Macroeconomic Principles in China

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Macroeconomic Principles The economic growth of a country is impacted by various factors that influence production.

These factors include the availability of: 

Increase in labor input

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Accumulation of capital

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Increased consumption

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Technological advancement

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Growth of business

Tax Cuts China implemented a policy on lowering costs for business in 2016 to tackle declining private investment. The policy aimed at stimulating the growth of private businesses by reducing the cost of doing business

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To lower business costs, the Chinese government implemented a raft of measures that included cutting taxes and reducing the number and level of fees charged by authorities. Also, the policy supported the expansion of business investments in the country, which would result in more production and creation of job opportunities.

Moreover, a cut in tax and fees needed to register and sun business in China gave the business an incentive to expand its operations within the country. The expansion created an increased demand for labor, houses, and products, which contributed to economic growth in the long-run. Business firms offer direct and indirect employment (Yue, 2015). As employment grows, the community's purchasing power increases, which in turn encourages production and business activities.

Technological Advancement Technological advancement is linked to long-term economic growth in the modern world.

The Chinese government lowered the restrictions on the registration and running of tech firms in the country (Garnaut, 2018). Subsequently, this encouraged the emergence of more business that trades in the technology sector. Technology is also linked to efficient production and management of an organization, which lowers the cost of running business and production. In a nutshell, technological advancement helps an organization save on production and management costs, creating a surplus of funds that can be used for expansion and research. Technology also ensures maximum production, which supports surplus production for the external market (Current Chinese Economic Report Series, 2019). It is also imperative to note that by promoting

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technological innovation, the Chinese government has been able to increase employment and production in the tech industry.

Increased Free-Trade In the last decade, the Chinese government has increasingly opened up to free trade, which has promoted export and import business in the country. Free trade promotes business activities within the country, lending credence to economic progress (Current Chinese Economic Report Series, 2019). As part of the free trade system, foreign direct investors have been continued to invest in China, contributing to job creation, expansion of markets, and strengthening China's strength in the export sector.

Moreover, the Chinese government engaged in multilateral and bilateral trade agreements that aimed at opening up markets for locally produced goods. The agreements helped reduce trade barriers, lowering the Chinese firms' cost doing business abroad (Garnaut, 2018). The export market is critical to the expansion of the industrial sector. Without a ready market, industrial production would dwindle, resulting downturn in economic growth. Industrial countries do not solely rely on local market demand to increase production but also international trade (Sánchez-Fung, 2019). As a consequence, free trade favors the expansion of business and general economic development.

Tax Reduction China implemented a tax reduction policy to create a robust domestic market, in which consumers’ purchasing power is enhanced. The policy involved a review of the income tax law to ensure that more people were legible for tax reduction (Garnaut, 2018). Lowering income tax allows people to accumulate surplus capital that they can use to buy goods and services that they would have otherwise not afforded. A strong domestic market is measured by the demand and

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purchasing power of the local population. By increasing the number of those eligible for tax cuts, the government increased the number of people who can buy goods and services at a given price without difficulties (Current Chinese Economic Report Series, 2019). The surplus cash encourages disposal through buying luxuries and other basic items at a high rate than before. In the long run, the production has to improve to meet the new demands.

Moreover, lowering taxes on income allowed individuals to save enough finances to start a small business. Tax cuts do not only work for corporates but also individuals and have farreaching effects on their economic development (Garnaut, 2018). Individuals’ economic progress is linked to the country's economic growth, hence the importance of bringing more people within a tax relief area on the taxation regimes.

Employment The Chinese government implemented the employment-first policy to increase the labor input in the economy. Military veterans and employees who had been temporarily laid-off by firms were given priority in employment, and graduates and immigrants increased the labor force and ensured that more people were productive. By increasing the number of those in employment, the government reduced dependence and also stepped up production. Human labor is crucial in increasing production and growing the economy (Garnaut, 2018). Consequently, China can realize significant economic growth by elevating employment-first to the status of a macro policy.

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References Current Chinese Economic Report Series (2019). China's Macroeconomic Outlook: Quarterly Forecast and Analysis Report, February 2019. Springer Singapore.

Garnaut, R. (2018). China's 40 years of reform and development, 1978-2018. Australian National University Press.

Sánchez-Fung, J. (2019). Interest rates, inflation, and the Fisher effect in China.

Macroeconomics and Finance in Emerging Market Economies, 12(2), 124-133.

Yue, L.Y. (2015). China's macroeconomic policy. Taylor & Francis Group.