As China is moving on to modern industrialization and globalization, there are also unavoidable social and economic effects. The biggest challenge for China is to deal with the early symptoms of an overheating economy.
Over the last two decades, the workshop of the world has been witnessing a remarkable economic transition and has been expanding its economy by more than 8% every year. In 2002, it became the first country to attract more FDI in a year than the US, bringing in $53.2 bn while $52.7 bn went into the US. It's no surprise that, in spite of the global economic and financial market turmoil of the past few years, China's strong economic performance has stood out. Unlike Korea and Japan, one important aspect about Chinese economy is that, it will be an economy built around the individual and small and medium enterprises. Going by the 22% of the world's population associated with China, domestic demand will be the principal driver in the world's sixth largest economy. China for sure is integrating itself deeper into the world economy, as it opens its market wider to foreign investors, mainly due to the WTO accession. Like last year, when China contributed to over half of the world GDP growth, it could be the major driver for world growth this year. Nonetheless, China's economic size, less than 5% of world GDP, makes its influence rather limited.
As China moves towards industrialization and globalization, there are some unavoidable social and economic issues. These include widespread corruption, widening income gap and rising unemployment (there are 380 million without a regular job in China). Providing jobs or economic support for this number of people will be a daunting task. Beyond this, according to China's National Bureau of Statistics, 90% of the domestic goods manufactured are in oversupply. This chronic oversupply would lead to factory closures, creating even more unemployment and social instability.
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