Although the world is only just beginning to crawl its way out of one of the most severe economic recessions in decades, it is encouraging to note that the state of Far Eastern finance does, on the whole, look promising with regard to its road to economic recovery.
The term Far East covers a truly huge variety of countries, from China and Japan, to Mongolia and North Korea. Although each country has its own individual cultural heritage and financial industries, the importance of the Far Eastern financial sector cannot be understated. In spite of the fact that each country in the area has different financial capabilities and output, with some, such as China and Japan, proving to be more economically successful than others, the economic state of the area as a whole is extremely important, as its health or misfortunes can have powerful impacts on the rest of the world. It is, for example, worth considering that economic output in this area accounts for around a fifth of the world’s GDP (PPP), a not insignificant figure.
Some of the key features of Far Eastern finance are things such as increased governmental decentralisation in the area of finance and economics, and, on the whole, a very positive work ethic displayed by workers in this geographic area. Additionally, the fact that this economic area is one that is in a state of fairly constant growth, offering free and flexible labour to employers and employees alike, has helped encourage the state of Far Eastern finance.
Although these features and others, such as typically low duties being imposed on imports, are naturally generalisations of the structure of Far Eastern finance, due to the inherent differences between each country’s economic and political system, such generalisations do help us to understand what some of the key contributing factors have been in shaping the structure of the Far Eastern economy today, and what has made the area so important to the global economy as a whole.
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In the current economic climate, financial growth is something that might seem a long way off for many economies. That being said, there is still possible growth out there – as some developing nations have shown.
While the rate of growth has declined in many traditional economic powerhouses, there is a new breed of financial success stories that have looked to buck the trend. Many countries, such as those in Europe, have suffered stagnation and even periods of recession. In stark contrast to this, some traditionally poorer countries have shown massive potential.
Financial growth in China has been continuing at an astounding level. What was once considered a poorer nation now sees unprecedented growth. Thanks in part to the country’s strict economic policies, increased foreign investment has seen the Communist state blast into the twenty-first century. In what may have been inconcievable just twenty years ago, China now dominates the world economy and has usurped many traditional financial powerhouses such as Britain and Germany.
Although China’s growth has slowed somewhat in recent years, it still remains at around 7.5%. In the past decade, China’s financial growth has continued at almost unprecedented levels. Many established economies are struggling to get any positive growth whatsoever, and some are considered to be doing well if they can reach growth figures of around 1%. China’s success has been almost off the scale.
It’s not just down to foreign investement, either. China’s billion-strong workforce has meant that production and consumption have been increasing domestically. A new burgeoning middle class means that there is now is a market both internally as well as internationally. China’s strong financial growth looks set to continue.
Althoguh China’s strong growth is somewhat unprecedented, there are still some precedents from history. In the 1990s, many Asian countries were achieving great economic success until the 1997 economic crash. Countries such as Thailand were previously seen to be on the rise, but have suffered less prosperous recent times. Although China will have to be careful not to head the same way, the nation’s resilience has been evident in its ability to resist the current global economic crisis.
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Over the last decade the Chinese economy and finance supporting the growth of the economy has increased at a significant rate. According to The World Bank the Chinese nominal gross domestic product (GDP) in 2001 was 10,965.5 billion Yuan. By 2011 the nominal GDP had increased to 47,156.4 billion Yuan. Over that period nominal growth rates averaged 15.33% per year, with a real growth rates (the growth rate after allowing for inflation) averaging 10.38% per year.
The growth in the Chinese economy and finance was stimulated by numerous influences and events. The foundations emerge 1978 when, following a decade of stagnation, Deng Xiaoping outlined a new economic policy. Rather than continue with closed door economic policies a new model of ‘market socialism’ was created. In ‘market socialism’ the traditional, socialist markets that had constricted the development of the Chinese economy and finance markets where gradually opened up to market influences. Changes where implemented slowly; including the long process of joining the World Trade Organization (WTO).
China’s acceded to the WTO in 2001, since then significant developments have taken place within the Chinese economy and finance sector, resulting in increased international trade. China became an attractive trading partner, especially to developed countries. Attractions were predominantly cost based; low costs leading to comparative advantages, especially in textile and other labour intensive industries. Another important factor increasing the total amount of trade and boosting the economy was the expiry of the Agreement of Textiles and Clothing (ATC) in 2005. The ATC had succeeded the Multi-fibre Agreement; both of these agreements limited the volume of Chinas textile exports. The WTO membership and expiry of the ATC have aided export driven economic growth. According to WTO statistics in 1998 China had only a 3.37% share of the global export market. By 2010, China accounted for 10.28% of all exports. Growth has been phenomenal, but when considered in the context of the changes, it is not surprising.