The Recent Economic Growth in China, Essay Example

Introduction

The recent economic growth in China has put the country in the spotlight as a potential world economic leader. In 2010, China overtook Japan as the world second largest economy. By analyzing China economy for the past 30yeasr, it is clear that China economy changed from a centrally planned system that as not open to international trade to a more market oriented that is dominated by private sector. The growth that is witnessed in China has triggered many analysts to analyze what is happening. In fact many policy makers and leaders continues to debate of how and what is driving the rapid economic development in China. Looking at the economic history of China, the country started it reform by adopting a more open policy. In fact, Deng Xiaping the chief architect of China launched opened policy and economic reforms that would outline gradual society changes in 1978. This marked the emergency special economic zones. The Emergence of numerous special economic zones (SEZ) and industrial cluster after the country reform is with no doubt important engine of China after economic reform launched in 1978 contribute to the phenomenal economic growth in China. The paper studies how the Special Economic Zones and industrial clusters impact China’s economic development and make economic success. The first part of the paper will describe the development experience and historical background of China’s Special Economic Zones and industrial clusters. The second part of the paper evaluates the government preferential policies that has overall positive effects on foreign direct investment and encourage innovation capacity. Thirdly, the paper evaluate the performance of the Special Economic Zones and industrial clusters, these performance include GDP, tax revenue, employment, productivity, foreign trade and innovation.

Economic Theory

The study is based on some theoretical economic perspectives that measure the success of SEZ and economic clustering. First, the study wills discuss the theory of comparative advantage. Almost all part of inland China wants to develop their economy. However, they are faced with the problem of lack of capital. From the general observation, most SEZs are located near the coastal regions to better link to international markets. This is normally a strategy to attract foreign investment. While some SEZ succeeds, others are inefficient.  SEZ receive special attention from the government in term of incentive. The government support provides not only preferential policies but also good access to major infrastructure. Some of the key characteristics of zones are that they offer access to high quality infrastructure, facilities and support services. When SEZ is established, normally, it attracts investment more or less and then based on the investments, the cluster are created.

The study will also explore the theory of economics of cluster. In economics, the cluster concept usually implies a further step from the literal meaning of density by reference that economic activity may cause increased technology or economic performance of the units’ engaged. In this regards, it can be concluded that the major advantages of industrial cluster are specialization, collective efficiency and lower transaction costs.

The data

In order to evaluate the performance of Special Economic Zones, the study will employ a qualitative research by conducting some interviews and field visits for direct observation in SEZ areas. By conducting field visit is expected to help the researchers get an insight on how they mange bureaucracy ties between central and local government. Some of that will be sort includes; real GDP data, employment rate, labor income per capita, cost of living (CPI), Tax revenue, foreign trade, and FDI on Shenzhen, Zhuhai, Shantou, Xiamen, Shanghai Pudong New Area and Tianjing Beihai New Area. Furthermore, the study will list some prefecture-level municipalities ETDZs to examine how it impacts innovation capacity.