China's Importance to the Global economy Research Paper

China's Importance to the Global economy - Research Paper Example China is the world's second largest economy if we see by both nominal GDP (Gross Domestic Product) and PPP (Purchasing Power Parity)(New York Post, 2010). It is even the permanent member of UNSC (United Nation Security Council). China has been title as the global super power by a number of academic (Carnegie Endowment for International Peace, 2010) military analyst (Maxwell Air Force Base, Alabama: The Air War College, Air University. p. 33.) and public policy and economics analysts. However, its outputs contribute widely to the world; its demands for raw materials are massive that may poke environmental threat. Despite, China benefiting higher economic growth rate its domestic consumption remain low, as a result higher national saving rate and more overseas investments results. China will move on to become the world’s second largest economic nation in the years to come.    Factors Contributing to China’s Current Status China's rapid growth cannot be term as an accide nt. Behind its success lie the application of right policies from the side of the economic theory and even practically. Decision to Join WTO China's growing economy resulted in a very significant role in global economy. Its decision to be a part of WTO has not only supported its country towards success but also contributed to the worldwide economic development. The practical importance of this success is evident. This year China will probably account for whole of net economic growth worldwide. China's GDP growth would be 8.0% or above. Its economy will grow by 7.9% year-on-year probably in the second quarter and would accelerate. Urban investment rise by 34%, retail sales by 15%. China’s success result explicably because of the normal economic factors. China makes use of series of mutually and interconnected reinforcing policies. Price Control Measures China has very strictly enforced price control measures. It has kept the value of its currency (Yuan) at an artificially low level. Division of Labor Firstly, the economy has a high proportion of exports. Every economist after the great Adam Smith has recognized the vitality of division of labor in acceleration the level of productivity, and division of labor in a modern economy is essentially international. An increasing level of imports and exports are the increasing way of participating in such a division of labor. Economies of Scale The application of division of labor also results in economies of scale for China. The investopedia defines economies of scale as â€Å"The rise in  efficiency of production  as the quantity of goods  being produced accelerates.  Typically, a country that achieves economies of scale benefits from lowering of the average cost per unit through the increase in production units this results fixed costs are shared over an accelerated number of goods.† High Level of Investment Second is China's greater level of investment. Latest econometric research reveal conclu sively that, after division of labor, the largest factor in economic growth results from the rate of increase of fixed investment. This covers not only the developing economy such as China but also even the developed economies. Mr., Dale Jorgenson, the world's leading proficient on the productivity growth notes, "Investment in physical assets is the most essential source of economic growth in G7 nations. The contribution of input capital exceeds that of the total factor