How will China look to sustain economic growth in the future Essay

How will China look to sustain economic growth in the future - Essay Example (Hu and Khan, 1997: Harder, 2010, p.1) The nation has been able to sustain the growth inspite of minor fluctuations. The economy had been experiencing a 6 percent annual growth before it underwent an economic reform in 1978, which changed to 9 percent post reform. It witnessed a above 13 percent per capita growth in its peak years- a nearly quadrupled figure. The country experienced a growth in its capital accumulation in the form of ‘stocks of capital assets’ and the setting up of new factories, developing machinery, and logistics systems which was an important factor in the growth of the economy. The growth in the number of Chinese workers also resulted in a sharp and sustained increase in the productivity, which was also a major factor for the economic growth of the country. The key driving force of the growth has mainly been the unremitting expansion in the production of the economy, which accounted for more than 42 per cent during the period 1979-94. This also broke the traditional myth that an economy can only grow with the growth in its capital accumulation. ... It has been argued that productivity driven growth are more sustainable and the ‘market oriented reform’ taken up by the country had resulted in creating the ‘productivity boom’. The reform brought in the introduction of ‘profit incentives to rural collective enterprises, family farms, small private business and foreign investors and traders’, which stimulated the efficiency of the economy. Many enterprises were also exempted from the state authority intervention, which resulted in an increase in the share of the collective enterprises from 42 percent to 50 percent and the share of the private business and joint ventures from 2 percent to 10 percent, while the output of the state owned enterprises declined from 56 percent to 40 percent. The profit motive of the producers increased the investment in their business in order to improve its performance. Reforms in the economic policy had also extended property rights in the countryside as the rural people started of non-agricultural business. The post reform period was marked with more competent use of labor and more fruitful farms as a result of de-collectivization and high priced farming products. This resulted in fast growth of village enterprises driving many people into ‘higher value added manufacturing sector’ from the ‘traditional agricultural sector’. The reform granted the enterprise managers with greater freedom as they were free to place their own production goals, sell the products in the private market with competitive prices, and give bonus to the employee who works better and fire the one whose performance is not good. The reform also entitled them to retain some of the firm’s earnings for further