Evaluate the impact of the policies available to the Chinese Government to deal with their declining competitiveness.

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Ben Ezekiel Test (40 Mins)

Evaluate the impact of the policies available to the Chinese Government to deal with their declining competitiveness. (30 Marks)

One policy available to the Chinese government to deal with their declining competitiveness would be to try to increase labour productivity through increasing spending on education and training to help develop skills and close any skills gap. Government may also promote a more flexible labour market, such as reducing trade union power, encouraging part-time work, and encouraging new business start-ups.This would lead to greater competition within the Chinese economy leading to increase in working effort from workers and therefore higher incomes and GDP per capita However, improving education takes time to come into effect and therefore would only benefit in the longer run, meaning that in the shorter run competitiveness within China would decline ever further.

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Another policy that could be used to increase competition could be through investment grants and subsidies, and by tax incentives to encourage new product development. Keeping interest rates low is also a strategy that would encourage investment and and therefore greater competitiveness.  In addition, keeping them as stable as possible would increase certainty and reduce risk. Finally, investment may be stimulated by reducing the interest rate elasticity of investment, which means it is easier to raise interest rates without a negative effect on investment. This could be achieved by investment grants and tax relief on investment. However, the danger with too low ...

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