The question of whether the economic growth of China is export led or is likely to become domestically led is foremost in the minds of the analysts. The Chinese economy is increasingly focused on investment and consumption. However, there are chances for China to develop trading relationships that is more balanced with the developed economies. Simultaneously, the operating business or the ones that plans to enter China could be finding the opportunities of greater extent as there can be an acceleration of the economy in relation to its transition from a manufacturing based economy to an important consumer market.
In shedding light to this question, a new way to measure the China’s growth in exports and the role it plays in the economic expansion overall. There is an increasing trend or likely to be in the future that the major driver of growth remains with exports, but it seized to be as dominant as it is perceived. There have been signals that the Chinese economy shifting towards an economic growth that is driven domestically is or have started already.
There is another that needs to be addressed that is an important aspect related to the economic growth of China. There has been acknowledgment from the officials of China that economic reforms taking place for the last two decades has been responsible for intense popular unrest that has been redefining the interests, composition and the political attitude of the country in relation to its ever increasing complexity of its social strata. There has been shift in the boundaries between the poor and rich and there has been growth in the gap between them. There has been losing of ground between demobilized soldiers, ordinary workers, the farmers, and other weaker section of the society. These sections have lost ground with the waning of their support system.
When comparing between the contribution of DVAE to the growth and other major components of macro economy, it reveals that the private consumption is topped by DVAE. However, it also shows that the private consumption has lesser importance than investment in the period 2002-2007. In the years when there was economic downturn worldwide (2008 and 2009), the contribution of exports has been much less in relation to the growth than what has been done by the other factors. This is the explanation as to why it was not possible for the Chinese economy to be fully matching the growth rates of its GDP in the decade’s earlier part. However, there has been a shift for a greater role in finished imports, investment, and private consumption explaining the way China could be weathering well the downturn with an indication that there will be a movement in an economy that is focused domestically. This will hold true even if an important role is played by the exports when there is picking up of the global economy.
If the changes continue in the renminibi value in the years to come, there will also be affect in the evolution of trade in China. The export sector, which is more focused and value added that has been suggested by the analysis of DVAE has the implication that export’s greater share consists of goods that are priced higher to be competing more directly with developed economies. This along with appreciation in the Chinese currency has been pointing towards the creation of trading partnerships, which are more balanced with the rest of the world. This is a shift, which is important in the context of the consideration of the businesses with regards to the strategic moves of future in China.