China is the main country which is pulling up the World GDP due to her productivity which takes attention of multinationals. The World economy has showed a decreasing growth due to weak financial system for ordinary people and a global economy where multinational can take advantages of information to develop ideas with their high volumes of paper money. China shows exponential growth in her exportations until point to overtake exports from the United States, moreover this country has increased her uses of crude oil per capita, it means Chinese improve their manufacture system and they give more added value to World. China case is important to the World due to multinationals believe in her economy and they invest in this country. Developed and developing countries have to be aware of this case to replicate it, multinationals do not have to be afraid to invest in developing countries to improve social welfare through lower unemployment rate, nowadays multinationals can hire high skilled people and unskilled people in developing countries, this objective can bring reduction of poverty. The only movement that these multinationals have to do, it is to invest in developing countries and developed economies have to ensure their investments, at the end it is just paper money.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
The World economic growth showed positive growth until 2009 when financial crisis struck the World economy with a World’s GDP decline in 2.2% as figure 1 shows (gray line). Moreover, World economic growth shows a decreasing trend since 1962 when it reached 4.4%, this decreasing trend is evidenced throughout the World GDP’s moving average (green line figure 1), taking a value of 3.9% in 1981 and 2.3% in 2011. This decline in economic growth can be explained by the openness of economies in a global scenario where information goes fast, population growth, weak and expensive financial system for ordinary people, political issues and few global enterprises which do not pay attention to social welfare as employment rate as main issue.
Figure 1. World GDP growth 1962 - 2011
(%)
*Moving average growth take into account 5 lags.
Source: World Bank Data.
Fortunately this World economic decline is offset by China growth. China is divided into three main regions: China mainland; Hong Kong and Macao. These three economies have showed an important growth since 1981 when they shared around 2.1% of total World GDP as figure 2 shows, by 2011 they reached 14.7% of total World GDP where China mainland is the main economy that contributed. This figures are supported by China GDP growth that has been no less than 3.8% since 1981 (dashed line figure 2), it is important to highlight that China grew 9.2% in 2009 when main economies showed a negative growth.
Figure 2. China contribution to World GDP 1981-2011 (%)
Source: World Bank Data.
China (all three) showed this growth due to multinationals find high standards in labor force, lower salaries and strategic geographical position. People from China shows an increasing productivity which is reflected in higher exports than the United States since 2007. Figure 3 shows the United States productivity related with China productivity (horizontal axes), as one can see, China productivity increased in the last eleven years related with the United States productivity, therefore China showed higher exports than USA (vertical axes, year is close to the point). This increasing productivity from people from China maybe improve more, China is importing more crude oil per capita than before. China imported 0.1 liters per capita of crude oil in 1966 and 1.2 liters per capita in 2011 as figure 4 shows, it means China is making finished products with high value added. On the other hand the United States shows a marginal reduction in crude oil per capita, by 1966 this country consumed 9.8 liters and this country showed a reduction to reach 9.6 in 2011, this information let reach two conclusions: first the United States is improving her uses of crude oil or the United States is getting a stationary productivity which means same products and a slow growth.
Figure 3. USA and China relative exports and productivity 2001 - 2011
PPP: Power Parity Prices at 2005 prices.
Source: World Bank Data and Trademap.
Figure 4. USA and China mainland crude oil consumption 1966-2011
(Liters per capita per day)
Source: World Bank Data and BP Statistical review 2012.
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