China's Economic Growth - Essay Sample

Introduction

The adoption of the reforms in 1978, gave the nation a new phase in the domestic market and the global growth with over USD 214 billion in the gross domestic production (GDP). Thirty-five years later, the nation has gradually grown its gross domestic output with up to USD 9.2trillion (Li, & Xu, 2015). Through this, it is clear that the gradual economic growth has tremendously grown making China the leading producer in Asia, due to its strategic planning. However, despite the growing and demanding economy, the nation has been faced with a series of financial challenges, that has forced the country to restructure and refine its policies to save the economy.

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Even though the Chinese economy may be regarded as the second productive economy globally, over the years, there has been a tremendous decline in the production and general drop down in the performance of the market. The economy greatly depends on the foreign investors, who contribute to more than 53% of the industrial growth in the nation. Through this, the foreigners have created and established companies that constitute the overall financial returns in the country. Companies invested in technology sectors have been the primary dependent assets that have constituted to the growth of the economy, due to the increasing demand for new technological products. As a result, this has created job employment to the Chinese market in both domestic and abroad, increasing the Chinese GDP.

Internet Finance

In many developed nations in the western world, the conventional banking industry has played a critical role in establishing the economic foundation of many organization. In this case, the role of the banking industry in any economy plays a vital role. Chunhong, & Xie, (2015) points out, the banking industry has evolved from soft loans lending within the nation to international investments, where a country is given a grace period to generate and start repaying their debt. In this case, it becomes easier for businesses with lower capital and excellent financial records to benefit from these opportunities.

In early strategical development established by the Chinese government in 1978, gave the banking industry opportunity to help shape and grow the development of the nation. With the higher growth in the industry, internet finance has become a competitive sector in the conventional banking industry, as new technology gets invented and updated frequently. Internet finance in China has been on the horizon, since 2007, with more credible and security measures being the goal of the department. On the other hand, the conventional banking sector has remained to target more prominent clients from bigger organization for loans and other banking services. Through this, the traditional banking sector is gradually losing its small-scale customers who in this case, have dramatically grown to compete within and at the international level, a step that has allowed the internet finance to seize the opportunity.

The flexibility of internet finance, which involves quicker lending and borrowing terms, easy accessibility to wider pool of funds, and well as reduced proceeding requests is one of the threatening sectors to the conventional banking in China. Since 2011, there has a dramatic decline in the growth of the traditional banking industry, which affects the overall growth of the sectors within the nation. Even though the Chinese government is significantly focusing in mitigating the internet finance to help revive the conventional banking in the country to help improve the financial growth within the nation, internet banking is still promising to grow by 5% by the year2020 (EY, 2017).

As Li, & Xu, (2015) points out, many organizations in the nation have declined in production, and services sector, due to lack of proper funding to ensure that the businesses within the nation are flourishing. As a result, this has gradually reduced the overall production in the Chinese market, despite the struggling steps undertaken by the government to ensure that the ever-growing market is supplied with the required quotation of products. Even though the local and small-scale firms within the nation, are now on the horizon, due to the improved interment financial lending, the government is gradually losing a huge amount of revenue due to the decline in the large-scale production sector. Never the less, this has forced conventional banking in China, to adopt new strategies to attract more small-scale customers in the industry, which aims at restoring their financial growth and returns.

Countermeasures

As a way of mitigating the falling market and financial problem in the Chinese market, the government should take stunning measures, regarding the ownership of the organizations within the nation. As Chunhong, & Xie, (2015) points out that, foreign investors have been on disadvantaged over the past decades, with the Chinese government establishing and imposing rules and regulations that highly oppressed the foreigners within the market. In this case, the government should revise the ownership and partnership rules to give the foreign investors 51% shares to control in their business, then the domestic investors to occupy the remaining percentage (EY, 2017). In this case, foreigners will develop the notion of establishing their businesses within the nation, rather than relocating to other favorable markets, since they have control of the company.

On the other hand, the government should focus on the conventional banking sector and its role in the financial growth of the business. As a result, the government should take the initiative of regulating internet finance to promote traditional banking, which is used to grow business at a larger scale within the nation.

References

Chunhong, S., & Xie, E. (2015). Fiscal Mobility, Public Transfers and Its Efficiency on Alleviating Poverty: Analysis Based on Micro-data of Rural China. Journal of Financial Research, (4), 3.

EY. (2017). Latest China regulatory updates - China further opens up financial sector (VI). Retrieved from https://www.ey.com/cn/en/industries/financial-services/ey-pov-china-further-opens-up-financial-sector-vi

Li, C., & Xu, J. (2015). Tax Structure, Tax Price and Demand for Redistribution: An Empirical Study Based on Chinese Data. Finance & Trade Economics, 36(11), 27-39.