Research and Policy... & Limitations of the Study...

Research and Policy Implications

The present study has mainly concentrated on the Chinese economic policies which have gathered China a growth momentum for thirty long years above the global average and its effect on distribution and inequality within the economy and out. The economic growth leaves traces on distribution of wealth and income inequalities to derive conclusions and develop framework for further policy research and implementation. The economists often criticize China for its policy of external devaluation or depreciation which increases exports at the cost of domestic real wages and demand and growth and imports too. Moreover, the debt fueled growth and a higher current account surplus that is increasing trade balance in the global economy and with trading partners also raise important questions the way global inequality has been affected through low employment and low demand and growth globally. Lose money supply and depreciation have also increased fears of the housing bubble in the economy. It raises object in the way Chinese economy is gaining competitiveness in global trade. The cheap Chinese goods, no doubt, increase real wages, but reduce employment in the domestic economy so the question of real wages does not arise, therefore cheap goods and dumping are not received in the right way for domestic growth, and it hurts domestic employment and growth. On the other hand, if China uses internal devaluation means higher real exchange (nominal exchange rate minus inflation) by making the internal price-level competitive through reforms and increasing productivity, through all the possible measures like more investment in education and innovation. It is well behind the developed countries like the US. We could easily find clues about how and what the economic policies should be used to increase both, domestic and global demand and growth

Limitations of the Study and Scope of Further Research

The limitations of the study include poor spending on education, innovation and growth in productivity which might deter the economy from increasing competitiveness, lower cost and prices to increase demand and growth, domestically and globally. Unless China increases domestic demand and also help increase demand abroad by increasing real wages, the growth of exports alone might not achieve the growth rate it saw during the last three decades. Nonetheless, there is a further scope of research in the factors that help achieve productivity and competitiveness in the long-run. So far China has relied on higher nominal exchange to increase exports demand which has been criticized by many to achieve competitiveness, but in the long-run a higher real exchange rate achieved through increasing domestic productivity might also help gain competitiveness. Lower domestic real wages and less employment and demand abroad may itself put brakes on Chinese expansion, which it should definitely try not to happen and should explore other options to increase demand and growth. Chinese authoritarian style of operation could derail its ambitions which might be replaced with a more democratic and market based economy. There is a scope for research to help rebalance the economy from an export and investment driven economy to a consumption driven model that has also scope for imports and higher demand and growth in the trading partners economy, too.