China in the World Economy

Abstract

Abstract. After several decades of widely admired success in raising its gross national product (GNP) and becoming the world’s second largest economy behind the United States, doubts have recently emerged about the sustainability of China’s impressive economic success unless it undertakes major reforms and changes its growth model. Opinions vary, however, about China ever attaining the same level of growth that had been achieved in past decades, particularly since the 1978-79 reforms. Sometimes, expressing the present realities and forecasting the future is affected by the measures used, the observer’s expectations, and perceptions of what can or cannot be done to deal with current issues and problems. Often, it is a matter of perceiving the glass as half full or half empty. For some observers, the growth model, adopted since 1978-79, has been extremely successful in gaining the objectives sought, To others, that model resulted in many unintended consequences such as a wide disparity in incomes and excessive emphasis and reliance on manufacturing and exports at the expense of the service sector and domestic consumption. What cannot be disputed, nevertheless, is the fact that millions of Chinese have been lifted out of poverty, and incomes per capita have substantially increased. Instead of depending on foreign assistance, China is now an aid- giver and a major player in world economic affairs. This paper examines the current economic status of China, its transition from one of the poorest countries in the world, to become a middle income country despite the fact that it has a huge population of 1.3 billion people, and the imbalances that have emerged and have to be corrected to ensure sustained economic growth. Keywords. State-owned enterprises (SOEs), Balance of trade, Asian Infrastructure Investment Bank (AIIB), Renminbi (RMB), Special Drawing Rights (SDRs), WTO. JEL. F10, F40, J51, P33.