Chinese Economic Development and New Growth Engine

China used to be a communist society with a poor, planned, centrally controlled, and inefficient market economy, isolated from the global market. However, the situation changed about four decades ago when China began the process of trade liberalization and created new economic reforms that boosted its economy. Since that time, the country became a socialist market economy, relying mostly on exports. Its fast economic growth made the state one of largest economy in the world, manufacturers, traders, and foreign holders. Nowadays, China is an associate of the World Trade Organization (WTO), and it participates in foreign trade and capital expenditure. Nevertheless, many of the Chinese commercial activities are still regulated by the government or the Party. Despite China’s quick development, the state can no longer rely on exports and should shift its focus to consumption if it wants to continue to grow.

Why Can China no Longer Continue to Grow Along the Past Track of Relying on Exports?

During the last several decades, Chinese gross domestic product (GDP) had been growing significantly, enabling China to raise millions of its citizens out of poverty. According to Jiang (2017), the state’s gross exports had reached “to 2.21 trillions of dollars, and ranking first of the world” (p. 64). Such a situation seems quite positive and makes many people believe that China may continue to grow in the future, using the same strategies. However, relying on exports is not enough today because of the long-term consequences of such a track. Thus, labor costs are rising, manufactures are polluting the environment, and natural resources are being depleted too fast, which means that the country’s sustainable development will suffer if it does not change its tactics.

With a huge amount of exported goods, China has a great influence on its trade partners. In 2014, China reported “12.3% of global exports,” 95% of which were manufactured products (Marukawa, 2017, p. 35). Such a situation negatively affected developing countries that had manufacturing industries. For example, in South Africa, the decrease in manufacturing employment occurred due to China’s fast export development (Marukawa, 2017). Brazil, Indonesia, and other countries suffered from China’s export of industrial goods too (Marukawa, 2017). Evidently, many countries will not want to continue buying mass-produced products from China if they want to save their manufactures and develop their own economies. Thus, China cannot rely on exports only if it aims to grow in the future.

The harmful effect of exports on China’s economic growth can be explained by the relationships between production and export structure. For example, China produces goods, using high-tech industries mainly, which is fast and effective. However, the country’s export sectors “are still stuck in the processing trade which fixed China’s economic growth model” (Jiang, 2017, p. 72). China produces enormous amounts of goods, which leads to the exhaustion of natural resources and the increase of the product price. Such tactics do not attract foreign investors, promoting only cheap urban labor, environmental damages, and tax neglection. Therefore, China should change its economic path in order to avoid all these negative consequences and continue to grow.

What Should Be the Right New Growth Engine for China?

The right growth engine for China should be its focus on domestic consumption and finding the balance between the socialist political regime and a free market economy. The state should think more about the development of services, innovation, and “higher value-added manufacturing” (Song et al., 2017, p. 1). To achieve these goals, China should focus on its macroeconomic development and technological change. Over the past several years, China has already made some progress in rebalancing its economy towards “household consumption and away from fixed capital investment” (Song et al., 2017, p. 3). The next step should be an investment in human capital and education. China should fund more in its potential workers to increase their productivity and attract younger workers. The quality of education should also be improved if China wants to become a more productive and efficient society and economy. By investing in its people, China will be able to grow economically without relying on exports only.

Moreover, the country should integrate sustainability and cyclical use of resources to promote its economic development. Most developed countries have already transferred to sustainable economic development, thus saving natural resources and reducing energy consumption and prices. According to Zhou et al. (2020), structure “ecologicalization,” i.e. transfer from high-polluting and high-energy-consuming to low-polluting and low-energy-consuming industry, enhances sustainable development and “promotes economic growth” (p. 11). However, the researchers claim that China’s development of fossil energy technologies did not stimulate economic growth, and “industrial structural upgrading is not suitable for China’s current economy” (Zhou et al., 2020, p. 27). Thus, the state should search for some other ways to develop its economy and benefit its citizens in the nearest future.

One of the new growth engines for China is the Internet-based new payment system. With the development of the Internet and modern technologies, the processes of consumption and selling products became easier for both the manufacturers and customers. The Chinese government has introduced several policies aimed at innovation-driven development. These policies include “Made in China 2025,” “Internet Plus,” and “Mass Entrepreneurship and Innovation” (Nishimura, 2020, p. 304). The main purpose of these and other policies is to enable high-talented people to start businesses easily and stimulate Chinese students who study overseas to return back to China after graduation. The development of online payment services, such as Alipay and WeChatPay, made the transactions easier, safer, and more convenient, thus attracting more consumers and, consequently, stimulating economic growth (Nishimura, 2020). The new economy will focus on consumption, promoting higher consumer spending, and becoming the new growth engine for China.

Critical Assessment of How China Performed in 2012-Present: Discussion and Conclusion

Since 2012, many factors have influenced Chinese economic development. When Xi Jinping became a Chinese President, he dreamed to fight the corrupt political and economic systems and challenge the United States in all aspects. Xi launched the anti-corruption campaign and restored the Party’s control of Chinese society. He put the needs and interests of the Chinese economy ahead of the interests of common citizens, ruling the country with iron-fist repression and controlling Internet usage. Such a totalitarian approach influenced the Chinese economic development negatively, creating all conditions for people to emigrate.

Having analyzed Xi’s economic reforms and other governmental changes, one can conclude that his policies would have never led the country to new economic growth. Instead of spreading democracy and liberty, Xi advocated authoritarian regimes and broke up trade relationships with the United States. His administration increased Party control over the largest state-owned firms and complicated the development of small private businesses (Leutert, 2018). Evidently, such policies would not contribute to the Chinese economic growth and could even lead to strikes and protests of the citizens against totalitarian regimes and repressions.

In conclusion, despite all difficulties and problems the Chinese society has faced, it can still recover its economic growth, changing its direction from exports to the new economy. If the government creates favorable conditions for the expansion of local businesses, focuses on consumption and innovation, and invests in sustainable development, the economy of the state will rise again. If Chinese citizens have access to improved education and well-paid jobs in their country, they will not want to leave it, thus, the economy will prosper eventually.


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Leutert, W. (2018). Firm control: Governing the state-owned economy under Xi Jinping. China Perspectives, 2018(1-2), 27-36. Web.

Marukawa, T. (2017). The economic nexus between China and emerging economies. Journal of Contemporary East Asia Studies, 6(1), 29-41. Web.

Nishimura, Y. (2020). New normal and new economy: A new growth engine for China. International Journal of Economic Policy Studies, 14, 301-312. Web.

Song, L., Fang, C., & Johnston, L. (2017). China’s path towards new growth: Drivers of human capital, innovation and technological change. China’s New Sources of Economic Growth, 2, 1-19. Web.

Zhou, X., Song, M., & Cui, L. (2020). Driving force for China’s economic development under Industry 4.0 and circular economy: Technological innovation or structural change? Journal of Cleaner Production, 122680, 1-51. Web.

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