Economics A2

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Is the rise of China good for America and Europe?

March 15, 2011 by mrslpowell · 22 Comments · Uncategorized

Begin by watching the link below :

13C you will argue that the rise of China is BAD for Europe and America.
13D you will argue that it is GOOD.
Happy blogging !

22 Comments so far ↓

  • agradeant

    The rise of the chinese empire comes with much a threat for Europe and America. For a country with one fifth of the world’s labour capital as well as a surplus in fuels such as coal, their rapid economic growth is inevitable. What does that mean for us? Well, we have already seen much of the UKs manufacturing industry collapse, with the lack of competativeness, and the chinese aren’t likely to sit on industry forever. Heavy pegging ensures a tough challenge for international competitors and sustained demand for chinese goods. Their massive eonomic growth does not just have a negative impact on our economy. China faces a huge environmental problem, with pollution figures high. Their economic growth has seen rises in inequality, with abysmally low gdp per capita rates compared with their total gdp. China have replaced happiness with growth, as the contagious misery spreads from chinese labourers to european and US fims trying to compete.

    posted by ‘lucky if I get a B grade’ Anthony A.

  • Peter

    The rise of China may have positive effects for America and Europe. As the yuan is a weaker currency than the dollar or the pound, it allows for America and Europe to buy relatively cheaper imports, which includes capital equipment. This will lower the American and European firm’s costs, possibly increasing profit. From here, if labour is invested in well and trained to use the specialist machinery, it may improve output and labour productivity in the long run, allowing for GDP and economic growth to rise.

    Moreover, the increased competition from China will force American and European firms to become more efficiency, dynamically and productively, in fear of losing market share and having to leave the market outright. This may lead to R&D and innovation, as the firms will develop new techniques to lower costs and increase output. Also, if these lower costs are passed on to the European and American consumers, they will benefit from lower prices, better quality goods and services, and an increased variety of products.

  • Jackie Chan

    http://en.wikipedia.org/wiki/Usa_economy

    http://en.wikipedia.org/wiki/Economy_of_the_European_Union

    Both has the highest % of imports from China.

    What happens when China decides produce and consume the goods and services they make.

    Anyways. Current, USA is the biggest economy. Recently; “When America sneezed, the world caught a cold”. Curable with some medicine and Strepsils.

    If China does become the biggest economy. What happens when they sneeze? Bird Flu. We all die!!!!

    So. Is the rise of China good for the USA & Europe? (Considering the potential impact of their sneeze)

    I’d prefer just a little cold to bird flu.

    Conclusion:

    I believe it should be Chinese Take Away for dinner. Everyone. Go treat yourself to some too. ;)

  • Eddy

    On peter’s comment yes it could make American and European firms to become more efficient, but that still would not be enough as China’s produciton costs would still be much lower as their labour costs are so low. Therefore European and American firms would still not be able to compete with the cheaper Chinese products.

  • rimmel

    China’s economic growth is increasing rapidly due to their manufacturing industries, this is clearly a threat to the western world as they have declined enormously within the manufacturing industry therefore relying on other countries such as china for goods. China have obviously realised this as they have pegged their currency to the dollar to keep an incentive for americans to buy their goods. Another reason it can be damaging to western countires is that they will struggle to compete against china’s low production and labour costs. This could mean the end of any new manufacturing firms being established within western countries. However it could be said that china depend upon us as much as we do them. china although thriving from high ecnomic growth still face low standards of living and wage rates. This means many people within the country do not have the demand for a lot of the luxury goods they produce, therefore they depend maninly on western countries to demand these goods.

  • Kirsty

    The growth of China can have positive effects for the UK, Europe and America in a number of ways.
    One such way is through imports, China makes imports at a very low cost and so the price of Chinese goods is also low. This means that the rest of the world benefits from cheaper imports. Despite this not being ideal if consumers stop buying domestic goods as much and replace them with Chinese goods, this can be outweighed by firms in America and Europe buying cheap goods to benefit their business. This benefit can help firms to sell services or goods which can have a positive effect on their balance of trade.
    Similarly technology has changed due to the growth of China, the increased production of certain technological goods has lead to over time the goods becoming cheaper, which allows greater use of that technology for consumers and firms which benefits everyday life and firms (e.g. better economies of scale due to better technology).
    The growth of China’s economy provides the potential for businesses in the UK, America and Europe to grow and so help the economies of those countries.

  • Ryan

    Due to the country’s rapid economic growth, the Chinese government is able to receive more tax revenue without even raising the tax rates as national income has risen. Increased tax revenues can be invested in merit goods such as education and health care and this can have a bad effect on Europe and America. Education, which is a supply side policy, will lead to more people earning high-level skills especially in the tertiary sector. This means China will not be relying on the American and European economies for some goods and services, which will reduce their balance of payments as they are exporting less. It will also affect other macroeconomic objectives such as employment because if you are not selling your goods then you won’t be making enough profit to pay your workers and therefore some of them will be made redundant. Less number of workers = Less industries = Less economic growth = Lower national income = Increased crime rates = Failure!

  • Nick

    Certain people (Peter) fail to realise that the Yuan is a weaker currency than the Euro or Dollar for a reason: it is pegged in a manner that makes it entirely beneficial to the Chinese, rather than their consumers in the West.

    The rise of China as an economic powerhouse has led to a widespread loss of economic capability in Western nations. Unable to compete with the low labour costs in China (and indeed the aforementioned pegged exchange rate making importing cost-effective), domestic firms have closed down and moved to other sectors. Far from becoming more efficient due to the threat of losing market share, that time has been and gone: the market share has already been lost.

    As a result, Western nations are almost entirely dependent on China for their goods. We are now at a point where China can dictate their terms and their prices to the West, confident in the knowledge that Western nations are almost completely reliant on Chinese imports for their goods. The newly developing markets in other Asian nations like Thailand and Indonesia are challenging China’s theoretical monopoly, but there can be no doubt that the rise of China has been bad for Europe and America.

    P.S: ‘Nuff said, Peter.

  • TwinK

    The rise of China is definately a negative thing for America. Their recent strong growth is a threat to American power which could cause conflict issues due to China’s main trading partner being the US. As stated by Eddie, the low labour costs in China has forced American and European firms to shut down, negating healthy world competition.

  • TwinT

    To be honest, China is well on its way to becoming a formidable global power. The size of its economy has quadrupled since the launch
    of market reforms in the late 1970s and, by some estimates, will double again over the next decade. It has become one of
    the world’s major manufacturing centers and consumes roughly a third of the global supply of iron, steel, and coal. It has
    accumulated massive foreign reserves, worth more than $1 trillion at the end of 2006. China’s military spending has
    increased at an inflation-adjusted rate of over 18 percent a year, and its diplomacy has extended its reach not just in Asia
    but also in Africa, Latin America, and the Middle East. Indeed, whereas the Soviet Union rivaled the United States as a
    military competitor only, China is emerging as both a military and an economic rival — heralding a profound shift in the
    distribution of global power..

    Also to add insult to injury, two things are likely to happen: China will try to use its growing influence to reshape the rules and institutions of the international system to better serve its interests, and other states in the system — especially the declining hegemon — will start to see China as a growing security threat. The result of these developments, they predict, will be tension, distrust, and conflict, the typical features of a power transition. In this view, the drama of China’s rise will feature an increasingly powerful China and a declining United States locked in an epic battle over the rules and leadership of the international system. POW

  • Harry Potter (keiron)

    Countries such as the UK will never be able to compete with countries like china at creating goods because their huge labour supply and lack of minimum wage rules allow them to produce goods at extremely low prices that western countries can’t mess wiv. However countries such as the UK create revenue from services such as insurance and legal firms. However if China start to use a lot of their revenue from goods as capital for training people at the same stuff western countries specialise in, they will be able to compete with the high quality western services. However due to the high labour supply and lack of wage rules in China they will be a lot cheaper than the western countries and take all their customers so the western countries will be f’ed as they are getting beaten at providing goods and services!

  • Alistair

    China’s immense economic growth has contributed to negative externalities which need to be accounted for, the high pollution levels are caused by the lack of effiency of the technology.

    http://en.wikipedia.org/wiki/Environment_in_the_People's_Republic_of_China

    Figures from the link are rather appalling, with concentration on pure economic growth, it has neglected the health of its inhabitants (in 2007, 1% of its population breathe “safe” air).

  • Menelik

    I typed in an entry earlier but the computer lost it, so excuse this rushed piece of commentary.

    The rise of China is definitely bad for the west. We are lossing jobs as both firms in the service and manufacturing industries move their production to the east, in search of lower production costs and a larger pool labour to select from. But if China is receiving foreign investment as a result of its natural competitiveness, who are we to say it shouldn’t happen. We’ve had our growth and possibly reached our limit. The majority of Uk workers have a high standard of living in comparison to chinese workers. I don’t see us taking a pay cut to lower our labour costs do you?

  • Amy.N

    China is emerging as a major force in the world economy with an average growth rate of approximately 9.4% a year in real GDP and is forecast to be one of the world’s biggest economies within the next decade.

    A rise of a new economic power could potentially be beneficial for western countries such as Europe the US by lifting the entire global economy. An example of this would be the explosive growth of the US where increases in global trade and advanced technological progress led to a better world economy.

    China has a weaker currency compared to that of the US and Europe. As China’s economy is primarily based on exports, a weaker currency will mean lower import prices of Chinese goods for these western countries . Although it can be argued that by importing more Chinese goods it reduces domestic demand for those goods/services, it can also have an advantage as inexpensive Chinese imports can help to keep global inflationary pressures down.

    In addition, China has great technological advances compared to many other countries which can help to boost growth. If firms from the US and Europe import technological goods from China (i.e advanced machinery), it would allow the firms to become more productively efficient. This and the falling costs of information and communication due to the better technology will lead to a fall in prices of European and American goods, which will benefit domestic and foreign consumers greatly.

  • David Offei Boadu 13D

    REPLY TO Menelik

    The rise of China is definitely bad for the west. We are losing jobs as both firms in the service and manufacturing industries move their production to the east, in search of lower production costs and a larger pool labour to select from. But if China is receiving foreign investment as a result of its natural competitiveness, who are we to say it shouldn’t happen. We’ve had our growth and possibly reached our limit. The majority of UK workers have a high standard of living in comparison to Chinese workers. I don’t see us taking a pay cut to lower our labour costs do you?

    David’s comment: the impact of globalization has caused firms to drive down production costs in China in order to attract in investments.
    One one hand, China is international competitive therefore it has to drive out production costs either by innovation or driving down production costs in order to be efficient. Maybe the UK firms are not as innovative as the Chinese firms that why foreign firms are moving to the East but not in the UK. Also, assuming that the UK firms are inefficient, they cannot compete against the UK ion an international scale.

    Nevertheless, China is an example of the benefits of economic imperialism. The West many years ago told the World that capitalism is the way forward. China at that time was a communist country. However, in the late 20th century they opened up their markets. This shows that the benefits that China receives not from its economic miracle is due to the West enlightening them about the possibilities and befits of capitalism in general. In light of light of this, China’s economic superpower is thus beneficial to the West

    Secondly, the fact that UK workers are losing their jobs to China is largely going to benefit in the UK economy in the long run. This is because it will act as an incentive for British worker to work harder or to invest in training courses to improve their productivity rate.
    In addition, China is attracting many firms because of it high productivity rate. UK workers need to work harder and faster to compete against China.

  • David B 13d

    REPLY TO Menelik

    The rise of China is definitely bad for the west. We are losing jobs as both firms in the service and manufacturing industries move their production to the east, in search of lower production costs and a larger pool labour to select from. But if China is receiving foreign investment as a result of its natural competitiveness, who are we to say it shouldn’t happen. We’ve had our growth and possibly reached our limit. The majority of UK workers have a high standard of living in comparison to Chinese workers. I don’t see us taking a pay cut to lower our labour costs do you?

    David’s comment: the impact of globalization has caused firms to drive down production costs in China in order to attract in investments.
    One one hand, China is international competitive therefore it has to drive out production costs either by innovation or driving down production costs in order to be efficient. Maybe the UK firms are not as innovative as the Chinese firms that why foreign firms are moving to the East but not in the UK. Also, assuming that the UK firms are inefficient, they cannot compete against China on an international scale.

    Nevertheless, China is an example of the benefits of economic imperialism. The West many years ago told the World that capitalism is the way forward. China at that time was a communist country. However, in the late 20th century they opened up their markets. This shows that the benefits that China receives not from its economic miracle but from the West who enlightened them about the possibilities and benefits of capitalism in general. In light of this, China’s economic superpower is thus beneficial to the West

    Secondly, the fact that UK workers are losing their jobs to China is largely going to benefit in the UK economy in the long run. This is because it will act as an incentive for British worker to work harder or to invest in training courses to improve their productivity rate.
    In addition, China is attracting many firms because of it high productivity rate. UK workers need to work harder and faster to compete against China.

    in conclusion, China is good for the WEST.

    A QUESTION FOR 13C: HOW many of you can say that you have not bought any goods or services that hasn’t been made in China?

  • Jackie Chan

    Yes Yes Taiye. Copy & Paste. POW!

    “A QUESTION FOR 13C: HOW many of you can say that you have not bought any goods or services that hasn’t been made in China?”

    Is that necessarily a good thing? Everyone consuming oversea produced goods. Yes, low global inflationary pressure because of cheap produce is good. But the UK itself has a trade deficit of (estimate) £9.2bn. http://www.guardian.co.uk/business/2011/feb/09/uk-trade-deficit-hits-record
    That is -£9 200 000 000.

    Is that good for our economy? IS IT????????

    “Secondly, the fact that UK workers are losing their jobs to China is largely going to benefit in the UK economy in the long run. This is because it will act as an incentive for British worker to work harder or to invest in training courses to improve their productivity rate.”

    UK has undergone a process called de-industrialisation. We are a tertiary sector economy – meaning we specialise in services. China is a secondary sectory economy – specialising in the manufacturing industries. If the British are training, they are probably going to type faster on a computer in the bank. Not producing goods faster whilst accepting 20p an hour. You didn’t answer to Menelik’s last sentence. & To be honest, the British loves going on strikes because of low wages anyway.

    & Also. David. “in conclusion, China is good for the WEST”. WE KNOW IT IS. WE LOVE CHINA. I LOVE CHINA. The question is about RISING China. Not China. RISING!!!!! GROWING. ASCENDING. EXPANDING. IS RISING CHINA GOODS FOR THE WEST? Apologies because my knowledge on politics is not up to scratch. All that imperialism and capitalism. Its a blur. Simple politics; the growth of China as stated by Taiye’s copy and pasted point; it could lead to conflict. The last thing we need is World War III.

    Amy. If you look at the back of an Apple iPod. (Designed in California. Made in China). China is a developing country. The innovation and invention is from the West. China is just the production process. Mrs Powell says that China imports technology (capital equipment – machinery) from the West. Of course, I don’t know how reliable the source is, but I’d think it’s true.

    Lesson time. :)

  • Kyrell

    From reading through some of the points brought up earlier in this argument there isn’t much to be said in response that hasn’t already been said by a member of my team.
    However, the question is “Is the rise of China good for America and Europe?”. Some responses from the other side have led me to think that some of you believe that you think the World is make up of China, USA & Europe. It is obvious that China’s lack of a minimum wage and extensive working hours provides the USA and Europe with cheap goods which they benefit from. And yes China has grown much more rapidly then any other country but it would be small minded to assume that because the USA and Europe cannot compete with their exportation of goods that the rise of China is bad.
    The UK specialise in exporting services: I read a comment earlier stating that China could begin to do the same to increase their growth… The fact of the matter is that they’re not therefore for the time being there is nothing to worry about.
    It should also be mentioned that the cheap goods exported from china are initially engineered within the USA and Europe. China then take these goods and replicate them in ways that they believe benefits them but also has a knock on benefit across the world. It is easy to forget that large companies outsource their labour to China for the cheaper costs, yet the company is one reaping the profits NOT China. Although we receive goods tremendously cheap from China they are not the only country that the UK trades with. There are many agreements with different countries involving trading goods and services, so if the worst case scenario were to happen (China attempting to take over the World through trade in goods) then a treaty could be made that excludes them as a trading partner from the USA and Europe.
    To sum this up, YES at this current time the rise of China is good for America and Europe!

  • Lupe 'Drew' Fiasco 13D

    Ok, where do I start? Let’s try with the opportunities the growth of China can give us. For a start, pension funds that we have invested in high growth businesses in China for example, give ‘us’ (‘us’ being the UK, Europe and the USA for future reference) a return that very little other investments can promise or deliver. Essentially, and this can apply to other circumstances, we can piggy-back their success to some extent. If we have any kind of money invested in the Chinese economy, it is most likely we will have enjoyed massive profits. These opportunities will carry on to present themselves to the more wealthy part of the world until this growth stops.
    With China growing so quickly, the fields we specialise in come into play. For example, as great as their workforce is, it lacks in financial knowledge and expertise. This can only benefit countries where financial services are one the main exported services (UK). I think it was mentioned that if the Chinese decide to put resources into training the workforce, it could easily rival the developed countries ‘level’. This however has already been tried in Beijing and even Singapore where however successful, could not nearly rival London’s ‘power’. It leaves it wide open for our intervention and immediate benefit.
    With this growth, it is inevitable that most, if not all people involved (in China) will benefit financially. The producers become consumers and some of the money that went one way, comes back the other. On purely the government side of things, with sovereign wealth funds, the Chinese government was buying our property, investing in our businesses etc. and ultimately spending the money they gathered from this rise in the UK and the USA. They bought bonds or currency when the UK government used quantitive easing to raise funds which means they have a large stake in our countries as a whole.
    On the individual side, the everyday Chinese man, as he begins to live more similar to the western lifestyle, will want more western products which cannot be acquired in their own country. Enter the countries that can supply such products and the Chinese will have no choice but to import goods that cannot be attained from their own country, thus benefiting the UK, Europe and USA. In the same aspect, tourism in countries that have been notoriously popular destinations can only benefit as more and more Chinese have the option to travel to our countries and benefit our economies.
    To finish off a few ideas that may or may not be 100% accurate but nevertheless I think are beneficial to us. There will be an improved relationship between China and the UK, USA etc. (of course if there is enough to and from between the countries). With this can be the opportunity for more of our population to go over to China and work and so possibly send back money (benefitting our economies, not China’s).
    Also as a last point, at the moment China is acting as our ‘rubbish dump’. For the majority of our technological waste, it goes to China to deal with. Now however unethical, on an economical level, this can only help the UK, Europe and the USA.
    Now it looks like that time when I need to finish with a cocky little comment.
    P.S. I’d like to formally request that 13D gets the easier side of the argument for the next one as 2 on the trot for the harder argument is pretty harsh no? I would’ve loved to ruin China!

  • Jack

    The growth of the Chineese economy is good for both the uk and USA as it allows them to utialise their absolute advantage over the aforementioned countries. While this will mean that domestic demand for those products will fall, what you have to consider is if there is any domestic demand.

    The uk has deindustrialised and no longer produces it’s own goods instead allowing countries like china to more efficently manufacture goods.

    As long as the price Chineese goods stays low and the uk and us aren’t producing the same goods as china they can take the benefits of cheaper goods for the cost of a deficit on the balance of trade.

  • sgjohnson

    So I see the situation as..
    China – Pegged Exchange Rate – Keeping external value of currency low, western countries interested due to lower imports and this closes down our manufacturing industries.

    Yeah ok it’s closed down that industry and it’s still on decline, but don’t forget that isn’t the ONLY sector we can compete in globally. I mean, more imports into the country means other sectors are benefiting, cheaper costs of components if they’re made abroad? The courier sector must be thriving, and if businesses were smart they’d aim for a better quality of product which would offset the higher costs of production for the goods.

    The manufacturing industry is completely different to the financial service sector we have in the UK, to set up a factory and employ people at $1 an hour is a far easier job than setting up international banks who deal with immense figures and are able to place money into the right markets, help with purchasing houses, and help businesses grow & thrive. This requires a high level of expertise and would be a huge risk for the Chinese to do so. And remember a pegged exchange rate would not attract the inflows of hot money into the economy, as returns would not be beneficial to those looking for a high level of profit there.

    George Osbourne said on Wednesday that he wants to see ‘Made in Britain’ or ‘Invented in Britain’ on all products, I see the idea as quite far fetched but he is right in saying that we should begin to invest in enterprise, and the creation of new innovative products which can be sold globally. If people see goods they are highly attracted to and the price is right, then there will be demand for it.

    Oh, and also if the Chinese begin to start demanding their products don’t you think that will spark high inflation? Yeah and how are they gonna deal with that…. Interest rates? Probably, and exchange rates increasing will be a side-effect of that policy. We all know that, we do A2 economics…. So demand for Chinese product lowers globally & domestically. Meaning they aren’t exploiting as much. Meaning some form of international competitiveness by countries who care about there population would prop up!

    If businesses realize that they can use China as a benefit just like Primark did in the retail sector, then jobs CAN be created for our population while a large amounts of our imports come from abroad.

    Do what we are best at, improve in other sectors, enterprise for innovative exciting fresh products will ensure the West is fine and face no threat from China at all.

    *gets ready for a day at college, white polo maybe?*

    Shaun

    P.S the yuan isn’t pegged anymore, but they are managing how the currency floats and appreciates against trade partners.

  • Mr. Babalola

    No doubt China’s a lot more competitive than both the UK and America with their low production costs. China’s comparative advantage means that the UK’s economy has become very deindustrialised over the last two decades or so, leading to structural unemployment in certain parts of the UK dependant on a manufacturing economy- increasing both relative and absolute poverty in these regions.

    Although over the years, the UK has excelled in the tertiary sector due to various supply-side policy, there’s still some waste of resources in the economy (workers that have been made redundant by structural unemployment), which means the economy is being inefficient.

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