Critical assessment about china´s new growth plan

INTERNATIONAL FASHION ACADEMY

“critical assessment about CHINA´S new growth plan”
(The challenges to diversify its economy and develop national consumption)

By Estefanie Ramírez Contreras

August 2011

Shanghai, China.

EXECUTIVE SUMMARY

The essay provides a critical assessment about China´s new growth plan, focused on diversifying its economy and developing national consumption.Its background is analyzed, as well as the main actions and challenges that the implementation of the plan involves and their possible effects in the future.

INTRODUCTION

China’s became world´s second-largest economy in short time, without doubt one of the performance with more impact in our time. Although the economy is still having an impressive growth, China is facing enormouseconomic and social challenges. Overcoming those challenges will be critical to continued economic growth.

During the last three decades, China´s growth has been focused in foreign investment attraction and in an excessive dependence in exports. This model is now creating imbalances in the nation's economic structure and in international and domestic demands, as well as weakening domestic demand,one of the most important factors for sustainable development in the China´s economy.

After the global crisis of recent years, Chinese government realized that this growth model is leaving China vulnerable to potential downturns in the U.S. and Europe while is causing trade tensions with their trade partners.

This year’s meetings of China’s National People’s Congress rolled out the 12thfive-year plan. This plan suggests in words of Premier Wen Jiabao: "To adjust the balance between investment and consumption".

MAIN ARGUMENT

In order to reach a sustainable growing, China must follow a development model based essentially in rising domestic consumption, greener economy and the development of a balanced public services network. But achieving these goals, mean facingchallenges that are going to be analyzed on detail.

The change of the China´s growth model has to be done slowly, this is important not just for the country, it is also important for world´s economical health. .

The domestic consumption would help to bridge the immense gap between the people who turned quickly rich and the millions of people who live in extreme poverty. The new modelwould also reduce the huge Chinese trade surplus, this might give the China´s trade partners a breathing space to reduce its own deficit, and rebalance the out of kilter financial flows which have deepened the impact of the bubble bursting three years ago.

INDEX

The essay is organized as follows:

Pp. 4----------Provides a brief overview of the past 30 years.
Pp 5-----------Analyzes the“Economic Miracle”
Pp.6-8--------Examines the effects of the Global Economic Crisis and why China needs to change its growth model?
Pp.8-13------Summarizes key components of China´s new growth plan, analyzes the importance of each goal and main actions to be taken.
Pp.13---------Conclusions of the essay.
Pp 14---------References



In 30 years of the Maoist strategy of the centrallyplanned economy, China did not produce an efficient economic growth. After had been historically a glorious Empire, China was far behind of the industrialized economies of the West and new industrial powers of Asia.

After Mao´s death and the established of the new government leaded by Deng Xiaoping, the economic reform was unavoidable. The purpose of the reform program was not to abandoncommunism but to make it work better, increasing the role of market mechanisms in the system and by reducing government planning and direct control.

One of the main objectives were to expand exports, overcome key deficiencies in transportation, communications, coal, iron, steel, building materials, and electric power. Key factor was to redress the imbalance between light and heavy industry....