Microcredits and China's Economic Expansion

Business Financing (Microcredits) Causes and Effects

Introduction

The goal of the present study is to analyze microcredits, their origin and their development. This report shows two dimensions. Firstly, the origin of microcredits and secondly, the effects in developed countries and in developing countries.

Origin of Microcredits

Microcredits are a kind of loan addressed to a part of the society who did not have enough means to pay back a loan with a higher amount, a fixed employment or a verifiable credit history. In addition, it has also served to finance entrepreneurs. The roots of this type of loan were originated in the 60’s by Muhamad Yunnus. The main cause of this creation was the financing of this type of people to acquire their houses, entrepreneurs to start up their business and young people with no means to study to develop their degrees. Microcredits initially were assigned to developing countries but over time, they were expanded in developed countries because it was noted that it was a tool with enormous potential for poverty reduction.

Effects of the Creations of Microcredits

Two points will be analyzed in this section: the effects in developing countries and the effects in developed countries. On one hand, in the developing countries it can be said that there are economic benefits such as the ability to easily develop business through this type of financing. In addition, in terms of social benefits, there was an increase in the self-esteem of the beneficiaries of this type of financing since they were able to acquire those possessions or to develop the activities that without this financing would not have been possible. Education was encouraged, making those who could not study make their needs possible and finally, increased cooperation and ethics between lenders and borrowers. On the other hand, in developed countries the microcredits facilitated to the groups with difficulties of insertion in the labor market, generating amounts and terms of return that adapted to the socioeconomic reality of the country.

Conclusion

This study has illustrated the main cause of microcredits origin and their effects, showing that the need for financing was probably the main reason of microcredits develop

China. Economic Development (Causes and Effects)

Introduction

The goal of the present study is to analyze the expansion of China, their origin and their development. This report shows two dimensions. Firstly, the origin of this expansion and secondly, the effects caused by this success.

Economic Increase of China

The amazing increase of the China’s economy was their origin in the economic opening because of the Western Development Program. It was a package of measures issued by the Chinese government with the aim of increasing the national economy through primary development, such as the purchase incentive on raw materials. Their main measures were the massive development of infrastructures, encouraging the consumption of wood, which activated the construction sector and interiors in terms of buildings and furniture manufacture. For instance, a very known case was Beijing, where there was a great development of infrastructures, as will be explained in the next point.

Effects of the Western Development Program

The issues to be addressed in this section are: the world economy, international trade, national aggregate demand, infrastructure and technological development. First of all, during the first years since the implementation of the program, China was the world's largest importer of timber, as a consequence of their poor development. However, after the establishment of timber plantations changed its role, becoming one of the main exporting powers of raw materials putting in terms of production ahead of countries like Brazil, India, USA, Russia or Ukraine, among others. This expansion supposed a higher increase in terms of employment, investment, incomes, exports (balance of trades positive), increasing the aggregate demand and finally, generating an economic increase in general terms. In addition, They have their effects in the infrastructures, getting China to become one of the most developed countries in this aspect, besides to achieving a great improvement of their technology in all aspects.

Conclusion

This study has illustrated the main cause of the Chinese economy expansion and their effects, showing that the Western Development Program was probably the main reason of this expansion.