GDP IN DEVELOPING COUNTRIES: PEOPLE’S REPUBLIC OF CHINA
City and State:
Table of contents
1.0 Executive Summary 3
2.0 Introduction 3
3.0 Body 3
3.1 GDP and Amount of Spending 3
3.2 Amount of Spending In Terms Of Consumption (C), Government (G)
Investments (I), Exports(X) and Imports (M) In 2012 6
3.3 Graph the GDP Growth for This Country for the Past Ten Years 7
3.4 Business Cycles for China the Phase of the Business Cycle This Country Was Experiencing In 2005 and the Most Recent Year. What Data Did You Rely On To Inform
You as To the Phase of the Business Cycle 8
3.5 Government Spending For the Past Ten Years 10
4.0 Conclusion 11
5.0 Recommendations 11
6.0 References 12
1.0 Executive Summary
China is considered as a developing country judging from the size of Gross Domestic Product. China’s per capita income is very low. Out of its labor force of 780 Million people, a quarter of them are peasants. The GDP of China has not yet shown a noticeable change in the economic development of the country as well as its industrial growth. Its low GDP has facilitated the emergence of economic problems meaning that the country is still far from becoming a fully developed country (Brandt & Rawski, 2008, 44). The Gross Domestic Product of China is spent on exports and imports, transportation system, and government investment. In this paper, the GDP of China is analyzed from 2002 to 2012 each year will show a decrease or an increase in China’s expenditure which makes it slug in terms of development.
China is ranked second in the world after US economically. It is however, considered as a developing country judging from the size of Gross Domestic Product. China’s GDP was estimated to be US 47536 per year in 2010 which is less than the GDP of countries like Germany, Belgium (Guo, R 2012, 88). China a big economy and considering its fast growth it is predicted to may be overtake the Western economies in future but then it is not fully developed as per its capita indicators. China’s GDP is very low compared to other developed countries considering the fact that it has a large population living under the middle class level and high inequality level. Forty percent of people in China make get less than $2 in a day an estimation of 300 China people. This paper will give details on Chinas GDP over the past 10 years.
3.1 Amount of total GDP
This will cover the total GDP of China in 2012.GDP is the total of gross value added by all people in production in the economy plus the added taxes minus any subsidies, which are not included in calculating the product value. China’s growth slowed by 7.6 percent last year compared to the GDP in 2009 and 2012, due arising economic challenges on the nation’s growth (Li, X 2006, 23). According to the report released by World Bank in 2013, China sought to alleviate liquidity in the markets by getting loans from banks. During the July and September period, China GDP reversed by a slowdown of two-quarter growth (Yuann, & Inch, 2008, 101). The GDP of China amounted an average of US$1102.08 GRO THE YEAR 1960 TO 2012. The graph below shows the GDP of China from 2009 to 2013. It will clearly show the GDP fall in 2013.
3.2 Amount Of Spending In Terms Of Consumption (C), Government (G) Investments (I), Exports(X) And Imports (M) In 2012:
The GDP of China measures its outcome and input. It is equal to the total money spent in consumption, investment, government, imports and exports. The formula of calculating GDP is,
C+I+G +(X-M) = GDP where, C=Consumption, I= Investment= Government= Exports and M=Imports. The above formula clearly shows that if consumption, export and imports decreases there will be an increase in imports, investments as well as government expenditure and vice-versa.
China’s economy is mainly built on investments. Roads, dams, airports, factories and other constructions make up to 50 percent of its economy. Consumption covers the largest part of an economy and consists of private companies in an economy. Government is the amount of government spending on goods and services (Brandt, L & Rawski, 2008, 44). Imports show the gross imports which are subtracted to avoid adding up exports. Exports on the other hand show the gross exports. It includes goods and services got from other nations. In 2012, the percentage GDP in consumption was 46 percent, Percentage GDP of investment was 35 percent, and the government spent a13.5 of the Gross Domestic product with Exports (25%) and imports (21.1) of the Gross Domestic Product.
|Item||Amount ($ billion)||GDP (%)|
Amount of Spending of China in 2012
3.3 Graph the GDP Growth for This Country for the Past Ten Years
3.4 Business Cycles for China the Phase of the Business Cycle This Country Was Experiencing in 2005 and the Most Recent Year. What Data Did You Rely on to Inform You as to the Phase of The Business Cycle?
Business cycles refer to the frequent fluctuations, which occurred between the period of dynamic economic activity and the period when economic growth was stagnant.
China underwent three main business cycles-; first cycle which was the classical cycle, second cycle, which was the growth cycle, and the third cycle, which is the growth cycle. The first cycle is a period of high economic fluctuations around a stable state (Kwan, C H 2013, 15). During this cycle, assumptions of economic growth are ignored. The second cycle refers to frequent fluctuations based on a growth drift. It shows a cycle based on particular economic growth pointers. The third cycle, which is the growth rate cycle, assumes that a growth pace of an economic indicator is recurring. This stage shows a period of both low and high growth rates. In 2005, China saw a strong growth of 9.9 percent compared to 2004(9.5 percent). According to statistics given by the International Monetary Fund, the GDP of China was 2,279 US dollar (World Bank 2010, 54). The Agricultural returns were 12.4 percent of the Gross Domestic Product compared to 40.3 and 47.3 percent from service sector and industry. China was in the growth cycle since its economic growth boomed abruptly. China economic growth has dropped in the recent years indicating the classic phase or cycle.
3.5 Government Spending for the Past Ten Years
In the past ten years, government spending has increased rapidly with noticeable decrements in some years. One cannot conclude China as a country which ahs had a drastic decrease or increase in government spending. According to World Bank, China has had an average Government expenditure of approximately 730 billions (US dollars). Increase in government expenditure is brought about by the need for the government to spend more and the amount of capital spent on the growing population (Dutta, 2006, 77). In 2012, government spending was low. This was an indication that the government was using money efficiently. Government spending is based more on the expansion of the transportation system and investments on infrastructure. Chinas government gets its revenues from taxes whereby the percent rate of individual income is 45. There is also the real estate tax and Value added Tax. The total government spending accounts for 25 percent of the GDP (Sheng, & Song, 2012, 47). Chances are that will have deficit budget for the following years considering the spending rates which have been seen in the previous years. The expenditure will be less considering the benefits got from the business sector (exports and imports) which gives the country a high level of income. The country through taxes will be able to facilitate economic growth since there will be more job opportunities as well as the reduction in GDP. China’s new government has responded to a low expenditure with temporary taxes generated from small businesses.
|Year||Government expenditure (Total) (billions of $) – China|
China’s Expenditure from 2002
Despite the fact that China is the largest manufacturing country in the world, it is still ranked among the developing nations. It is the largest exporter and importer of good in the nation If China is able to put its development strategies in place and achieve its goals of becoming a developed country, then it might arise to become the strongest country in terms of economy.
China in becoming a fully developed country is able to set certain strategies; first, they should be able to define their own developments. Secondly, they have the power to decide the periods of time it will take them to follow develop. Fourth, China should be able to set goals, which would help them thrive in this competitive economy, and lastly they should be able to minimize government spending for a better thriving economy. China has a low GDP. It must consider working to increase its per-capita income. If this is put into action, China might surpass the USA economy to become the biggest economy country in the world.
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World Bank 2010, World Bank East Asia and Pacific economic update 2010, Vol. 2. Washington, D.C., World Bank.
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