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Income and Wealth Distribution Essay

Globalisation refers to the process of increased integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity. Globalisation has been integrated into the Australian economy; it has embraced the global economy and pursued policies to integrate its economy with those of its region and around the world. China is now moving from a planned economy to an increasingly market base economy now being the world’s third largest economy with increasing globalisation.

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Strategies such as the open door policy, trade policy, microeconomic policies, welfare and the environment policy and the macro policies have directed China into becoming more Globalised; recent high growth performance has led to a rapid economic development. The Open door policy is a statement that reaffirmed the principle that all countries should have equal access to any Chinese port open to trade. In China it was adopted towards foreign trade and investment, with Special Economic Zones (SEZ’s) established in the southern and eastern coastal provinces of China.

These zones attracted foreign investment and enterprises through a range of incentives. Trade in exports and important grew from 10% of GDP in 1978 to 36% in 1996. For China the importance of foreign capital lay in trade and access to overseas markets transfers of Western technology, and the receipt of management and marketing skills from MNC’s. China has introduced a ‘One child policy’ in order to sustain China’s population growth and improve China’s economic performance. In order to achieve growth in GDP, it must be greater than the population therefore they have to reduce the population to achieve this.

Agricultural reforms between 1978 and 1994 involved the abandonment of the commune system and its replacement of the Household Responsibility System. This new system led to dramatic increases in food production and surplus income was invested in privately run own and village enterprises responsible for light manufacturing of industrial goods. China uses monetary and fiscal policies as counter cyclical tools designed to exploit economic opportunities or minimise risks to the economy.

As China becomes more integrated in to the economy it becomes more vulnerable to external ‘shocks’ and movements in the international business cycle. The overall macro picture is one of the increasing strength in economic activity, and rising inflation as a consequence; keeping economic growth at 8%. The CPI increased 1. 5% in January 2010 and its forecast to increase a further 3% in 2010. Some commentators believe that this is not a concern because much of the increase in the CPI has been as a result of food price increases caused by poor weather in 2009.

Macroeconomic tools must be used to boost domestic investment and consumption, as export seems weak as a result of the recession. The trade and investment policy was put in place to increase the exports and investment, as it is a major part of China’s economy. Export led policies have contributed strongly to development and living standards. Chinas exports in 2009 predictably suffered as the national’s large markets fell into recession. While this posed a significant challenge it gave china an opportunity to restructure.

The sudden stall in economic growth was not caused by restrictive government policies but a result of insufficient growth models and unbalanced economic structure. An 11th five-year plan was implemented in 2005 to achieve a general trade balance and could either decrease exports or increase imports. China has sustained average rates of economic growth of between 6% and 8% for the past two decades. This rapid rate of economic growth has led to rapid resource use and environmental degradation.

China is therefore experiencing sever environmental problems associated with resource depletion and environmental degradation. The Chinese government commissioned the OECD to conduct a study of the environment in 2007. This report found that unless pollution is controlled, by 2020 it would cause 600,000 premature deaths in urban areas and 20m cases of respiratory illness per year. The report also found that up to 7% of China’s annual GDP is lost because of pollution, and this could rise to 13% of GDP if stronger environmental laws are implemented and enforced.

The Chinese government has begun to recognise and address the environmental problems that have emerged because of rapid economic growth and industrialisation. Targets have been set for pollution levels and there is a policy to move away from reliance of coal fired power generators to use of hydroelectric and nuclear power. A market has also been established for tradable emission permits, which gives firms an inventive to reduce their pollution levels by trading excess rights in a market. China’s impressive growth performance has not benefited all provinces equally.

Large geographic disparities in income remain across provinces. There are two bases of differences. The first is the per capita incomes are higher in urban areas in the east and south of China compared to the rural areas in the north and south. The second is the per capita incomes are higher in the southern coastal provinces of China compared to the north, and in the eastern coastal provinces, compared to the western provinces. China is one of the few countries in the world performing well overall in the indicators for the Millennium Development Goals.

Yet in recent decades, China has shown large disparities in economic and social outcomes between coastal and inland regions, a trend that reflects the differences between urban and rural areas. Coastal areas have consistently experiences faster economic growth because they benefit from their proximity to the Special Economic Zones such as Shanghai, where employment and income opportunities are greatest. The bulk of national income is concentrated in metropolitan and coastal regions as seen by the average growth of 13% five times the level of north-western regions.


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