’s Commune allowing peasant farmers to have much more control over their land and yield as long as workers provided a small amount of yield to the government. This act of privatisation is known as the Household-Responsibility-System. Between 1975 and 1985, the agriculture sector had increased by 25%, a rousing success that led to the privatisation of many other sectors in the Chinese economy

Open Door Policy

Pioneered by America in the late 19th century. Deng adapted the policy to suit the Chinese economy in December 1978. The purpose was to allow for foreign business globally to set up branches in China allowing for strong investment In 1980, four Special Economic Zones (SEZs) were set up: Shenzhen, Zhuhai, Shantou, and Xiamen. These were the four prime zones for foreign companies to set up in China and all of them were located near the coast of the South China Sea allowing for easy accessibility. Further incentives included extremely cheap labour, efficient land use and a reduction in corporate and income tax.

This was the turning point for China allowing for massive economic development and urbanisation. The scheme was so successful that for 12 years, Shenzhen had an annual growth of 9.8% meaning that the economy doubled every eight years or so. These incentives meant that companies would choose to set up new branches in China opposed to other nations creating rapid industrialisation and increased profits.

The following graph shows the primary consequences to urbanisation following on from the implementation of SEZs There were ever increasing incentives for workers to urbanise.

Overall, China had transitioned from a command market into becoming a mixed market Prices of goods were determined by the behaviour of the market and bottom-up approaches triumphed in making China from the 32nd exporter in 1980 to becoming 13th in 1989 doubling its global trade to becoming the largest exporter in the world now (twice the volume exported than America).

Technology and Sustainability (2000-2022)

China now focuses on transforming their economic development model. This has primarily slowed down growth compared to the late 20th century.

From previous strategies of providing exceptionally cheap labour and high productivity, the nation now focuses on greener technology and innovating new, cutting-edge products Since 2009, the average wage of a Chinese worker has gone from 26600 yuan to 72000 yuan in 2018 (11000 dollars). Despite the increases of wages, the country aims to bring most of its population out of the working class. In order to do so, China has been focussing on developing the finest technology and capital that act as a substitute for workers leading to a decrease in labour demanded by firms Over the last decade or two, China has been focussing on innovation. But how has this been put into practice?

China had created Economic and Special Technology Zones (ESTZs) primarily focussed on encouraging foreign tech industries to produce and invest in China allowing for more exports for China’s economy. China is renowned for creating many important components of American products like the iPhone In fact, most phones are produced in China making the country the dominating smartphone market In an age of technology, China is without a doubt the driving force of high tech.

Being at the forefront of education and technology, China is dedicated to producing and revolutionising greener technology especially when compared to the US Air pollution is a serious health problem in China and the transition from diesel and petrol cars to electric cars is accelerating.

Chinese electric car brand BYD sought to release a premium brand called Yangwang by 2023 We very well could see BYD taking the car market by storm similar to Tesla.

The economic development of China has been unprecedented and simply ground-breaking It is highly likely that China will become the global superpower in the late 21st and 22nd century The development from a socialist regime post WW2 to becoming a free market 1978 onwards has seen investment skyrocket creating surges in quantity of labour demanded and consumption which is why China has seen exceptional growth in GDP (national output). Whether we like it or not, China will become the leading country in the globe producing highly educated citizens and a site of innovation for Western firms

Recently, the frequency, severity and unpredictability of severe weather events have been increasing because of climate change. Given the increased frequency and magnitude, the costs of extreme weather could double this decade, providing the world with additional costs that they would rather not have Though at the same time, climate change could provide an economic opportunity and initiate the greatest transformation in our economy since the industrial revolution.

Since the 1880s, the combined land and ocean temperature has increased at an average rate of 0.07 °C per decade. And, since the 1980s, this rate has doubled causing the eruption in global temperatures and the frequent melting of polar ice caps contributing to a rise in sea level. Following these higher temperatures, a warmer sea fuels storms, increasing the potential for tropical cyclones to develop As warming also leads to more evaporation, heavy rainfalls and snowfalls become more frequent, making floods and cyclones more severe.

In its Fifth Assessment Report published in 2014, the Intergovernmental Panel on Climate Change (IPCC) reported that risks associated with extreme events will continue to increase as the global mean temperature rises.

Hence, it’s not just the two phenomena: rising sea levels and warming average temperatures that are the most important for assessing the economic costs of climate change. But what’s wreaking havoc on our economies is associated with the increasing frequency and intensity of extreme weather events, for instance, the floods in Germany, India, and China in July 2021 Or the severe wildfires in Southern Europe during August Collectively, a storm is rising on world economies, and will not stop till it has rained over each one.

It is difficult to assess the economic impact of weather-related disasters due to the lack of data availability and the issues with measurements due to their unpredictable and volatile nature. Therefore, to quantify the economic loss from significant weather events like cyclones and floods, it is important to focus on direct economic loss, for example, damage to infrastructure and production losses when there is a disruption to economic activity. Hence, disregarding indirect damage from water stress, migration and famine.

The destructive power of known weather events has increased since the 1980s, and the severity of economic loss can depend on the level of economic wealth There is an increasing trend with natural disaster damage, and countries which are heavily impacted by high seasonal rates of precipitation are those that have a greater percentage of GDP E G China and India Hence, GDP is used as a proxy as income and wealth are typically correlated with one another. The change In GDP between the 1980’s start of the 2000s depicts different average losses, with a higher average loss in the second decade of the 2000s. This signifies that climate change is harming the economy as much as it harms the environment.

The damage resulting from extreme weather events can occur during or after the hazard. The economic damage, in turn, can cause indirect economic loss – a reduction in the flow of economic activity after the event The losses can include a micro-level reduction in activity for example a decline in a firm’s revenue owing to business interruption or individuals’ loss of income. Or a mesoeconomic impact. This could be the interruption to transport networks or blockages in the flow of inputs through supply chains. And there are macroeconomic impacts including price and exchange rate changes, an increase in government debt and negative effects on stock markets and declines in GDP.

Assessing the damages caused by Hurricane

Harvey, based on estimations taken by the Centre for Research on the Epidemiology of Disasters in Belgium concluded a $95 billion total cost, second largest in US history. There was damage to infrastructure as well as commercial property along the gulf Small and medium-sized enterprises (SMEs) were inevitably damaged because of indirect losses.

There was a serious loss in productivity from weather events like Hurricane Harvey including many workers being unable to report to their jobs – creating significant declines in revenue for the duration of the inclement weather. For example, consumer activity is also rare during extreme weather events, leading to massive losses in sales and revenue. As a high-income country, the recovery period that followed took place two years after the hurricane occurred, which is in contrast to lower-income countries, where the recovery process spans over a long period, as the government are unable to support and assist due to a lack of capital.

Most recently, the weather is becoming the most uncertain determinant of demand. As winter is starting to make itself felt, as Germany's first snows arrive, natural gas is also taking a hit. Historically, the demand for gas has always been correlated to the temperature: the colder it gets, the more gas is needed. But climate change is making things more complicated. Temperatures are even colder and fluctuate differently than expected Moreover, home-heating systems have been left unused for longer than usual. And blankets are being sold more as people are willing to wrap up . Now, the gas crisis is not only just an environmental problem but a political one It is becoming more evident that renewable energy is more of a factor in heating up the homes of thousands of people. Indeed, hydropower has been an issue for Europe as a hot summer led to reservoirs being dried up. But our world’s investment into cleaner energy other than improvements and new solutions in ways to store electricity or whether batteries, hydrogen or other techniques, could in the future smooth out such variability.

The current climate issue we face is first an economic one Economists typically underestimate the cost of climate change and are therefore likely to underestimate its urgency and the urgency required for costeffecting mitigation policies. Climate change impacts different people And a low-income uninsured family has a higher risk compared to a family with a higher income Well, this is the case in the US. But, can be applied everywhere else, and is typically more prevalent in low-income countries

Politicians and leaders of major countries are now realising that new strategies are needed, and billions of dollars need to be spent to find carbon scrubbing and ocean seeding to remove carbon dioxide from the atmosphere, or solar radiation to reduce warming The unpredictability of our weather patterns has come from the global fossil fuel industry treating the atmosphere as a free sewer for emissions from their products. Therefore, now our global goals are to improve the environment and there is a demand for a return to a safe climate

Climate change also opens up a wide array of jobs and services to new industries which can pave the way to higher rates of future employability generating an increase in GDP for many nations, especially those that are low or middle-income, underdeveloped or developing nations. But the challenges that face our economy with climate change and the natural disasters that follow will cause more damage faster than a rate that will rebuild our economy.

Therefore, for now, climate change is controlling our weather patterns and dictating our storms, hurricanes, floods and droughts the correlation between that and our economy is a strongly positive one, and now it continues to control our current economic decisions and major economic funding for which we hope will be the for the short term