Chinese economy is the fastest growing economy among all the developing economies. We are aware of that, right? But ever thought what makes the Chinese economy get this tag?
Interestingly, China is the biggest exporter of goods and services to the richest economy of the world, the United States of America. Its export is greater than import.
Juxtaposing the resources of both China and India, both have an almost equal amount of resources to make themselves powerful but even after that, why is India lagging behind and China is ahead of every developing country? Curious?
Let’s take a dig at some of the mainstream reasons why China is said to be the fastest growing economy:
1. Special Economic Zone (Sez’s)
What are SEZs? A certain specified area is specially reserved for industries to undertake the production of goods and services. Those who set up the industry in these areas are given benefits in tax, electricity rates and many other things which encourages industrialization.
Interestingly, India has more than 3,000 SEZs but even then the industrialization process is weak and slow, whereas, China has only 4 SEZs.
The reason for the success of China is that all those industries whose plants are located in the SEZs are not allowed to take help from the industries of their home country. This increases the revenue of the Chinese industries which provides subsidiary help.
2. Stock Exchange
Beijing and the Shanghai Stock Exchange has an FDI investment which is highest among all the developing country. Interestingly, money generated through these stock exchanges is not allowed to invest outside of China. This saves Chinese capital by huge margin.
In the case of India, investors making money at Bombay stock exchange and national stock exchange, use the money generated to invest outside India.
Research showed that every year people lose their handsome amount, millions and billions of dollars in the casino. Considering this, the Chinese government has declared gambling at the casino as illegal, if played by Chinese. Only foreigners are allowed to play in those Casinos. Thus, the money worth of millions and billions of dollars are lost by foreigners and not Chinese.
4. Taiwan Politics
China invited the American industry to set up its plant at Taiwan where maximum aid will be given by the Chinese government. America accepted this offer. Everything was well planned and China attacked over Taiwan. America ordered the evacuation of Taiwan. But China rejecting this order said that if America attacks both of their industries will be ruined in Taiwan and at that time hundreds of American industries were operating in Taiwan.
Now China charges corporate tax and supplies raw material for these industries located in Taiwan and thus their industries which supply raw materials to the American industry at Taiwan is also growing.
5. Tiananmen Square Massacre: 1989
In 1989, a number of graduates and PhDs were rising in China. These intellectuals began realizing that the Chinese economy needs more liberalization, i.e., less restriction by the government over private and foreign industries. They demanded reform at the stock exchange market and many other sectors of the economy. To get their demand fulfilled, students gathered at Tiananmen Square.
Chinese government condemned this protest and gave them the ultimatum to vacate but when the water was over the neck, troops with tanks and helicopter were sent and ordered for the shoot. More than 10,000 students were killed on the spot.
Today, in the case of India, MNCs invest money at their terms and condition but in China MNCs come and invest money at the terms and conditions laid down by the government.
These factors make China overperform the rest of the developing countries in matters of a growing economy.