China's Economic Growth and Challenges

4) China (Crisis/ Devaluation of currency/ Economy)

In 1978, China was one of the poorest countries in the world, but since the market reforms in that year, it has become one of the most powerful economic countries with a great potential. Its GDP has grown about 10 percent per year during the last 30 years, being the country with the biggest economic growth around the world, thus the living standard has reached that of a welfare society because about 500 million people are out of poverty. Moreover, it is the largest manufacturing economy in the world, the most important exporter of goods, the fastest growing consumer market, and the second major importer of goods in the world. For these reasons, with a population of 1.3 billion, it has become the second largest economy and is increasingly playing an important and influential role in the global economy. Furthermore, China has the 'five-year-plan' strategy for economic development, which was adopted by the political party that is in power, the Chinese Communist Party, in order to guarantee the economic growth. At present, it is finishing the twelfth plan (2011-2015) and most of the objectives of the eleventh plan have been achieved.

However, there are important problems that the Chinese government must solve such as high inequality, rapid urbanization, a lot of inhabitants are still in poverty levels, external imbalances, and the most worrying problem, the unsustainable pollution. But despite its development in the last years, China is starting to suffer an economic crisis and the proof is that the Chinese stock market crashed in August of 2015. As a consequence, industrial production, investment, and retail sales have been weaker than economists expected and exports tumbled 8.3%. For this reason, the Chinese government devalued the Yuan in August with the objective to improve the competitiveness of their companies and rise the exports. This devaluation could have positive and negative effects. The main positive effect is that the Chinese exports will grow and negative effects could be the fall of its imports and changes in the speculation about the benefits and costs for the companies and investors that work in the international markets.