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DEVELOPMENT ECONOMIES - CHINESE ECONOMY

Gelişen Ekonomiler ve Çin Ekonomisi (Dilara Özkılıç)
by

Dilara Ozkilic

on 9 January 2015

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Transcript of DEVELOPMENT ECONOMIES - CHINESE ECONOMY

Chinese economy
Development economics
General knowledge
Economic Reform
WTO
Foreign relations
Education and health
Reasons for growth
Capital: Beijing
From 1949 to 1978: The People’s Republic of China was a Soviet style centrally planned economy
Economic liberation in 1978
From 1978 to 2012: China's investment and export-led economy has grown almost hundredfold
Fastest growing major economy in the world (6% -> 9% a year)
Nowadays
: Market economy based on private property ownership
Leading example of state capitalism
Joined WTO on December 11th 2001
Relaxed over 7,000 tariffs, quotas and other trade barriers to join
Exports quintupled
GDP (in US$) has quadrupled

Success mainly due to manufacturing as a low-cost producer
Cheap labor
Good infrastructure
Relatively high productivity
Favorable government policy
Possibly undervalued exchange rate
Dominates in strategic pillar industries
Energy and heavy industries
But private enterprise has expanded enormously
A state-run system of public education
All citizens must attend school for at least nine years
99 percent attendance rate for primary school and an 80 percent rate for both primary and middle schools
2007, 93.3% of the population over age 15 are literate
YUAN
1 Chinese yuan = 0.115386223 Euros
GDP (2012)
Total: $ 8.2 trillion (2nd)
Per capita: $ 9,055 (91st)
GDP growth
: 7.7 % (2013)
2012: Had the world’s second largest economy in terms of GDP and PPP
DEVELOPMENT MEASUREMENTS
Population 2011 estimate: 1 347 350 000
Area: 9 706 961 km²
Currency: Yuan
Largest city: Shanghai
Government: Presidential republic, single-party state
Consequences
Rapid economic growth contributed to severe consumer inflation
The prices of basic goods risen steeply
To curb inflation and moderate rising property prices the Chinese government has
Instituted a number of fiscal regulations and amendments
Raised interest rates
Imposed limits on bank loans
PROBLEMS WITH ENERGY
Economy highly energy-intensive and inefficient Industrial processes in China between 20% to 100%
More energy than similar ones in OECD countries World’s largest energy consumer in 2012 Coal supplies 70% of energy needs Lacks environmental regulations -> massive water and air pollution20/30 of the most polluted cities reside in China
Trade relations
TRADE RELATIONS
DEVELOPING WORLD
SUPERPOWER STATUS
Emerging superpower status
Relations with developing world
PISA
In 2009, Chinese students from Shanghai achieved the world's best results in mathematics, science and literacy, as tested by the Programme for International Student Assessment (PISA), a worldwide evaluation of 15-year-old school pupils' scholastic performance.
As of 2012, China's national average life expectancy at birth is 74.8 years,and its infant mortality rate is 15.6 per thousand births
Women and children
GENDER EQUALITY
Gender inequality index
Value: 0.209 (2011)
Rank: 35th out of 146
Global Gender gap
Value: 0.6853 (2012)
Rank: 69th out of 135
When the People's Republic of China was established, employed women accounted for only 7 percent of the workforce; whereas in 1992 women's participation in the workforce had increased to account for 38 percent
Marriage reform law under Mao’s rule
A family planning policy
The policy was introduced in 1978 and initially applied from 1979
In most rural areas, families are allowed to apply to have a second child if their first-born is a daughterAfter the introduction of the one-child policy, the fertility rate in China fell from 2.63 births per woman in 1980 (already a sharp reduction from more than five births per woman in the early 1970s) to 1.61 in 2009
ORIGINAL REASONS FOR ONE-CHILD POLICY
The original intent of the one-child policy was economic
To reduce the demand of natural resources
Maintaining a steady labor rate
Reducing unemployment caused from surplus labor
Reducing the rate of exploitation
HUMAN RIGHTS
The one-child policy is challenged in principle and in practice for violating a human right to determine the size of one's own family.
According to a 1968 proclamation of the International Conference on Human Rights, "Parents have a basic human right to determine freely and responsibly the number and the spacing of their children"
China's economic relations crucially depend on bilateral trade with the other nations of the world
Biggest trading partners:
USA
The Chinese petrochemical sector, manufacturing sector, and hospitality industry are preferred areas of investment by the US investors
India
2003: China and India entered into an agreement to initiate open border trade via the Silk Route
Japan
During the year 2004 China substituted the United States of America as one of the major trading partner of Japan
Singapore
The list of exports from Singapore to China reflects that Singapore has the upper hand over China as far as oil refinery and electronics industries are concerned
China is the world's largest developing country
Consolidating and developing cooperation with other developing countries is a cornerstone of China’s foreign policy
2005: China continued to strengthen collective dialogue and cooperation with other developing countries
To construct a new type of partnership featuring long-term stability, equality, mutual benefit and all-round cooperation
It kept on pushing forward its cooperation with African and Arab countries within the frameworks of the China-Africa Cooperation Forum and the China-Arab Cooperation Forum and deepening its ties with Latin-American organizations.
The "rise of China" has been named the top news story of the 21st century by the Global Language Monitor
"China is currently the most fashionable potential superpower and the one whose degree of alienation from the dominant international society makes it the most obvious political challenger."
Is constrained by the major challenges of development and by the fact that its rise could trigger a counter coalition of states in Asia
Economist and author Arvind Subramanian argued in 2012 that China will direct the world's financial system by 2020 and that the Chinese renminbi will replace the dollar as the world's reserve currency in 10 to 15 years
Encouraged
the formation of rural enterprises and private business
Liberalized
foreign trade
Relaxed
stated control
Invested
in industrial production
Allowed
privatized enterprise
1 Chinese yuan = 0.160133 U.S. dollars
Globalization
in 1980 China became apart of International Monetary Fund and a member of the World Bank
Banking Reform
1993 Chinese economy was at down with high inflation. The CCP reacts by controlling bank lenders, as a result, China to ride out the 1997 financial crises
How is China Doing Currently?
Unemployment Rate in China increased to 4.10 percent in the fourth quarter of 2013
The average inflation of China in 2013: 2.57 %
Since July 2012 actual interest rate is 6
The Gross Domestic Product (GDP) in China decreased to 7.40 percent in the first quarter of 2014 ( weakest showing in 24 years )
New Economy Demands
As the world becomes increasingly aware of poor environments, 2008 China signed the 10 year Energy and Environmental Cooperation Framework to implement reactions to climate change and sustainable energy.
16 of world’s 20 most polluted cities are in China
BOOMIİNG ECONOMY
Less than 30 years: enormous economic progress
maintaining an average %10 GDP growth rate (forecast 8% to 2015)
US 2.2 % since 1970s
Alarmed US and UK and other powerful countries
1967: 1%, right now: 7.4%
2nd largest economy by nominal GDP and PPP
7.8 rise in GDP in 2009, unaffected by the 2008 global recession
in 2012 surpassed US to become the largest exporter in the world
833m mobile phone users, 420m internet

$117.6 billion in foreign direct investment (FDI) in 2013
Biggest economy
Over the last 20 years, China has become one of the biggest economies on Earth, surpassing Japan and one step behind the United States.
GDP in a Slowing Economy
GDP Annual Growth Rate: 7.7% (2013)
"China sad recently it must sustain growth of more than 7% to create the 10 million jobs it needs each year."
Government lowered its target this last year from 7.7% to 7.5% growth for 2013
Shadow Banking
"The financial activity that exists outside the formal banking sector"
Dramatic rise in private loans taken out by companies
"Analysts worry that new lending is not translating into growth and is increasingly dominated by unregulated operators"
Fear that some companies may default
10-15% of Loans will not be recovered
Accumulating Debt
China's total debt is 215% higher than the country's GDP
Debt $18.4 trillion
10.72 trillion Yuan was issued to local governments, according to Beijing
36 select governments has a 13% debt increase between 2010 to 2012
Credit used to help sustain growth (issued to local governments, fund infrastructure projects, etc.)
2014 Initiatives
China's Economic Reforms
China's annual parliamentary meeting was held on March 5th, 2014 outlining their plan for economic reform
Agenda:
- Stabilize economic growth & Financial Reform
(Managing government debt)
- Opening up China's markets
- Clearing pollution
- Easing on the One-Child Policy & Population Control
Financial Reform
Clamp down on Shadow Banking
All banks are government owned
Loosening the Currency Control
Yuan is heavily controlled by China's Central Bank
Currency dropped 1.6% below the dollar in February
education level
Insufficient of investment in the rural areas
Income inequality
Corruption
Slowdown in economic growth
Long term inflation
Rising social costs as government revenues declines
50% of Chinese GDP: savings
Planned economy Market economy
Closed economy Open economy
Rural Urban
Three transformations
over 13 percent of the population is in poverty
China has had very
large increase in industry
the past 50 years
GDP RANKING
1. US 16.2 trillion $
2. CHINA 8.2 trillion $
3. JAPAN 5.96 trillion $
Total trade
2013
No 1 The United States
: $521 billion
No 2 Hong Kong:
$401 billion
No 3 Japan
: $312.55 billion
No 4 The Republic of Korea:
$274.24 billion
No 5 Taiwan:
$197.28 billion
No 6 Germany:
$161.56 billion
No 7 Australia:
$136.37 billion
No 8 Malaysia:
$106.07 billion
No 9 Brazil:
$90.27 billion
No 10 Russia:
$89.21 billion
Deng Xiaoping
Dilara Özkılıç
Possible Solutions
cut required reserve ratio for banks to keep monetary stimulus growing
tax breaks for businesses to boost consumer spending
decrease the federal funds rate
reduce discount rate
combat corruption
Trade volume (2013)
: $4.16 trillion US: $3.91 trillion
Other Issues
Continue to negative aspects
Electronic equipment: $561,703,550,000 (25.4% of total exports)
Machinery: $383,310,504,000 (17.3%)
Knit or crochet clothing and accessories: $96,810,372,000 (4.4%)
Furniture, lighting , signs and prefabricated buildings: $86,435,683,000 (3.9%)
Optical, technical and medical apparatus: $74,689,712,000 (3.4%)
China's Top Exports
One Child Policy
The policy was introduced in 1978 and initially applied from 1979
The original intent of the one-child policy was economic
To reduce the demand of natural resources
Maintaining a steady labor rate
Reducing unemployment caused from surplus labor
Reducing the rate of exploitation

In April 11, 2014. As China eased its one-child policy by allowing couples to have two children if either parent is an only child
Full transcript