China U.S Economic War

          China-U.S Economy War Name Institutional Affiliation
China-U.S Economy War Introduction The United States is ranked as the world’s largest economy. However, over the recent years, China’s constant economic growth has threatened to overtake the USA. After the implementation of market reforms in 1978, China has seen an average growth of 10% per year (World Bank, 2018). This growth has enabled the country to better the lives of approximately half of its 1.3 billion citizens by improving living standards. China’s GDP has grown at a fast pace and is soon expected to surpass that of the United States by the end of 2030 (PricewaterhouseCoopers, 2017). However, since the population in the United States is significantly less compared to that of China, aspects such as income levels in the United States are bound to be on the higher side compared to China, regardless of the economic position. The United States is also bound to lead on other factors such as living standards and quality of life, regardless of whether Chinas economy is larger or not. This paper aims at comparing the two economies and discussing the impact of the war on the two countries. China’s Economic Growth Since the implementation of market reforms in 1978, China’s economy has transitioned from a centrally planned setting to a market-planned economy (World Bank, 2018). This shift has enabled the country to experience exponential growth of 10% per annum in their Gross Domestic Product (GDP). Aside from the GDP, the country has also managed to improve the living standards of approximately 800 million citizens. Despite the fact that China managed to achieve its Millennial Development Goals by 2015, and largely contributed to world growth after the 2008 financial crisis, the country is still labelled as a developing nation. Reason being, China still has incomplete market reforms and close to 55 million citizens residing in rural areas live in poverty. Similarly, the rapid economic growth has resulted in several challenges. These challenges include external imbalance, poor environmental sustainability, rapid urbanization and high inequality levels. More so, a large number of citizens have opted to look for jobs in foreign countries, which has led to demographic pressures. At this stage, China would face more setbacks in their transition from middle-income, which is their current position, to high-income. Nonetheless, the country has opted to adjust their policies and forcefully tackle the challenges by implementing a five-year plan set to run from 2016-2020. The plan aims at solving issues of health care, improving education, reducing pollution, adopting proper methods of environmental sustainability and tackling social imbalance. The plan is meant to be implemented parallel to a different plan of doubling their GDP, which means that the country needs to rebalance their economy while improving it at the same time. In the last quarter of 2017, China experienced a growth of 6.9%, hugely due to the property and export markets, which had shown resilience throughout the year (Trading Economics, 2018). The primary sectors that significantly contribute to China’s economy are fishery, forestry, farming and animal husbandry. The secondary sectors include construction and industry that makeup 9 percent and 40 percent of the country’s GDP respectively. The tertiary sectors include real estate, hotels, transport and wholesale, among others. Currently, China is focusing on achieving growth in GDP of 6.5 percent by the end of 2018. Part of the country’s target in 2018 will also be to reduce issues related to the quality of life and reduce financial risks.    United States Economic Growth After World War II, the United States experienced an increase in productivity and economic activity which was accompanied by an annual increase in GDP by 4 percent from 1940 to 1970 (FocusEconomics, 2018). Afterwards, the country shifted from manufacturing and industry to services, which saw the nation boost its economy significantly in the following years.   The United States economy is currently the largest globally. The United States economic contribution to global output is estimated at 20 percent, which is larger than that of China (FocusEconomics, 2018). Majority of the output in the United States economy is contributed by the services sector, which is technologically advanced and highly developed. Companies that fall into this category include retail, healthcare and financial institutions. Resultantly, the sector contributes to 80 percent of the country’s GDP. Additionally, the manufacturing sector also plays an important role in the country’s economy, with companies such as telecommunications, machinery, aerospace and automobiles. In general, the manufacturing sector contributes to 15 percent of the country’s output.      The growth of the United States economy has been made possible through a combination of factors. These factors include adequate natural resources, knowledgeable workforce, technology and sophisticated infrastructure. Their business and market environment are also encouraging since the government has implemented policies and legal systems that are favorable for economic growth. Nonetheless, the great recession made significant impacts on the United States economy, which experienced a drop in GDP and high rates of unemployment. However, the country has seen steady growth and recovery has been made possible by the expansion of monetary policies such as holding interest rates at the lower bound. Although the country managed to recover from the recession, there are many other challenges that are still unsolved. The rise in instability, health care costs, government budget deficits and salary stagnation are some of the current issues that the United States is facing. Economic War between the United States and China According to a report by the World Bank, China is the curent largest economy in the entire world in terms of the GDP Purchasing Power Parity (PPP) (World Bank, 2018). The International Monetary Fund also second’s the decision by the World Bank to name China as the largest economy based on PPP since it determines the number of goods and services you can purchase with a certain amount of cash. Currently, more money is spent on purchases in China than in the United States. More so, the United States economy is worth approximately $17.81 trillion, which is slightly lower than that of China, which is approximately $17.91 trillion. Other than that, the Center for Economic and Business Research (Cebr)...