Key Factors Behind China’s Rise to Economic Supremacy

We all know China as the second-largest economy in the world. Well, there are no clear stats and projections available backing the countrys journey to reach such a level.

China is making strides in almost every industry using every means possible, whether it is to connect with non-native speakers using Chinese translation services or to neglect political disputes with other countries.

Indeed, it has come a long way, so lets dive into the key factors that fueled this remarkable journey:

Chinas Economic Reforms and Gradual Approach

China has not become the worlds second-largest economy within a few years. The journey started decades ago. Long story short, the story began in the 1970s with the concept of “reform and opening up” shaped by Deng Xiaoping. The reform completely changed the economic landscape and turned China into a socialist market economy from a centrally planned economy.

However, the change wasnt sudden. Deng began with experiments in the coast’s Special Economic Zones (SEZs). He welcomed foreign investments by targeting the places where businesses had more autonomy. The success of these zones proved the potential of a market-oriented approach.

This isnt it. After finding success on the coasts, Deng turned his head towards the agriculture sector. The new reform was introduced under the title “household responsibility system.” It was the replacement of collective farms with individual land leases, boosting rural incomes by incentivizing farmers.

Collectively, these reforms unleashed the potential of the Chinese economy. This gradual approach turned out to be a smooth transition toward a market-oriented economy, furling the rise of Chinas economic supremacy. This also might answer the question of how China became an economic power so fast.

Manufacturing Powerhouse: An Attraction for Foreign Investments 

Another key factor that plays a crucial role in the rise of economic supremacy is Chinas manufacturing industry. This massive powerhouse rests on three pillars:

  • A vast and adaptable workforce
  • The strategic attraction of foreign investment
  • State-Owned Enterprises

China doesnt only provide an endless supply of workers but also allows for specialization in the manufacturing sector. This leads the companies to outstanding efficiency and economies of scale. Not only that, with designated economic zones, tax breaks, and relaxed regulations, China actively escorts foreign investments.

China doesnt allow geopolitical issues to affect its trade relations. For example, despite the political tensions with Japan, Chinas manufacturing sector is leading the way toward Japan. The country never misses a lead. Even the number of companies providing Japanese translation services is increasing to break down language barriers and promote economic relationships and other proximities between these two Asian regions.

Export-Oriented Approach 

Chinas export-oriented approach has always been a key driver of its economic rise. It began with the accession of the World Trade Organization (WTO) in 2001. This opened doors for China to expand its reach to international marketplaces and trade freely with global clients, which are usually countries.

As said earlier, China never misses a lead. It admired the importance of strategic currency policy and initially kept its exports artificially cheaper than the US dollar. Ultimately, this gave Chinese manufacturing a high return on their investments while gaining popularity on the international level.

Well, this wasnt as simple as it looked. Because of its strategic currency policies, China was accused of currency manipulation and faced criticism. However, despite the criticism, the export-oriented strategy proved highly successful in propelling China towards economic supremacy.

Investment in Human Capital and Development

Chinas journey as the worlds second-largest economy is full of controversies. One such example is the “one-child policy, which expired in 2016. Luckily, just like the currency manipulation, the one-child policy also proved beneficial.

It even has a double-edged impact—well, in the beginning only. Initially, the policy boosted human capital by concentrating resources on a smaller population. However, it created long-term challenges in the form of a smaller workforce and an aging population.

But things are under control now as China prioritizes human development by shifting its focus to the education system rather than ideological indoctrination. Now, the system prioritizes skill-based learning. The country is now investing in higher education, creating a more qualified and skilled workforce that is a clear driver of its economic growth.

Governments Role and Investment Plans

Chinas economic rise wasnt solely market-driven. The government played a vital role by introducing strategic investments such as five-year plans. According to this plan, the government limits its focus on a specific industry and takes steps for its promotion.

For example, nowadays, Chinas main focus is on high-tech sectors such as green energy and artificial intelligence. So, the government allocates resources and funds for research and development to support the growth of these target industries.

Along with that, the government extends its focus beyond specific sectors. The countrys infrastructure development has always been on top. But it doesnt only benefit locals; it also proves beneficial for the countrys economic growth.

For example, the BRI (Belt and Road Initiative) project is a global infrastructure development project. The aim is to connect China to other countries through a network of highways, ports, and railways.

The Gwadar Port project in Pakistan is another significant example. Through these strategic investment plans, the Chinese government plays a crucial role in shaping and directing the countrys economic trajectory.

Key Factors Behind China’s Rise to Economic Supremacy