China's top economic challenges to maintain as one of the fastest Essay

China's top economic challenges to maintain as one of the fastest growing economies - Essay Example GDP has grown swiftly at an average of 10 percent a year whereas over 500 million people have risen above the poverty line. A gradual shift from a centrally-planned to a market-oriented mixed economy, which is based on the market demand and supply mechanisms, has largely contributed towards China’s economic boost. Since the economic liberalization began in 1978, China’s economy has grown around a hundred times. China has recently emerged as an investment-driven, export-led economic giant. Factors leading towards this enthralling progress include salient economic reforms. Foreign trade structure has been de-centralized and efforts have been made to integrate into the international trading system. China became a member of  Asia-Pacific Economic Cooperation  (APEC) group in November 1991, a step believed to promote liberated two-way cooperation in the economical, regional trade and technological fields. The induction into trade organizations such as World Trade Organiz ation (WTO) in 2001 was also a healthy move to escalate China’s trade figures as WTO required the Chinese government to further liberalize and deregulate trade. Fostering foreign-invested industries has also lent a helping hand towards China’s export growth. All these reforms aggregated into China becoming the fastest paced growing major economy not only in the region but also in the world. ... Today, the government and the policy makers of China have concerns regarding many issues which have arisen as the by-products of intense economic expansion in the country (Zhang 2003). Firstly, one of the major challenges faced by the Chinese economic growth is the prominent US accusation of ‘manipulating’ the Chinese currency. Over the past few years, the official currency of China, Yuan, has been held in a floating exchange rate system, though only allowed a very narrow margin to fluctuate. Many in the US however urge for a more flexible exchange rate which pivots around the market equilibrium determined by the market forces of currency demand and currency supply. Despite of the fact that Yuan has been allowed to fluctuate more liberally and has even risen by 20% in value against the US Dollar since 2005, Japan, European Union and US yet accuse China that it manipulates its currency by deliberately keeping it at a low exchange rate in relation to the US Dollar with a v iew to make the US products less competitive and, simultaneously, the Chinese goods and services more competitive and relatively cheaper than the US goods. This lowered currency rate leads to a rise in Chinese exports whereas US exports decline. A large amount of trade deficit suffered by the US in trade with China adds to the gravity of the accusation. Concerns for China regarding this issue are that the US, World Trade Organization or APEC might impose trade sanctions on China for its ‘problematic’ currency exchange rate. These sanctions may prove very costly for the growing Chinese economy as the world’s second largest economy is principally led by mass amount of exports to its