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Anthony TorresProfessor NamalaECON 201M5 December 2017 China’s sustainability Is China a sustainable country? Yes, in fact it still upholds one of the highest economies produced individually. Many people have begun questioning how long before the dynasty of china falls. Many people have argued that China’s environment is toxic and harmful to all residents. This has to lead to multiple cases of people dying as a result of the harmful contaminants that are constantly being inhaled. As a result of the deaths occurred by it’s pollution, people have begun making assumptions that if this continues on, China will become an extremely hazardous area for people to live in. China can fall with the pollution, people will begin to migrate, causing a gap within the economy. As more people begin fleeing the country, money will become scarce causing a recession. Along with pollution conspiracy, people have also argued that China’s debt will eventually lead them into a recession. Many world economist have argued that this can be possible however, china in fact, has more than enough things they can do to prevent this. Going back to the debt, China has been allowing many people to constantly use a credit card, however china never assumed that this can cause a future harm. They did not set a limit as to how much money can be loaned. Chinese residents used their credit cards to build infrastructure and businesses since they were given the sufficient amount of help by the credit cards issued by the government. As more money is being loaned out, money has begun facing the early stages of a money shortage. On October 18, the Communist Party of China met for the 19th National Congress to discuss the path the country will take in the following years.  President XI Jinping gave a 30,000-word speech, which lasted over 3 hours, which consisted of how China’s economy has done.  Of course, many people are going through and deciphering the speech to see the direction China will go in. According to Eric Li, a political scientist in Shanghai from the Washington Post, people should read the article from The Economist about President Xi’s speech, but they should also ignore what they must say about it. Eric Li goes on to say that over the years, The Economist has had several articles that spoke negatively about the National Congress yet none of what they said has really come true. In 1992, The Economist had said that China had taken a step back. That was the same year that Deng Xiaoping’s now famous southern tour that launched a new wave of reforms the likes of which the world had never seen in history. Between the years of 2002 and 2012, we saw China’s GDP quadruple, and become an economic superpower. Since the last National Congress meeting, at least 60 million people have been lifted out of poverty, showing that China is fulfilling and making progress to better their country. I believe the point of Eric Li’s article is to show that many have been saying that China’s growth will not last and it will eventually come to a halt, yet over the years China has been doing the opposite by continuing its growth, and at the same time adjusting so that the growth continues. China’s remarkable economic growth over the last three decades has been well acknowledged, and there seems no consensus being reached on how this increase is created and whether it can be sustained in the future. While some economists argue that “China’s potential for economic growth from relatively low labor costs will continue to exist for another 30 Years”, others have questioned its sustainability. China was hit by something of a shock on Aug. 14, when three closely watched economic indexes were released for July: industrial output, fixed asset investments and retail sales. All three fell significantly short of market expectations. Especially worrisome was industrial production, which grew only 6.4 percent over a year earlier, or 1.2 percentage points lower than in the preceding month. The result defied expectations that the index would rise by more than 7 percent due to recovery of steel, cement and other materials output for infrastructure projects. Capital investment by the private sector is weak, creating a gap that even aggressive spending on infrastructure projects cannot fill up. Real estate investment in July grew a mere 2.0 percent, far short of the 8.5 percent growth in the first half of this year. In anticipation of the slowdown in real estate investment, the Xi administration had launched a plan to build the Xiongan New Area, where economic functions now concentrated in Beijing would be moved. But despite the launch of the project with much fanfare, no concrete plans for construction of buildings and facilities have been publicly announced, and major state-owned corporations are said to be resisting the government’s call for relocating to the new area for fear of cost burdens and in the face of opposition from their employees. With the help of well-known CGE models, we can prove that the most significant factors that have contributed to the phenomenal economic growth in China are namely international trade, Foreign Direct Investments, and migrant labor. There are also other issues to explore such as how some different economic potentials like the removal of the household registration system and engaging free trade with its major trade partners could be further exploited. The GTAP is a multi-region, multi-sector CGE model that has been used widely to tackle many economic and trade policy issues in developing countries. The latest version of the dataset, which is based on 2007 actual data, is used for running two sets of eight counter-factual simulations. According to the results of the simulations, it can be concluded that the export-orientation development strategy, efficient use of FDI, and exploitation of comparative advantage of its migrant workers are the most significant factors that have contributed to the remarkable economic growth in China. Although not all of these factors are always a constant in the future, several alternative reform measures including the removal of the household registration system and further liberalizing international trade through forming Foreign Trade Agreements with its major trade partners would keep contributing to sustaining China’s economic growth. The policy implication is that China should continue with open and reform policies toward developing a more liberalized domestic factor market and engaging more FTAs with its major trading partners. When these economic potentials are further exploited, China’s rapid economic growth can be sustained further for at least another decade. The economy grew 6.7% last year, which was its slowest pace for more than a quarter of a century. Beijing has for years been trying to transition the economy from one reliant on exports and state investment to domestic consumption. Brisk consumer spending and strong factory output fueled economic growth in July-September, while retail sales rose 10.4% on-year during the first 3 quarters. China’s leaders need to move away from reliance on monetary policy, which is clearly no longer working. Real reforms, rather than the tinkering they have done until now, are necessary and should include, first and foremost, a clear resolution to allow loss making companies in overcapacity industries to go bankrupt. Next should come the break-up of bloated state-owned enterprises and the monopoly positions they enjoy in many major industries followed by an honest accounting of the true scale of bad loans in the state-owned banking system.Less pressure for high growth could roll back the policy stimulus that has caused China’s debt to spiral to levels that have led to two sovereign rating downgrades and warnings of a financial crisis.The soaring debt is most concentrated in China’s state-owned enterprises, which have continued overbuilding and overproducing for example with a glut of steel. They have also tried to reduce the economy’s dependence on credit as a way to fuel growth. One option is a bank bailout that would push government debt from 55% to 90% of GDP. China has many things they can do to stay above water. Overall, China’s economy is growing and is still a big economy in the world. China will be and has been sustainable throughout the past years, that is why we should not worry about China’s economy.


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