Comparing the China and the US economic systems

By | July 13, 2013

Before we can say whether China’s plan economy with some degree of capitalism economy system could be outperforming the US economic systems, we can evaluate the performance of these two economies by reviewing several key indicators that we have listed above, the three of the indicators would be discussed:


1.1    GDP & GDP growth rate



Figure 2 China GDP value

Source: 2012


Figure 3 US GDP value

Source: 2012


In term of the GDP value, the US is still lead the competition against China with 14582.40 billion US dollars in 2010 accounting for 23.52 per cent of the whole economy in the same year. In comparison, China had less than 6000 billion US dollar, therefore the economy size of China is still far lagged behind the US. And taking into consideration of the much larger population in China, the economy size in China in term of per capita is much smaller than that of the US.



Figure 4 China GDP growth rate

Source: 2012



Figure 5 US GDP Growth rate

Source: 2012


And in term of GDP growth rate, it is apparent that China is going through a faster speed of economy growth with about double digit growth in the past decade except during the financial crisis. But the rapid economic growth of China has been contributed by two major factors: First of all, there are abundant human resources in China, and labor cost in China is much lower than the other industrialized countries. China’s education system is also being fast developed, thus more people will achieve higher level of education than in the past. With comparative advantage in cheap labor cost and increase of human capital brought about by education, China is anticipated to sustain the economic growth in the coming years ( 2010); Secondly, China’s rapid economic growth began in the 1980s with the implementation of the so called reform and opening up policy proposed by Deng XiaoPing by introducing the market economy in China with some adaptations made to the socialism social structure. And also by introducing the private ownership which is a major feature of the capitalism economy structure, China’s private business sector began to develop and contribute majorly to the later economic development of China. Therefore, China’s success could be said to be contributed to its strategy to introduce the capitalism, or the free market rather than adhering to the collective economy, or planned economy inherent to the socialism.


1.2    Unemployment rate


Figure 6 US unemployment rate



Figure 7 The unemployment rate in China


In term of unemployment rate, China is holding a lower unemployment rate than the United States, this could be rationalized in two ways: on one hand, the economic in China is growing and the demand for labor is increasing while the US economy is to some extent in recession, therefore the unemployment rate is kept in a higher level; one the other hand, also the majority of China’s population is still in the rural area and their unemployment status usually would not be taken into consideration. In addition, the data released by the government are usually considered to be


1.3    Gini coefficient


According to the new reports in this year, for the eleventh year in a row, Chinese officials say they cannot publish the nation’s Gini coefficient. The main reason, National Bureau of Statistics Director Ma Jiantang said Jan. 17, is that data on high-income groups is incomplete. Some experts criticized the announcement, saying the government is looking for reasons to de-emphasize China’s significant wealth gap. The last time Chinese officials published a Gini coefficient was in 2000, when they announced that China’s 2000 figure was 0.412. A 2007 China Reform Foundation report found that 4.4 trillion yuan ($697 billion) in urban residents’ “grey income” had not been accounted for, amounting to 24% of China’s total GDP ( 2012). If we say that it is impossible that a powerful government like Chinese government could not calculate a Gini coefficient, China’s unwillingness to publish the data could mean that the Gini could be very high.


1.4    Critical thinking about the economic system


With the above analysis regarding the two largest nations’ economic performance, we can see that for several reasons, Chinese economy system could not be considered as better than the US economy: first of all, the China’s economy size in term of GDP value is still much smaller than that of the US economy. Secondly, China is enjoying a faster GDP growth which reduces the unemployment is largely because of its cheap labor cost, and it is not reasonable to make comparisons between these two different nations as the US have already passed the period in which it accounts for its lower cost labor to obtain economic growth; thirdly, the Gini data in China is still unknown to the outside world indicating that the gap between the rich and poor could be quite large. In another world, the Chinese economic system is still largely unknown to the world and this increase the business risks. fourthly, the economic system in the US has go though test of many times of economic crisis while the Chinese economic system only encounter direct impact by the 1997 Asian crisis. Therefore, it is not safe to make the judgment that China has a better economic system than the US.





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