The economy of China is the one of world’s largest economy. It is after the economy of United States of America. The power of this economy is measured by the nominal GDP and purchasing power parity. China is the world’s fastest growing prime economy. China is the largest exporter of goods in the world. It also happens to be the second largest importer of goods in the world. The provinces of the coastal region of China are more industrialized than the other regions in China. The growth of this economy has raised attention that China gets from the rest of the world. This highly boosts the economy of China. This essay critically analyses the issues and policies in the Chinese economy. It has made use of highly topical sources to create a precisely analytical paper.

History of the Chinese Economy

Civil wars, foreign invasions, frequent revolutions, and restorations in China had caused fragility in the economic state of China by 1949. This country experienced a war time inflation that was dead serious since their currency got transported to Taiwan in 1948, during the communism versus capitalist conflicts. By the end of 1950, tight budget control and money supply immensely helped to reduce the inflation rates in China. This control was mainly done to prevent the growth of privates sector, which got composed of the small and prominent businesses. In the history of China, they have used capitalistic policies. Economic reforms in the economy of China began in the 1980s with the introduction of new leaders in the throne. These leaders are Li Xiannian and Deng Xiaoping. Once, they achieved power. They began to consolidate their power to enhance economic empowerment (Chow 1994). The new government influenced the economy of China by nationalizing the country's banking system and bringing all currency under a centralized control. This policy enhanced the currency of China to be used in creative ways and ways that boost the economy. Also, this policy prevents money laundering within the economy of Chinas. Therefore, this economy has continued to grow rapidly, and that is why it remains an Influential economy around the world.

During the reign of Mao Tse Tung, China experienced some recovery from the disastrous effects of the Second World War. One of the policies he used was the attempt to enhance Cultural Revolution. He did this to put China back on track. This was easily done destroying the “Four Olds”, which include habits, culture, customs, and old thoughts. In 1978, a decision was made to allow foreign directive investment. This occurred first in various small and specialized zones, in China (Wang 2003). This was a hugely significant step to mark economic growth of China. China has been fairing extremely well with the introduction of this economic policy. In fact, its excellent performance enhanced the political leaders to get motivated and allow the foreign investors even into other parts of the country. The legal and other infrastructure that was necessary to enhance the working of this policy in other areas in China got refined since economic growth was taken as a serious issue by the leaders of the 1980s (Naughton 2007).

Another reform that has been carried out in the Chinese economy to enhance its growth is known as Rural Industrialization and Enterprise reform. The scale of change in the Chinese economy has grown boldly with fueled production increases that come with appropriate incorporation of these policies. The sate owned enterprises are known to be uncommonly productive (Deng 2009). Therefore, they boost the economy of this nation considerably. This policy enhanced the creation of industries and infrastructure in the rural areas. This resulted to increased activity in the rural areas. In fact, this was the foundation of the increased massive exports that China has today. These industries existed in a centrally planned economy. These big industries in China have hundreds and thousands of employees. Therefore, it is vivid and clear that the economy of China has been growing rapidly in the recent past.

The sustainability of the growth in the near future is debatable. This is because the current policies in the economy of China are exceptionally friendly to developmental issues. In the future, the economy of China is likely not to strain or suffer economic recession, because it has already dominated the market of various products in the world. In the recent past, improved conditions have been marked on the positive performance of the Chinese economy. The manufacturing sector in China, for instance, marked an expansion. This expansion got signified by increased employments and increased orders, especially in the industrial sector. The renewed rise in PMI shows that the Chinese economy is being boosted by the new activities and polices, made by their leaders of late (Wong & Lu 2002).

Reasons for Chinas Economic Strength

Several theories get used by scholars to explain the reason for the economic strength of China. These people appeal to social issues such as education. Education has contributed a lot to forming the current economic status of China. This is because education plays a highly significant role in nurturing the skilled labour force of China. This labour gets used to increase the profit margins of various industries such as mining, tourism and technology. Also, in 1989, the collapse of Soviet Bloc enhanced China to create further reforms for the economy of China to avoid suffering the same fate (Eckstein 1977). Also, China wanted to avoid Russia under Boris Yeltsin. The policy of decentralizing the powers of the states was extremely instrumental in enhancing the creation of a chance to exercise various policies that could enable economic empowerment in China. The economic incentives that the economy of China had were also extremely beneficial in making it remain a strong economy across the world. This economy enhanced the people working in areas that contribute to a large portion of the state revenue to get employment (Cai 2010).

The Role of the Government in Shaping the Economy of China

The government of China has played a pivotal role to contribute to the current stability of the Chinese economy. The government of China has been responsible for planning and managing the national economy since 1949. During the early years of 1950 the Chinese government literally dominated the foreign trade system. Today things have changed. The private proprietors also dominate a significant percentage of the same. Therefore, this indicates that the current growth of the economic strength of China may be sustainable in the future since most sectors are run by private firms now. This means that the change of a government cannot affect the performance of this economy, or drown the economy in the future (Pyle 1997). The role of the government of China in establishing the economic stability being enjoyed by China at the moment cannot be ignored. The role of the government in shaping the economy of China carried so many responsibilities in the past. These responsibilities have reduced in the recent past. The market forces in China and the private enterprises in China have increased at a relatively high rate. The legislation of China is also friendly to create room for economic empowerment. For example, the state constitution of 1982 held that the state has a responsibility to guide the economic policies and priorities. It also allowed the state council that exercises executive control, to direct other bodies on matters pertaining the budget and economic plan for every year. These policies have enhanced the economic strength of China (Wang 2003). The fact that the people working in key economic sectors in China are not unscrupulous is also another strength that contributes to the good performance of the economy of China. The people of China are generally good and hard working to enhance economic empowerment. Some of the Organizations in China that are used to supervise the Chinese difficult economic sectors include: Ministry of Finance, People’s Bank of China, the National Development, and Reform Commission. These Institutions are used to monitor the economic performance of fields such as agriculture, Aviation, Motor Vehicle Industries, and Tourism (Bramall 2009).


Inflation has been an economic concern that contributes to the slow performance of the economy of China. This concern has caused decreased performance of the economy of China at various times in history,. For example, during the winter of 2007-2008, the Chinese Inflation rate had increased to 7%.  The shortage of fuel and gasoline in China in the year 2007 was a leading cause of the inflation experienced in China. The policies that are used to tame inflation in China are tremendously relevant to China as a country. The leadership of this country today works so hard to ensure that they enhance the performance of this economy without any challenges. In the recent decade, science and technology has developed rapidly in the economy of China; its role in stabilizing the economy of China, and stabilizing the performance of the Chinese economy. Technological innovations also help the economy of China to recover from the derogative effects of Inflation (Chow 1987)


From the fore going, it is unequivocally vivid and clear that the economy of China is growing at a highly rapid rate. The policies that have been developed from time to time to enhance the performance of the Chinese economy will enhance a sustainable economy in the future. Sustaining this economy is not easy. This is because it is at the risk of suffering heightened inflation rates. The active nature of Chinese citizens in various economic fields will enhance the sustainability of the economy of China in the near future. The policies and the strength of this economy, as it appears all through the essay needs to be protected in the future. The current political and economic policies created by the Chinese government seriously foster the economy of China. Also, the fact that the Chinese government has fewer roles in sustaining the economy of China means that the private proprietors have an added responsibility to control the economy of China and enhance its stability in the future.

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