Question 1 (a)
The year 1990 was the beginning of China’s growth in terms of Gross capital formation. China was constantly lacking behind in terms of gross capital formation in decades earlier than 1990 but in 1990 and onwards, China was able to take the lead from US and Japan with capital formation of more than $3T.
The rapid boom in export from the year 2002 brough significant changes in China’s export. Such a boom not only helped China to establish a strong export base but also helped China in taking the lead from United States. In the year 2010, it was indicated that China become the largest exporter in the world with exports accounting $1.6 trillion. On the other hand, it was also indicated that United States was able to enhance its exports in the year 2010 as compared to year 2009 where US witnessed decline in exports by $0.2 trillion.
United remained the world’s largest manufacturer of goods. US was consistently leading the manufacturing industry all around the world with manufacturing worth $1,500 billion. Meanwhile, China constantly lacked behind in the manufacturing industry but with the rapid boom in manufacturing industry in the year 2005 and onwards, China was able to take the lead in the year 2008. In the year 2009, it has been indicated that China was able to enhance its manufacturing to $2,000 billion whereas; US maintained its manufacturing at $1,500 billion.
Question 1 (b)
The GDP growth per year is forecasted to decline at a steady rate. The labor growth rate is also quite depressing for China as the labor growth is expected to decline to -0.4 in the forthcoming decade. On the other hand, the labor productivity as shown on the table would decline from 8.9 percent to 5.5. This means that due to negative changes in the China’s labor growth and labor productivity, the overall GDP growth would diminish with the passage of time.
The structural changes that are projected to take place in the forthcoming decade includes investment ratio and consumption ratio. It has been forecasted that China’s investment would significantly decline from ‘49’ in the year 1995-2010 to ‘34’ in 2026-2030. This eventually indicates that foreign countries would tend to seek other countries that are beneficial to invest rather than investing in China. On the other hand, it has also been indicated that the consumption rate would significantly enhance due to the rising population of the country. It has been predicted that the consumption rate would increase from ‘47’ to as high as ‘66’ in the forthcoming years which might prove to be negative aspect for the country.
Question 1 (c)
During the analysis of the size and composition of China’s public expenditure, it was indicated that the ‘Total Outlays’ of OECD’s high income, upper middle income and lower middle income countries was far ahead of China with score of 41.6, 33.1 and 36.1 respectively. Meanwhile, the Total Outlays of China was as low as 25.7. On the other hand, the evaluation of ‘General Public Services’ indicated China’s public expenditure to be around half of the OECD’s high income countries whereas; the upper middle income and lower middle income countries are also out of China’s reach in terms of public expenditure. The OECD’s expenditures for ‘Defense’ and ‘Public Order and Safety’ of the citizens were around 1.6 each. In this case, it was indicated that China was quite near the OECD’s higher income countries whereas; both upper middle and lower middle income countries were ahead of China in both the sectors.
‘Economic Affairs’ was one of the sectors in which China’s expenditure was quite higher than OECD’s higher income, upper middle income and lower countries. In this particular sector, China’s public expenditure was as high as 7.9 followed by lower middle, middle and higher income countries with estimated score of 6.1, 5.3 and 4.2 respectively. On the other hand, China’s expenditure in terms of ‘Environment Protection’ was the same as upper middle income countries i.e. 0.5 while the score of higher income countries was 0.7.
On the other hand, it was indicated that China’s public expenditure in ‘Health’, ‘Recreation, Culture and Religion’, ‘Education’ and ‘Social Protection’ was quite lower than all the OECD’s high income, middle and lower income countries whereas, China’s expenditure in terms of ‘Housing and Community’ was higher than high and upper middle income countries but the score of lower middle income countries was significantly higher than that of China’s public expenditure.
