China: Its Emergence as the “Workshopof the World” Due to the 1979 opening up ofChinas markets to trade and investment, an unprecedented rate of growth wasseen by the country “1980 to 2003: 9.5% growth/year, 2003 to 2008: 10%growth/year” (MacKinnon and Cumbers, 2007, pp105).
This growth has deceleratedslightly since the recession but is still a strong 6-7% ahead of the globalaverage (Spark, 2013). At the time when many economies saw their growthdecline, during 2007 and 2012, Chinas GDP grew by a notable 60% (Spark, 2013).During the mid-20th century China was categorised as one of the”poorest countries in the world” which was mainly at fault due to its very weakhealth and educational systems, in addition to this, wars completely destroyed partsof the country (Spark, 2007). The Maoist period of stagnation from 1949 to 1978was crucial in providing China with a strong economic base as during this timeGDP had already started to increase by ~5% per year alongside life expectancy(Spark, 2007). In order for China to become attractiveto other countries, four Special Economic Zones (SEZs) were created in 1979(MacKinnon and Cumbers, 2007, pp105) with the aim of attracting capitalists(Spark, 1013). Success of these SEZs was incredible, with Hong Kong bringing intwo thirds of the total (MacKinnon and Cumbers, 2007, pp105) and the Chinese governmentdecided to create “open coastal cities” in 1984 which meant that Westerncompanies could now set up along the East coast of China, soon after this theYangtze valley opened up for foreign investment (Spark, 2013). A number of factorsfacilitated the growth of China into becoming a flourishing production economy.
China has a large labour supply, meaning supply outstrips demand for work. TheChinese workforce will work for low wages as they are mainly lower middle orworking class (Investopedia, n.d.).
There are also no workers’ rights relatingto child labour or low wages, meaning companies can get away with paying thelowest possible wage. Chinas evolution of supply chains has helped to supportits growth as many areas now connect together to form a system of manufacturingthrough low cost labour, large workforces with great technical skills,component manufacturers, suppliers and customers (Investopedia, n.d.). Forexample, in the late 1980s China supported the fastest growing automobileindustry, which was composed of six main clusters around China that all linkedtogether (Mackinnon and Cumbers, 2007, pp233). By 2003 every single majorplayer in this industry had invested in China, proving the singularity ofChinese bargaining power in gaining access to any world market (MacKinnon andCumbers, 2007, pp234). 1985 saw the abolition of “double taxation” on exportedgoods from China, which increased its competition and lower tax rates and meantthat production costs could be kept down (Investopedia, n.
d.). Chinas dominance over other economies is not likely to remain forever.
Alreadywe are seeing newer emerging economies (such as India) with growth ratesincreasing rapidly and they may pass China in the near future. As China shiftsto a more knowledge based economy, away from production, this will cause wagerates to rise meaning the one key advantage that China historically had, i.e.cheap labour, will no longer be maintained, reducing Chinas competitiveness(Investopedia, n.d.).