People’s Republic Of China 'S Economic Sustainability: Long-Term Trends

Determining the impact of the economic policy of PRC on the standard of living of the population

Assessing the standard of living of the population is a difficult question to study. Looking through the prism of analysing the dynamics of GDP per capita allows us to determine the positive dynamics of improving the well-being of citizens, along with the fact that the PRC economy remains among the developing ones.

Characteristics of the structure of the PRC economy from the point of view of dependence on international trade

The involvement of the Chinese economy in global economic relations makes it obvious that PRC has a high influence on the processes in the world economy. However, at the same time, it is necessary to note the declining dependence of the country's economic growth on the international environment. Taken together, these factors suggest that the PRC economy is becoming more resilient.

Determining the importance of PRC in international investment

PRC 's transformation from an investment recipient to a direct investment donor reflects PRC 's growing competitiveness in the global manufacturing market. On the one hand, retaining the interest of foreign investors by providing various kinds of benefits allows us to attract large companies from all over the world to the country every year. On the other hand, the expansion of the investment portfolio of PRC companies through the implementation of foreign projects forms the necessary platform for the sustainability of the economy. The participation of PRC companies in the construction of the "One Belt, One Road" initiative is also aimed at reducing investment risks and increasing investment profits (Zhang, et al., 2020).

Changing the quality of life of the population in PRC

Table 1, based on data from the International Monetary Fund, shows the dynamics of Gross Domestic Product (GDP) and the dynamics of GDP per capita, which indicate a constant increase in the level of development of the country and the positive economic activity of people, and their quality of life.

As follows from the presented data (Table 1), over the past 15 years, the PRC economy has been steadily developing, which has had a positive impact on the growth of GDP per capita. Although PRC is still among the developing economies in terms of this indicator, the intensity of the increase in the indicator (Figure 1) indicates an improvement in the quality of life of people and prospects for further growth in the level of well-being of citizens.

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The COVID-19 pandemic has affected the PRC economy in such a way that economic growth in 2020 was the lowest in recent years, but remained positive at 2.3%. PRC's unemployment rate in 2020 was 5.2%, remaining at the level of 2019 (People’s Republic of China 's GDP growth rate in 2020 was the lowest in 40 years, 2021). In 2020, PRC became the only major economy in the world to avoid an economic downturn due to the COVID-19 pandemic. Nominal per capita income in PRC for 2020, despite the pandemic of the new coronavirus infection, increased by 4.7% year-on-year to 32,189 yuan (approximately $4,960 at the current exchange rate). Moreover, at the beginning of 2021, PRC President Xi Jinping, at a meeting dedicated to the country's achievements in eliminating poverty, declared PRC's victory in the fight against absolute poverty. As Xi Jinping pointed out, 98.99 million people in rural areas crossed the poverty line, 832 counties and 128 thousand villages were removed from the poor areas. Over the past eight years, PRC has invested about 1.6 trillion yuan (about $246 billion) in the fight against poverty (Xi Jinping said that People’s Republic of China has won a complete victory over absolute poverty, 2021). According to the World Bank, PRC has lifted more than 850 million people out of poverty over the past 40 years (Kukhto & Zaichenko, 2019). This allows us to talk about the effectiveness and efficiency of the economic policy of the PRC, aimed at improving the quality of life of the population.

PRC's share of global exports

The growing influence of PRC on the world economy is confirmed by its role in the gross world product, which is clearly reflected in the IMF data presented in Figure 2.

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Almost 18% of the world's production of goods is concentrated in PRC, which underlines its high involvement in global value chains. At the same time, attention should be paid to the importance of the economy's involvement in the international division of labour for PRC 's economic growth and achieving sustainability. Based on the official data of the international organization UNCTAD, the key indicators for assessing the openness of the economy are calculated (Table 2).

The presented indicators were calculated using the following formulas:

$E_q=\frac{E_n}{GDP}\mathrm{*}\mathrm{100}$,

$E_q$ - export quota,

$E_n$national export volume,

GDP – gross domestic product of the country;

$I_q=\frac{I_n}{GDP}\mathrm{*}\mathrm{100}$,

$I_q$ – import quota,

$I_n$volume of national imports,

GDP – gross domestic product of the country;

$E_{n/w}=\frac{E_n}{E_w}\mathrm{*}\mathrm{100}$,

$E_{n/w}$ - share of exports in world exports,

$E_w$global export volume,

$I_{w/i}=\frac{I_n}{I_w}\mathrm{*}\mathrm{100}$,

$I_{w/i}$ - share of imports in world imports

$E_w$global export volume.

The change in indicators is shown in Figure 3 clearly.

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The share of PRC 's GDP in the VMP has been steadily increasing for almost the entire period under review from 2005 to 2020. Despite the global financial crisis of 2008-2009, the Chinese economy was in good shape. The shares of exports and imports in the global economy have been steadily growing since the 2009 crisis. Thus, modern PRC plays a major role in the international economy, as it is an active and rapidly developing leader, occupying a key strategic position. In terms of total trade volumes, PRC occupies a leading position. The main goal of PRC 's foreign economic strategy was to increase the competitiveness of the national economy by creating a new group of labor-intensive mass-demand goods and developing knowledge-intensive and capital-intensive industries.

From 2005 to 2019, with the increasing importance of PRC in the world economy (the growth of the share of exports in world exports and the share of imports in world imports), the export and import quotas of the PRC economy are decreasing, which indicates the growing importance of domestic demand in the structure of gross domestic product. Thus, we can talk about a systematic and effective reorientation of the economic growth model from an export-oriented one to a model of domestic consumption development.

PRC's Investment Strategy in the Global Market

For many years, the main factor in attracting foreign investors to PRC was the low cost of labor resources. Although this competitive advantage is shrinking, a large skilled and relatively inexpensive workforce plays a role in attracting investment to this day. Chinese experts argue that it is the quantity of the labor force and the lack of the need to pay high wages that have played a significant role in making PRC one of the most favorable regions in the world for direct investment (Khasanova, 2020). The general dynamics of investment processes can be traced in Table 3.

In 2020, PRC became the main destination for new foreign direct investment, overtaking the United States. New investment by foreign companies in the USA has outperformed all other countries for decades. However, in 2020, their amount fell by 49%. The leader in this indicator was PRC, which managed to attract 4% more foreign direct investment than last year.

Among the factors behind the sharp drop in foreign investment in the United States last year is a broad economic downturn due to the effects of the COVID-19 pandemic. However, the total volume of foreign investment in the United States remains much larger than in PRC. The flow of foreign investment in the United States peaked in 2016, when $472 billion was invested in the American economy. In the same year, the amount of foreign investment in PRC amounted to $ 134 billion. Since 2017, investment in the Chinese economy has been growing, while in the US it has been declining annually. Investment in the EU decreased by 71% in 2020. At the same time, the United Kingdom and Italy, where there was a high death rate and a complete lockdown on the background of COVID-19, did not attract new foreign investment at all. In Germany, the drop was 61% (People’s Republic of China surpassed the United States in attracting foreign direct investment, 2021). At the opening of the third session of the 13th National People's Congress (NPC, the highest legislative body), a report was published in which the authorities said they would strengthen financial support for national enterprises to enable them to recover from the pandemic. The government pays special attention to the revival of small and medium-sized businesses, which have extended the repayment period of outstanding loans until the spring of 2021 (People’s Republic of China's economy in the context of a pandemic: "secrets" of growth against the background of a recession in other countries, 2020). As an alternative to affordable bank lending, experts suggest actively developing the national stock market and attracting investors, including from abroad. According to a number of PRC economists (Zavgorodny, 2020), PRC is still not actively using such opportunities, but the PRC leadership is aware of the need to attract foreign capital to the country: both Xi Jinping and Premier Li Keqiang made promises to strengthen the openness of the PRC market and create new, more favourable conditions for foreign companies. Thus, key investors, along with diplomats and humanitarian workers, belong to the "privileged" category of people who have the opportunity to freely obtain a visa to PRC even in the conditions of a pandemic, while for the majority of the world's population, due to the difficult epidemiological situation in the world, this is not yet possible. The attractiveness of the digital industry for investment should also be emphasized (Zhang & Liu, 2020). These projects are especially in demand in the XXI century. The pandemic also proved to be a driver of their development and increased demand. In the conditions of lockdown and remote forms of work, digital tools have proved to be important for ensuring the stability of society and maintaining the production process in many sectors of the economy.

At the same time, the increasing volume of foreign investment carried out by PRC indicates the accumulated financial base and the desire to diversify investment flows through participation in major international projects. Among them are projects implemented through the implementation of the "one Belt, One Road" initiative (Chen, 2020).