Effect of Chinese Government Policies

Effect of Chinese Government
Effect of Chinese Government

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Effect of Chinese Government Policies


The essay examines the effect of Chinese government policies when it comes to addressing long-term unemployment, wage inequality, gender discrimination; and inward and outward migration.

Long-term unemployment

Although the economy of China has increased about 2.5 million employment opportunities since the beginning of 2012, almost 4.8 million (3%) individuals were jobless for over 6 months since 2013. Prolonged job loss has become a major challenge for Chinese economy while creating considerable problems for employees, their families, and society. Minimizing long-term unemployment while assisting the affected people, families and communities are essential for policy makers irrespective of their levels.

A robust, healthy and dynamic economy is critical when it comes to addressing prolonged joblessness, however, policies that stimulate continuous growth to seem to be vague. In the case of absence rapid economic development, particular policies can be imperative in assisted that long-term jobless get job opportunities help their families with the effects of prolonging unemployment. Such policies are job training, employee development initiatives (Bidani and Goh, 2004)

A robust economic development can be an appropriate solution to minimizing prolonged joblessness. Long-term unemployment leads to adverse effects on the community. Currently, the majority of Chinese believe that it’s the government’s role to reduce the costs of preventing long-term unemployment (Qiu, 2006).

Effect of Chinese Government Policies

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Nevertheless, the aspect of government role when it comes to combating long-term unemployment presents sharp incongruity amongst economists. While economist activists support the government’s responsibility, non-activists believe that government policies must be avoided.  Such disagreements began more than five decades, which presents a vital backdrop for recognizing the enduring debate regarding the effects of government policies in addressing long-term unemployment.

Afterward, the massive and long-term joblessness coupled with industrialized market challenged the classical theory’s predictions. Depression was used to portray a worst recession. The Great Depression in 1929 and lived up to its name, when it started unemployment was about 3.2%, and four years later it rose to 25% while the real GDP reduced by over 25%. 

Apparently, classical theory demonstrates that unemployment can be moderate as well as short-term, which a direct inconsistency of reality, that is supply creates Nonetheless, the Keynesian model indicates that long-term employment is a result of demand and supply. Moreover, organizations highlight production decisions based on the degree of estimated demand or anticipated total spending (Galasso, Ravallion, & Salvia 2004).

The more people spend, the higher the output organizations will anticipate selling and manufacturing. Implicitly, supply/productivity act in response to demand- not the opposite, as demonstrated by classical theory. Of great importance is that Keynesian theory shows that the degree of total expenditure can be insufficient to provide job opportunities, and traditional model presents false information about modification of interest rates to combat long-term unemployment.

Effect of Chinese Government Policies

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Government Intervention in long-term unemployment

Because Keynesian theory fails to support the idea that market economics could be used use to prevent long term employment. Keynesian theory shows that the government can use various policies in a bid to leverage aggregate demand (AD) using demand and supply policies.

Demand related Policies

These policies are vital when there is recession leading to prolonged joblessness, for example, the after 1991 and 2008. Some of these policies include;

 Fiscal Policy

The Chinese government uses fiscal policy to reduce unemployment through increasing AD and the rate of economic growth.  However, this calls for pursuing expansionary monetary policy, which entails reducing taxes while increasing government expenditure. Reduced taxes lead to high disposable income and helps in enhancing consumption in turn contributing to a high AD. As such a high AD leads to increase in real GDP. 

If organizations produce more, it leads to greater demand for employees and this reduced demand-scarce joblessness. Moreover, with a high AD as well as a robust economic growth, fewer organizations will be insolvent implying less joblessness. In this regards, the federal government recognizes some of the challenges associated with prolonged job loss while enhancing available services such as boosting employment opportunities, address problems of housing bubbles especially those who prefer to move jobs and assist those that want to low paying jobs.

According to Keynesian theory, in particular during the recession, capital and labor are redundant, for that reason the government must get involved so as to create extra demand so as to minimize long-term unemployment (Galasso, Ravallion, & Salvia 2004).

Nonetheless, this mainly relies on various elements of aggregate demand such as if at all self-assurance is low, reducing taxes cannot lead to growth in client spending since individuals may choose to save. Again, individuals may not spend tax reductions if they are reversed immediately. Fiscal policies are associated with a time lag that attempts to increase government expenditure can take much time to impact changes in aggregate demand.  Assuming, that economy is almost full, an increase in aggregate demand can lead to inflation.

Expansionary fiscal policies may only minimize joblessness in the event of productivity gap; in turn it requires high regime borrowing. Eventually, monetary policies can result in crowding cut that is the government increases spending although they reduce spending and thus aggregate demand decreases. Nevertheless, Keynesian theory shows that crowding reduction cannot take place in a case of liquidity gap.

Effect of Chinese Government Policies

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Monetary Policy

With monetary policies, the government reduces the interest rates, which in turn minimizes borrowing costs while encouraging individuals to spend as well as invest. This raises aggregate demand and allows GDP to grow and minimize demand-scare joblessness.  Additionally reduced interest rates lead to a decrease in exchange rate making exports extra competitive.

Under certain conditions, low-interest rates can be unproductive in increasing demand.  However, monetary policy relies on other elements of aggregate demand. On the other hand, reduced interest rates cannot help increase spending, if financial institutions are not ready to give loans (Lund, 2002).

Supply Side Policies

Supply policies are associated with macroeconomic parameters. Much as supply policies do not increase the overall AD; they aim at overcoming the imperfections in job market and minimize long-term employment as a result of supply factors including structural, frictional and classical or real wage (Qiu, 2007)

On supply side policies, the government uses various policies;

  • Training and education programs. They purpose to assist the long-term jobless with new skills that allow them to get jobs in upcoming sectors. Nevertheless, in spite of providing training and education initiatives, the jobless can be either unable or not willing to learn new concepts. In any case, this is likely to take a long period to reduce joblessness (State Council PRC 2005).
  • Job subsidies. Organizations are given tax breaks/ grants due to prolonged unemployment. This is important particularly in giving them self-assurance as well as on job education. Nonetheless, it’s relatively costly while encouraging organizations to substitute existing employees with prolonged joblessness to gain from subsidies.

Effect of Chinese Government Policies

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Wage inequality

China experiences a remarkable growth in the income gap between urban and rural masses. This lies at the center of social unrest in the nation while leading to significant dangers for the leadership of Chinese Communist Party (CCP). While government economic policies have attempted to provide 30-year growth at 30% and improved the lives of more than 600 million from poverty, the frequency of crowd incidents has grown from 8,700 to 180,000 cases in 1993 to 2010 respectively. These disputes entail claims of corruption as well as illegal land seizures by local governments (Appleton et al., 2004).

Government policies

Increasing personal income

The Chinese government has doubled personal income from 2010-20. In addition, it has increased the minimum wage to 40%. Nevertheless, experts are not impressed by such policies since according to official statistics, averages income for migrant employees, a group the is expected to benefit from the wage increase are already enjoying about 50% of the average salary (Knight and Song, 2007).

Liberalizing Interest Rate

The government has liberalized interest rates so as to promote market-based rates and increase the floating range of deposits as well as loans. The objective is to increase payment of interests to savers while helping boost household incomes. This policy is essential particularly for effective regulation of the economy of China to consumption-driven development. In fact, interest rates on deposits have delayed inflation for several decades leading to negative returns for households (Xu and Ximing 2013; Sicular et al., 2008).

Effect of Chinese Government Policies

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Tax Reforms

The government initiated a number of tax reforms such as consumption taxes on luxury products and services (Zhao and Sai 2007).  However, it is not clear if the attempt when to negate inequality plan made two years ago.  The Chinese government has been slow in implementing a property tax, something that is likely to suitable for ensuring equitable distribution of income. For an extended period, Chinese administration has promised to impose taxes on properties however up to now it has managed to target luxury features in a number of cities. (Li, Chuliang and Sicular, 2013).

Government policies on gender discrimination

The constitution of China highlights the importance of equal treatment of all citizens regardless of their ethnicities, religious practices, gender among others. Furthermore, China has various laws as well as government policies that foster equality, particularly in workplaces. Nevertheless, workplace discrimination is not only pervasive but also extensively practiced by private and government organizations.

Policies that aim at combating gender discrimination are hindered by technical difficulties, ineffective enforcement and conflicting reforms and government policies that seem to foster instead of discouraging gender discrimination (Appleton et al., 2014).

In China discrimination among women is widespread and begins even before they join the labor market. Gender-based quotas and enrollment reforms in higher learning institutions are common, regularly leading to higher performance among women compared to men, in particular, majors such as military and police force. Much as China’s ministry of education defends such practices, they often extend to majors with less association with gender, such as sciences.

Upon graduation, women have a hard time compared to men in getting employment opportunities, particularly in technology and science fields (Brandt, Loren and Thomas 2008). Nonetheless, gender discrimination is rampant low-skilled professions. By and large, male are ideal for white-collar opportunities while sales and clerical jobs are preferred for female.

Effect of Chinese Government Policies

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According to Becker’s Discrimination Theory, there are various categories of employees including skilled, unskilled, men or women (Becker, 1971). It also involves individuals with undesirable traits and those without non-fiscal considerations on who to recruit. Organizations can reject to recruit from these categories since they wrongly undervalue their economic competence. Organization’s traits are discriminatory not based on their gender rather they are ignorant about their actual power (Wang et al., 2014).

Government reforms

Equal employment

The Chinese government has guaranteed for equal work for men and women. Employment is the foundation of individuals’ livelihood and essential resource that women depend on for subsistence. For many years, the government has encouraged women to start their own business and given them special treatment when it comes to employment training tax breaks.

In addition, the Chinese government has implemented favorable reforms for women including the creation of public-welfare opportunities, the introduction of employment centers, funding special recruitment practices and vocational courses, monitor gender discrimination against employed women and help those primarily laid off to find new opportunities (Wang, et al.,.2014).

Effect of Chinese Government Policies

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Laws and guidelines

While the constitution of China has various statues that highlight on gender equality, they are inadequate when it comes to preventing gender discrimination. Such vagueness and inadequate implementation of reforms mean that gender discrimination cases are not addressed.

Increasing concern and activism about gender discrimination particularly in workplaces in 2000 contributed to the implementation of various policies;

  • Law on the Protection of Rights and Interests of Women that prohibits sexual harassment
  • Regulation of Employment for People with Disabilities of 2007 that requires firms to provide at 1.5% of employment positions to disabled people
  • Convention on Discrimination in Employment and Occupation that requires the administrating to implement broader policy frameworks against gender discrimination in workplaces

On the other hand, these policies continue to be wanting in efficiency, coverage, and management. For example, they depend on local employment centers that are not only overworked but also understaffed to monitor and rollout anti-discrimination policies. Also, because prospective workers are not real workers based on the law, cases of gender discrimination in places of work are never subjected to labor dispute negotiation structure, and the victims should use official court procedures that are expensive and time-consuming.

Employment Promotion Law was considered an important tool for addressing gender discrimination in workplaces; however in reality its impact has been muted. Apparently, gender discrimination is prevalent and implementing of anti-discrimination reforms is deficient, despite some development (Zhang et al., 2004).

Effect of Chinese Government Policies

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Nevertheless, the enforcement of laws coupled with activism like Yirenping and the Equity and Justice Initiative and  Act Together in Guangdong presents a basis for awareness concerning gender discriminatory practices and importance for additional reforms. The relevance of activism in promoting gender equality in China cannot be overlooked, especially in the application of laws to litigate as well as openly humiliate discriminating firms. In spite of progress further policies are necessary to fight gender discrimination including;

  • Increasing the coverage of ant-prejudice laws to involve general forms like sexuality, individual beliefs, age, and physical appearance.
  • Increasing fines charged on firms from 1,000 to 50,000 yuan per instance.
  • Establishing a government agency responsible for addressing gender discrimination in workplaces. Such a body will be in charge of executing anti-prejudice regulations and suitable structure for investigating and mediating issues related to gender biases.

Inward and outward migration

Migration presents opportunities as well as challenges. Much as well-managed migration can promote welfare in home and destination nations when mismanaged it can threaten social cohesion, safety, and autonomy.  Government policies on migration should focus on knowledge however such knowledge should be developed in a way that deals with policy priorities. Chinese internal migrants considerably contribute to the growth of China’s economy for the past three decades, particularly in the initial phase of economic liberalization.

For example, in the early stages, when the country opened to the world, it received about USD 9546.5 million FDI out of which USD 9254.6 million was from inward migrations while USD 292.34 million from the outward (Smart and Hsu, 2004). Simply put, inward migrations have been the primary source of Chinese inward FDI. On the other hand, inward migration is regarded as a vital when it comes to cross-border trade as well as commercial networks, which are in turn viewed as essential parameters for economic integration Zhuang and Wang, 2010

While China has witnessed tremendous growth due to inward and outward migration, demand and supply dynamics trigger to this development leading to urbanization trends. According to neoclassical theory, with inadequate supply and increasing demand for cheap workforce attract immigrants from a country with surplus labor. With regards to China, high demand for workforce in urban regions and other countries is due to to; a) increasing investments in manufacturing industries and b) elderly population coupled with declining rates of fertility.

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Government policies: 2012 law

The law involves combating “three illegal”- unlawful entry, residence or employment in China.  In addition, the law increased fines for all crimes related to migration. For example, expired visa from $800 to $10,000 while for detention for same crime increased from 3 to 10 days or 2 months for complicated cases (Zhang,  2003). Nonetheless, this law has not initiated strategies to manage the nation main problem; migrants trapped in China due to expired visas. While visa applications can be supported through housing registration, such registrations require valid travel credentials.


The essay was dedicated to reviewing the effect of Chinese government policies to address long-term unemployment, wage inequality, gender discrimination; and inward and outward migration.


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