Canada and China each have their own unique traits when it comes to their economic systems since each country’s system was a product of their history and their needs in the past.
Both countries are considered well to do nations. Canada belongs to the top ten wealthiest nations while China is one of the top three largest economies of the world (Barboza, 21).
Furthermore, both these nations cannot be classified as either communist or capitalist system as they contain different elements. Canada is classified as a mixed market economy while China’s economy has been called many things including market socialism and state capitalism.
Economic freedom in Canada differs substantially from that of China. The latter country has been identified as one of the most preferable when it comes to economic freedom as government interference is kept at a minimum and start up procedures are some of the easiest and most convenient in the world. Business costs in the G7 have been described as some of the lowest in Canada.
Foreigners only need about three days to start up a business and may only have to go through a two step procedure when doing so. Even the issue of corporate governance is given a lot of precedence in this nation. On the other hand, while China may be having a high number of multinationals located in the country, it still has a long way to go in terms of economic freedom. Government corruption still prevents it from reaching its potential.
Furthermore, the banking system in China is yet to be redefined in order to make it more feasible towards the creation of some of these other systems. Additionally, corporate governance is a serious issue in China because the rule of law is not as solid as it ought to be (Starr, 54).
Both countries were affected by the global financial crisis that started in 2007. It can be argued that this was because they both depend on the largest economy of the world (the United States) for trade. However, it should be noted that the extent to which each country was affected differed. Canada is more dependent on the United States than China is. In fact, in 2008, about 280.8 billion US dollars worth of imports were from the US yet its total imports amount to 442.9 billion US dollars (Statistics Canada, 48).
This is the reason why its trade deficit transformed from a surplus of 46.9 billion in 2008 to a deficit of about 4.8 billion Canadian dollars in 2009. Things have worsened in the subsequent years since it is predicted that their debt will amount to 49.2 billion Canadian dollars. The country has been trying to gain autonomy from its neighbor the United States but this has been rather difficult owing to years of codependency.
China was also affected by the global crisis because of its inclination towards exports. However, because its biggest trading partners exclude the US which was the most affected by the global crisis, then China has not felt these effects as much as their neighbors. It has still had to roll out a stimulus plan to get back on track.
Canada’s economy, much like most developed nations is service based. Financial institutions and other similar organizations drive this economy hence explaining why it was highly affected by the global recession. However, the latter country differs from other developed nations because it uses conservative lending practices. It has been shown that Canada will possibly be one of the strongest countries to rebound out of such a crisis because of those policies.
However, agriculture and the industrial sectors surprisingly account for a huge portion of this country’s earnings. This is partly because Canada is endowed with a number of resources in mining as well as in agriculture. On the other hand, China is one of those countries that depend on the industrial sector rather than the service based sector for growth.
The injection of government investment into this country caused the heavy industrial sector to soar over the past three decades. However, the light industries are also forces to reckon with since the private sector, which was promoted by the Chinese government, has continued to cause increments in output in the latter country.
In terms of the type of economic system, Canada is a mixed system that is more inclined towards a market economy. Its population is basically very affluent and their living standards can be compared to those of the United States. Furthermore, it has a very skilled labor force and therefore this gives an advantage over and above other nations.
Although the economy of Canada has been steadily increasing over the past four decades, these rates can in no way be compared to growth rates of China. The country boasts of having the highest economic growth rates in the world since it has managed to sustain a rate of ten percent for over thirty years.
This is the reason why the country got to be one of the largest trading nations of the world. Rapid growth rates were achieved through government initiated reforms that started in the late nineteen seventies. Those interventions caused increased investment in the country and thus had a net effect on the consumption patterns or the standard of living within it (Alon & McIntyre, 15).
It should be noted that China differs from Canada in terms of its export dependence. China heavily depended on the presence of multinationals within its borders for growth much like other Asian tigers like Malaysia and Singapore. The Chinese economy which can be interpreted as state capitalism or market socialism was a serious product of interventions by its government.
Currently, the government has been trying to open up its respective internal markets so as to increase its prospects but this is yet to fully produce an outcome. In fact, it may be said that China is still within the transition phase because it is now departing from government led reforms to market led reforms hence explaining why categorization of its economic system is a little tricky.
The poverty situation in both countries differs substantially. Canada’s populace mostly consists of affluent individuals with unemployment levels reaching ten percent in 2009 (Sturgeon, 14). These people may be unemployed but most of them enjoy very strong social services and health care systems from the Canadian government so they are able to live comfortably.
On the other hand, China has the same percent of people living and depending on less than one dollar a day. In fact the income disparity between the rural and urban population within this country is a cause for concern. This illustrates the one sided nature of the government interventions that were enacted by the Chinese government as it was trying to promote growth within its borders.
China is currently in a position where it’s infrastructural and energy demands supersede its ability to supply them. The country’s big population is what is causing these problems because when a net analysis of the requirements to transport resources and to create products through the use of local energy supply is made, then China easily falls short. On the other hand, Canada has very solid infrastructures and is often seen as one of the most self sufficient in terms of its energy supplies.
Canada is an affluent nation while Chin is still grappling with income disparities between the rich and the poor. On the other hand, economic growth rates in China cannot rival those ones prevalent in Canada as they are very high. The business environment in China is more stable than that in Canada.
Sturgeon, Jamie. Jobless rates to peak at 10 percent. National post, 13th March 2009, 14
Statistics Canada. Imports, exports and trade balance of payment. 16 November 2010 http://www40.statcan.gc.ca/l01/cst01/gblec02a-eng.htm Accessed on 28 October 2010
Alon, Ilan & McIntyre, John. The globalization of Chinese enterprises. NY: Palgrave, 2009
Starr, John. Understanding China: economic, political historic culture of China. Beijing: Hill and Wang, 2008
Barboza, David. China passes Japan as second largest economy. New York Times, 16 August 2010, 21