China’s economic growth has perplexed global economists and market analysts for years. The country boasted an average growth of roughly 10% for 30 years
! Even now, the Chinese economy continues to grow at an astonishing rate of 6.52%, making the country the largest economy
(as far as purchasing power parity is concerned).
So, how did this happen? What made China experience such unprecedented levels of economic growth? Well, the answer to that question is a little nuanced and requires careful explanation. Here’s why we believe the Chinese economy continues to soar every year.
The Crucially Important Role of State Investment:
The importance of state investment in an economy’s boom cannot be understated. Currently, China boasted a state investment growth of 23.5% while investments from the private sector have fallen by 2.8%!
As compared to Western economies, and particularly the Euro (€) and the United States Dollar ($), there’s a stark contrast in the percentage of state investment. In fact, state investment in the United States decreased by 1.4% in 2016 which just goes to show that if a government is not willing to invest in its own economy, its GDP and economic growth will be stinted.
While you might believe that economic growth leads to state investment but that is seldom the case as the latter is almost always the cause, not the former. For example, the Chinese government outlined an investment plan in which 2016 in which 131 projects would be completed in 2016, 92 projects would be completed in 2017 and 80 would be covered in 2018.
These projects were all related to Chinese infrastructure and, to no one’s surprise, the economy grew at a rate of 6.9%! Similarly, 2017 proved to be even more fruitful for the Chinese economy as it marked the first time in 7 years that the economy accelerated. All these facts show the critically important role state investment plays in the boom of a country’s economy.
Foreign and Private Investments Matter Too!
While you might think that state investments alone are enough to drive a country’s economy but that’s simply not true as private investments (and investments from foreign players) play a pivotal role too. Confused? Allow us to elaborate.
Countries all over the world need investments from foreign companies to ‘fill the gap’ between a high demand for capital and a low population. Even though China’s massive population means that it doesn’t require foreign investments, these investments do, however, help keep the economy steady.
In other words, investments from private and foreign firms complement China’s enviable state investments. These three factors continue to drive the economy, which is why the Yuan (¥) continues to soar!
Furthermore, the Chinese government invites foreign investments by giving foreign investors tax exemptions and creating conditions which are extremely profitable. However, entering the Chinese market is easier said than done as countless firms have tried, and only few have succeeded. This is why we recommend opting for the services of a company that can help you set up your business in the country.
If you’re looking to penetrate the Chinese market and take your brand to unprecedented heights, then get in touch with Business China. The company is your definitive solution to open a new company in China as it offers impeccable services aimed at making your transition into the local market much easier.
Get in touch
with Business China today to ensure that your company does well in the Chinese market!