Question:

Why China has a higher GDP growth RATE THAN U.S.????

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It's for my economics class. PLEASE HELP ME!!!!!!!

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2 ANSWERS


  1. China is going through the industrialization process,  whereas the US went through the same process during the early 20th century. During this time China has a higher GDP growth rate because they are trying to catch up to the already advanced US and Western World. China is making industries that the US already has, such as steel and manufacturing industries. China's output is much higher than the US because they are making buildings, companies, schools, exports that they never had before. So think of it as US is richer than China and China needs to build so much, which causes GDP to increase, so that they can be at the same economic level as the US.


  2. The right answer for macro is that China started at an underutilization point on the Production Possibility Curve, while America is at an effecient point. China has been growing from a very poor GDP, deep in recession, so increases in Aggregate Demaqnd or Supply have a large impact...the US needs to grow the Long-Run Aggregate Supply, which can only grow about 3-4% each year.

    Heres an answer I gave before about China's economic history...maybe this will help too.

    In 1979 Deng Xiopang started to reform the Chinese economy stating that the economic situation be judged on facts, not truths...and the fact was they were miserable.

    Since then, the government has created Special Economic Zones (SEZs) where they would allow small capitalist experiments to see how things worked. The results have driven their policies since.

    In 1998 they signed an agreement into the World Trade Organization which basically protected foreign investments in factories and such from Chinese government nationalization. (Government takeover of foreign assets) Foreign investment soared.

    The Chinese government has recently allowed private property, incentive work systems, and have gotten control of the most free economy in the world when the British turned Hong Kong over to them in 1997. They have used Hong Kong as a model SEZ for the nation.

    These changes have encouraged massive development in China since 1979 to the extent that younger people rarely hear the phrase "There are starving kids in China." Economic groth has been (depending on who you believe) 8-12% per year since then, and they are quickly catching up from an ineffecient start.

    The best thing the Chinese government has done is to stay out of people's business, one which, under Mao's rule found villagers melting good steel in home furnaces to meet government scrap iron quotas, and tearing apart effecient farms to make ineffecient ones.

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