The Chinese economy has maintained a momentum of rapid growth while Essay

The Chinese economy has maintained a momentum of rapid growth while many other economies in the world have slumped - Essay Example As a result, the barriers to economic growth under the conventional planned economy were removed and full production became the order of the day. As part of the economic reforms, the country adopted a step-by-step approach in pushing the reforms ahead. At the same time, it made sure that there as a balance between the economic reforms, growth and social stability. This enabled the country to correct the notion that China is a hard place to trade as is evidenced by the large capital investment by overseas investors. According to Sharma (2007), there has been a major capital injection into the country’s economy, which been a major boost in the development of the economy. The country has also recognized the importance of a flexible monetary exchange rate. It has put measures in place to ensure that there is free capital mobility (Prasad, 2004). Economic experts have argued that the high economic growth rate registered by China will only be sustained if the country continues imple menting the comprehensive economic reforms, and the open up policies. ... This has been enabled by the ongoing reforms in the banking sector. Financial transactions and mediations in China are transacted across the banking sector. The banking industry is heavily dominated by the state-owned banks who act as the main lender to companies in China. There is an absence of the corporate bond market which underscores the crucial role that banks play in the economy of China (Li, 1997). China has instituted a reduction in interest rates to encourage more borrowing especially by people in the private sector, particularly the small and medium enterprises. Therefore, stability of the banking industry in China is crucial for sustainability of economic growth in the country (Li, Liu and Yun, n.d.). Currently, the Chinese government has accelerated efforts to address three key issues; maintaining the economic growth, avoiding social contradictions and improving the ability to cope with financial crisis. Lams have been put in place to stimulate domestic demand with an ai m of reducing the over reliance on Gross Domestic Product growth in fixed investment and export promotion. China relies more on the export market which is detrimental in the midst of a global financial crisis like the one being experienced in the world (Wang, 2010). To address this issue of export-oriented economy, the Chinese government has made it a national strategy to strike a reasonable balance between the export oriented models and inward- looking economy. This is being implemented through expansion programs in the global market, while laying down policies to promote domestic consumptions. The Chinese government is on record for trying to uplift the purchasing power of its large