ECO403 GDB Solution Fall 2012

The case:

Transport sector is an important component of an economy impacting on development and the welfare of populations. Transportation, either in the shape of road, rail or airlines is very important now a day. Different studies show a positive correlation between the growth of infrastructure and economic development. In many countries, rail is the primary and important mode of transportation. Railroad sector serves not just as an economic engine but as a part in the essential network of transportation in any economy. If we look at the transportation sector of China, over the next decade airport, road, bridges and railway construction will provide massive boost in the economy of China. According to a report, the top economic planner, the National Development and Reform Commission announced approval of 55 infrastructure projects ranging from subway lines to highways. Therefore, China’s government has approved 25 new railway projects showing that the government is ramping up the government spending to boost the weak economy.  For better understanding we see the comparative facts and figures of other economies. Most emerging economies invested only 3% to 5% of their gross domestic product on infrastructure in the 1990s and 2000s while, China invested 9% of their Gross Domestic Product.

 

Requirement:

Being an economist, keeping in view the above scenario, analyze the impact of structural changes made by China’s Government on the gross domestic product of the China.

Solution:

Transportation developments that have taken place since the beginning of the industrial revolution have been linked to growing economic opportunities. At each stage of human societal development, a particular transport mode has been developed or adapted. However, it has been observed that throughout history that no single transport has been solely responsible for economic growth. Instead, modes have been linked with the function and the geography in which growth was taking place. The first trade routes established a rudimentary system of distribution and transactions that would eventually be expanded by long distance maritime shipping networks and the setting of the first multinational corporations. Major flows of international migration that occurred since the 18th century were linked with the expansion of international and continental transport systems that radically shaped emerging economies such as in North America and Australia. Transport has played a catalytic role in these migrations, transforming the economic and social geography of many nations. Concomitantly, transportation has been a tool of territorial control and exploitation, particularly during the colonial era where resource-based transport systems supported the extraction of commodities in the developing world and forwarded them to the industrializing nations of the time. More recently, port development, particularly container ports, has been of strategic interest as a tool of integration to the global economy as the case of China.

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