Transcript PowerPoint Template - e

China’s Economic
Development and it’s
International Economy
Hao kai
[email protected]
www.ncut.edu.cn
Contents
1. China’s rising economy
2. China’s economic reform
3. China’s international economy
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China’s role in Globalization
“Let China sleep, for when she
wakes, she will shake the world.”
——Napoleon Bonaparte
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1. China’s rising economy
Asia’s rise is the fourth big
transformation in relative economic
power since the industrial revolution
 Early 19th century: rise of the UK
 Late 19th and early 20th centuries: rise of
US and Germany
 Post-second world war: Japanese miracle
 1970 onwards: rise of the rest of Asia,
including China and India
Fastest economic expansion ever
Income per
Capita Growth
Time Period
China’s 20
year reform
7X
over 20 years
Japan post
WWII
recovery
6X
over 25 years
2nd
Industrial
Revolution
3.5X
over 60 years
1st
Industrial
Revolution
2.5X
over 100 years
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1. China’s rising economy
ASIA'S SHARE IN WORLD GDP
(at PPP)
70
60
50
40
30
20
33
10
17
12
9
0
1820
1870
1913
5
5
1950
1973
Source: Angus Maddison
Source: Maddison
China
India
Japan
Other Asia
2001
World economic history is a tale of
divergence
GDP per capita
1990 dollars, PPP basis
20,000
China
India
US
16,000
12,000
8,000
4,000
0
1600 1700 1820 1870 1913 1950 1970 1980
Source: Angus Maddison, The world economy: historical statistics, 2003
See Mark Thirlwell, http://www.lowyinstitute.org
Now, the start of the Great Convergence?
Between 1980 and
2012, China is
expected to close
GDP per capita gap
with US from 6% to
19% of US levels
GDP per capita
% of US level, PPP basis
20
China
India
15
10
5
0
1950
1960
1970
1980
1990
2000
Source: Angus Maddison, The world economy: historical statistics, 2003 and IMF World Economic
Outlook database
By 2050, China may overtake US as the largest economy in the world
GDP vs GDP per capita in 2002
GDP vs GDP per capita in 2050
GDP (US$ Bn)
GDP (US$ Bn)
14,000
60,000
12,000
50,000
China
US
10,000
40,000
US
8,000
30,000
India
6,000
Japan
4,000
2,000 China
India
Brazil Italy
Russia
0
0
20,000
France
Germany
Germany
Russia
10,000
UK
France
10,000 20,000 30,000 40,000 50,000
GDP per capita (US$)
Note: Bubble size corresponds to GDP size
Source: Goldman Sachs Economic Paper # 99
Japan
Brazil
Italy
0
0
UK
20,000 40,000 60,000 80,000 100,000
GDP per capita (US$)
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Why Did China Grow So Fast?
 Growth, growth, and growth, as the national
focus
 Pragmatic leadership: “Who cares whether a
cat is black or white as long as it catches
mice.”
 Sound policies
 Industrious and relatively well-educated
labor force
 Relatively efficient bureaucracy
 High savings rate (over 35%)
 Integration with the world economy
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2. China’s economic reform
 Market-oriented reform
 From central planning to market
allocation of goods and services
 Instead of applying “shock therapy”,
China has adopted a step-by-step strategy.
 “Walking across the river by feeling the
pebbles in the water.”
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Sequence of China’s Reform







agricultural production
(late 1970s - )
international trade and investment
(1979 - )
state-owned enterprises
(early 1980s - )
“socialist market economy”
(1993 - )
fiscal reforms
(1994 - )
privatization and private sector
(1997 - )
accession into the WTO
(2001)
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Outcomes of China’s Reforms
 People’s income improved very quickly.
• Over the past 30 years, annual GDP growth has
averaged over 9%
GDP (billion dollars)
GDP (billion dollars)
2,500
2,000
1,500
1,000
500
0
1980
1990
2000
Year
2005
• Growth has lifted incomes
– Percentage of population living on $1/day
has fallen from 80 percent in 1980 to
20% today
(Source: World Bank)
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Outcomes of China’s Reforms
 The old structure of the country’s
economic ownership has been altered.
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 From 1999 to now
 Private enterprises
• increased from 1.5 million to 3 million
• investors increased from 3.2 million to 7.7 million
• employees increased from 20 million to 43 million
 Since 1992 private enterprises’ GDP grows at 60%
a year and tax grows at 80% a year
The number of state firms has fallen rapidly
Share of Industrial sector Firms
100
90
80
Private
70
60
50
40
30
20
10
0
Private
Collective
I nd i r ect st at e
Direct
state
Collective
I nd i r ect st at e
Direct state
1998
2003
The private sector output skyrockets .
Constant prices gross output, industrial sector
5000
4500
4000
3500
3000
state
2500
private
2000
foreign
1500
1000
500
0
1998
1999
2000
2001
2002
2003
Urban Employment 1978 - 2003
18000
household
16000
foreign
14000
HK, Macau, TW
10,000 employees
12000
10000
8000
6000
private
joint-stock
limited liability company
joint ventures
limited partnership
4000
collective
2000
state-owned
0
1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
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Outcomes of China’s Reforms
 Operational mechanisms of state-owned
enterprises has been transformed.
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Outcomes of China’s Reforms
 Prices of commodities are now
determined largely by the market, rather
than by the state.
Share of deregulated prices
120
100
80
60
40
20
0
1978
1985
1991
Market prices
1995
State guided
1999
State fixed
2003
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Outcomes of China’s Reforms
 Direct interference in the nation’s
economy by the government is now being
replaced by indirect control by economic
and legal means.
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Outcomes of China’s Reforms
 Opening to the outside world has greatly
accelerated China’s reform and
development.
 Encourage investment, export, and import
• preferential treatment for overseas capital
 Gradual opening of the domestic market
 Accession to the WTO (December 2001)
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Outcomes of China’s Reforms
 China has liberalised trade policies
3. Challenges in trade policy
dramatically:
 average tariffs on manufactures are down from
46.5 per cent in 1992 to 6.9 per cent after
accession;
 average tariffs on primary commodities are down
from 22.3 per cent to 3.6 per cent
 Non-tariff barrier coverage is down from 32.5 per
cent to 21.6 per cent
 Extensive liberalisation commitments in
telecommunications, banking and insurance
 China has moved extensively towards a market
economy
 The WTO accession will accelerate this trend
dramatically
Mainland China's Exports & Imports 1978-2004 (billion US$)
600
500
400
300
200
100
0
1978
1980
1982
1984
Exports
1986
1988
1990
1992
1994
1996
1998
Imports
2000
2002
2004
• Trade’s role in China’s economy has
increased
Table 1.7 China's Exports and Imports, 1980 - 2005
Measure
1990
2000
2005
Average annual export growth rate (percent)
13.2
14.8
25.1
Average annual import growth rate (percent)
10.4
15.4
24.1
0.30
0.40
0.64
Trade dependence ratio
1980
0.13
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Challenges Ahead
 widening gap between rich and poor
 Regional inequality and fragmentation
 Unemployment Problem is deteriorating
 “GDP first” policy has made China’s development
increasingly unsustainable
 energy crisis, environmental problems, etc
 China is aging rapidly
 The legacy of “one-child” policy
 Insufficient Domestic Demand
 Reform of banking system is lag behind
Average Income Per Head (Yuan)
9000
8000
7000
6000
5000
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
78
4000
3000
2000
1000
0
per captical annual disposable income (yuan)--urban household
per cpatical anuual net income of rural households
• Urban/rural disparities remain pronounced
– 2005 Rural average net income: $397
– 2005 Urban average net income: $1281
• Sustained growth will require generating
higher-productivity and higher-income
employment opportunities for the 45% of
the population still engaged in lowproductivity agriculture
Regional Disparity in China: Per Capita GDP
( in Current Price)
20000
0.45
0.44
15000
0.43
0.42
10000
0.41
5000
0.4
0
0.39
1997
1998
Coastal provinces
1999
2000
2001
Interior provinces
2002
2003
Interior-coastal Ratio
Income Disparity
• Currently, China’s Gini Coefficient is 0.45
• The bottom 20% of income earners earn a mere
7.4% of the total income; while the top 20% take
home 50% of the total income
• As of July 2005, Chinese rural areas still had
over 26 million people living in absolute poverty
• China is still home to 18% of the world poor
• Widening income disparities undermined social
justice
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Unemployment by Region
7.0
80.0
6.0
70.0
5.0
60.0
4.0
50.0
40.0
3.0
30.0
2.0
20.0
1.0
10.0
0.0
0.0
unemployment rate 2003
unemployment rate 1990
unemployment 10 000 persons
Labor Disputes, 1996-2003
250000
900000
Cases accepted
Number of labors involved
200000
800000
700000
600000
150000
500000
400000
100000
300000
200000
50000
100000
0
0
1996
1997
1998
1999
2000
2001
2002
2003
Unemployment Problem was deteriorating
 Although the number of employed person was rising stably, the
unemployment rate also was going up
 The laid-off people from state-owned enterprises (43%) and
job-off after graduation (20.4%) accounted for the increase of
unemployment rate.
More migrants (current 120 million+ coming 150 million )
from countryside coming to city to look for job, though it will
enhance China’s advantage of low labor costs world widely.
Old Growth Mode Under Attack
• In 2009, to generate each US$1 worth of GDP,
China consumed 4.3 times as much coal and
electricity as the United States, 7.7 times as
mush as Germany and France, and 11.5 times
as much as Japan
• More than 50% of the petroleum used was
imported.
• Between 2002 and 2030, around 21% of the
world’s new demand for energy resources will
come from China. The old mode is deemed
instable and unsustainable
Insufficient Domestic Demand Is the Major Problem in China’s
Economy
Reason
1
The economy structure is not
rational.
2
The gap of income between the resident
in urban & rural areas is getting larger.
3
Result
The unemployment rate remained
increasing
Insufficient Domestic Demand
Economy Restructuring Need to Be Push Forward
Demand VS. Supply
Secondary VS. Service
Heavy VS. Light
The structural conflict in
demand and supply is very
heavy.
The structure of secondary
industry and service industry
need to be re-organized.
Supply: low
technological content
products
The growth rate of service
industry is lower than the
rate of secondary industry.
In the secondary industry,
the heavy industry has a
higher growth rate than the
light industry, which is
closely related to people’s
life.
Demand: hi-tech, deepprocessed products
Reform of banking system is lag behind economy development
The four state-owned
banks have strict
rules for loan
granted by their
branches, which ask
for small to medium
size companies to
provide guarantors
or mortgages.
conflict
For farmers and the
small to median
sized companies in
countryside or small
county, it’s very
difficult to find
qualified guarantor
or valid mortgages.
Small to medium sized enterprises
Banks
The small-medium sized enterprises can’t get effective, full loan in time.
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Challenges Ahead
 widening gap between rich and poor
 Regional inequality and fragmentation
 Unemployment Problem is deteriorating
 “GDP first” policy has made China’s development
increasingly unsustainable
 energy crisis, environmental problems, etc
 China is aging rapidly
 The legacy of “one-child” policy
 Insufficient Domestic Demand
 Reform of banking system is lag behind
Hu Jintao’s Vision:
hexie shehui (Harmonious Society)
• High growth with social justice
• Key measures:
– Transforming the old growth mode with its
emphasis solely on GDP to a new one with
more emphasis on balanced development
– Reduce income disparities
– “building a socialist new rural China”
– “Scientific development”
Plan One:
Rethinking Social Policy
• Shifting back to Deng’s second half of the slogan:
“common prosperity”
• Regional policies: the strategy of western
development; the revival of northeast China, and
the promotion of the rise of central China
• Income tax law was revised: to increase income
tax threshold from 800 yuan to 3500 yuan
• Policies and programs to cope with urban
unemployment, a new source of urban instability
Plan Two:
Building a “New Rural Society”
• The so-called “san nong” (agriculture, rural
areas, and farmer) has been on the top
agenda for the Wen Jiabao government
Plan Three:
Sustainable Development Via a New Mode
• “scientific development” (kexue fazhan guan)
• Searching for new sources of growth such as
innovation and technological upgrading
• Raising energy efficiency and cutting per unit
GDP energy consumption by about 20 percent
• More coordinated and balanced development
• Knowledge economy with emphasis on
intellectual property rights and famous brands
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3. China’s international economy
 Achievements
Mainland China's Exports & Imports 1978-2004 (billion US$)
600
500
400
300
200
100
0
1978
1980
1982
1984
Exports
1986
1988
1990
1992
1994
1996
1998
Imports
2000
2002
2004
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Achievements
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Achievements
China’s trade size and the market share 2001-2010
Import & Export
sum
Export
%
rank
sum
%
rank
2001
5097
4.0
6
2660
4.3
6
2002
6208
4.7
5
3256
5.0
5
2003
8510
5.5
4
4382
5.8
4
2004
11546
6.2
3
5933
6.4
3
2007
21738
7.7
3
12179
8.8
2
2008
25616
8.1
2
14286
8.9
2
2009
22073
8.9
2
12017
9.7
1
2010
29728
9.7
2
15778
10.4
1
Foreign Direct Investment in Mainland China 1984 - 2004 (in billion US$)
$65
$60
$55
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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Achievements
China's export commodity structure 2001-2010
Primary
products
Manufactures
High-tech
products
Textile
products
sum
%
sum
%
sum
%
sum
%
2001
263
9.9
2398
90.1
465
17.5
534
20.1
2002
285
8.8
2971
91.2
679
20.8
618
19.0
2003
348
7.9
4036
92.1
1103
25.2
789
18.0
2004
406
6.8
5528
93.2
1655
27.9
951
16.0
2005
493
6.4
7130
93.6
2183
28.6
1150
15.1
2006
529
5.5
9161
94.5
2815
29.1
1440
14.9
2007
615
6.0
11565
94.1
3478
28.5
1712
14.0
2008
778
5.5
13507
94.6
4156
29.1
1852
12.9
2009
631
5.3
11386
94.8
3769
31.4
1670
10.6
2010
817
5.2
14962
94.8
4924
31.2
2065
13.1
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Achievements
China's international competitiveness in different
industries 2009
Industries
Market share
(%)
RCA
index
TC
index
Competit
iveness
index
Agriculture, forestry, animal husbandry and
fishery
3.95
0.37
-0.53
99.26
Mining industry
1.21
0.11
-0.91
99.09
manufacturing
12.42
1.15
0.20
101.56
Textile industry
31.55
2.92
0.64
102.83
Leather, fur, feathers and products industry
32.73
3.03
0.79
103.26
Furniture manufacturing
27.09
2.51
0.92
103.80
Fabricated Metal Products
16.62
1.54
0.66
102.11
Electrical machinery and equipment
manufacturing
18.49
1.71
0.39
102.07
Communications equipment, computers and
other Electronic equipment manufacturing
24.31
2.25
0.20
102.43
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Achievements
private
25%
private
7%
state
43%
foreign
50%
different exporters’ share in 2001
state
21%
foreign
54%
different exporters’ share in 2010
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Achievements
Trade balance
1990-2010
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Achievements
Trade balance
2001-2010
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Challenges
 In 2009, to generate each US$1 worth of
GDP, China consumed 2.9 times energy as
much as United States, 4.3 times as mush as
EU, and 4.9 times as much as Japan.
 Now, China has become the world's second
largest energy consumer.
 More than 50% of the petroleum, iron ore,
bauxite, copper used was imported.
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Challenges
 China is aging rapidly. Wages rosed faster.
 Export products are still in the low end of
the global value chain.
 Processing trade represents a significant
share; value added in China is less than
implied.
For example:

The report published by three researchers in UC showed
Apple Company sold iPod at $299 each one. Its cost and profit were
as following:
Sell price:
$299
Cost:
purchased main parts $73 (from Japan )
purchased other parts $60 (from other country)
assemble
$3 (in China !)
Profit:
$163 (in US)
Apple Company gained $80
Other
$83
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Challenges
 Risk-resisting ability of foreign trade
enterprises are very low.
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Challenges
east
88%
east
91%
central
5%
west
4%
exports share in different area 2000
central
6%
west
6%
exports share in different area 2011
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