China

Carlo Marceau

Overall Score: 52.7 World Rank: 139

China Quick Facts/United States

  • Population: 1.4 Billion/316.4 Million
  • GDP: $13.4 Trillion /16.8 Trillion
  • GDP Growth: 7.7% /1.9%
  • GDP Per Capita: $9,844 /$53,101
  • Unemployment: 4.6% /7.5%
  • Inflation: 2.6% /1.5%
  • Foreign Direct Investment: 123.9 Billion /$187.5 Billion

Seven Major Sources of Economic Progress

Legal System

The Communist Party’s control of all levels of government in China. China has a weak judicial system that is vulnerable to influence. The migrant work force has little legal protection. Protection of property rights has deteriorated over time. It is said that a more comprehensive set of economic reforms is needed.

Competitive Markets

China's market is not very competitive because it is regulated by the government in almost all aspects. Incorporating a business taked 11 procedures and about a month. There are many licences that need to be aquired and they are expensive. The government provides businesses with the fossil fuels, electricty, and subsides needed to run the business. State owned enterprises are better able to get capital and lower financing costs while medium sized companies suffer from lack of access to credit.

Limits on Government Regulation

China has very restricted trade. Their government screens foreign invesment and tightly controls the financial system. Their export taxes, subsidies to state owned enterprises, anti dumping barriers and other measures restrict their trade. Also, China has a insanely high income tax that causes its citizens to not be able to spread money around to markets as freely as they can in the US. They must use the money they have for their needs, not wants.

An Efficient Capital Market

Capital is easily obtained by state owned enterprises but small and medium sized companies suffer from lack of access to credit. Remember China is communist so tax rates are extremely high on citizens. The government takes this tax money and spends it on what it feels fit. In the US it is very easy to get capital compared to China. The citizens have very few protections.

Monetary Stability

Remember China is communist so the government gives its citizens fixed incomes. Its economy is very stable but economic growth is slow. China can keep its economy stable by deciding how much everyone gets payed based on how the country is doing. They dont have to worry about loosing to much money to trade because they tightly control it. The Chinese government has a lot of control over its people and therefore its economy.

Low Tax Rates

In China, tax rates are extremely high. People dont work hard because there really is no point to. Everyone gets payed the same no matter how hard they work. China's top individual tax rate is 45% and its tio corporate tax rate is 25%. They also habe valye added taxes and real estate taxes. its tax burden equaled 19.4% of the GDP last year. All of the government expenditures eual 24.8% of domestic output and public debt equals 22% of GDP.

Free Trade

China's trade is largely restriced. Its adverage tariff rate is 4.1%. Other measure like export taxes, subsidies to state owned enterprises, and anti dumping barriers also restrict trade. The government looks closely at foreign investment and still tightly conrtrols the financial system. China's government want to control almost all aspects of trade.
China's Economic Transformation | Inside China | CNBC International
China's leadership is facing enormous challenges. Since taking office, President Xi Jinping, has been under pressure to navigate China through a massive economic, political and social transformation. Demand for Chinese goods has decreased and companies have large amounts of debt. Some people think that China is headed to an economic crisis.

Extra Credit: Interesting Facts

1. 100 million people in China live on less than US$1 per day

2. China executes the death penalty more than 4 times as the rest of the world combined.

3. Fortune cookies are not a traditional Chinese custom. They were invented in early 1900 in San Francisco.

4. Facebook, Twitter and The New York Times have been blocked in China since 2009.

5. The World's First Paper Money was created in China 1,400 years ago.

6. Table tennis is China's national sport.