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Transcript of China Economy
Information on the Chinese Economy
Role of Government in Business
President Xi's Reform
Billionaires and the Regular Citizen
Future for the Economy
"During the rush hours, about 20 percent of roads and intersections are in total gridlock and the traffic speed is less than 5 km/hour"-Zhong-Ren Peng
Poor road infrastructure
Narrow, overcrowded streets
Construction materials and devices needed to improve the cities will be negatively effected by the poor working conditions
Narrow, dangerous passages
Inefficient Urban Sprawl
Amount of urban construction land
Jack Ma and the Alibaba IPO
What is Alibaba?
Worlds largest online commerce company
in transactions last year
of China's online market
Central Government Supporting Strategic Industries
42 mainland Chinese companies
in the Fortune500 list of the world's biggest firms in 2010,
all but three
were owned by the government.”
- Government chooses most lucrative businesses to support, including
petroleum, coal, and information technology.
Reserved sections for urbanization increased by
Real Estate and the Average Chinese Person
in the past decade.
Farmers given proper compensation.
“China would need to find
- about the size of the Netherlands - to accommodate urban growth in the next decade.”
34,000 square kilometers
Financial inequality sparks between the city workers and countryside farmers.
Real estate dominates
of the Chinese Economy
12 to 24
new cities annually
The government has spent
Most people in China live on
less than $2.00
a day, these apartments cost upwards of
$50,000 to $60,000
Market will have a more prominent role in allocating resources
Government will have a "basic" role
Public service delivery
Management of social stability
"Economy will maintain strong, sustainable, and balanced growth"
"Restructure the roles of the government and the market"
of chinese households own
of the country's total assets and
of the nation's total income
Collision of location-based classes may provoke
Government tightening and loosening on allowed loans
General Economy Info
World's second largest economy by nominal GDP
World's largest economy by purchasing power parity
World's fastest-growing major economy
What's Next For China's Economy?
Economists say it is just a matter of time until China’s GDP becomes the world’s largest.
International economists in China warn that government’s GDP statistics are accurate only as indication of direction
Projections for China's Economy
Chinese President Xi Jinping said China's economy will maintain strong, sustainable and balanced growth
density of people
Expansion of cities leads to
expansion of pollution
spent of illnesses caused by pollution
commutes and energy consumption
4 issues ranked from most to least challenging
1. Inefficient urban sprawl
Inefficient urban sprawl
2. Environmental impacts
3. Rising inequality
4. Limited transportation
JK: Too many challenges to overcome. Too much money needed for urbanization with too many risks.
"China is growing too slowly and accumulating debt too fast. Its leaders have rejected fundamental reform." -Gordan G Cheng
- Market access rules that favor state-run firms
- Support profitable companies
of the confederation's list of the
biggest publicly traded Chinese firms were
controlled by the government.
Special Economic Zones
, China founded special economic zones
- Regions with economic and other laws, which are more free-market oriented (nationwide ones suspended)
Free Trade, Free Ports, Urban Enterprise, Export Processing Zones..
Allows government to focus on strengthening specific roles
"Economy where the government plays a
, rather than a
Increase dividend payout to 30%
in state-owned firms
SASAC will manage state
instead of state
instead of privatizing
Give private enterprises more access to capital, land, energy
"Over time, economic role of SOEs is eroded and overall economic efficiency improves."
Former CEO of Alibaba
Current richest person in China
Net worth of
AI: Housing bubble is said to burst
anytime now as the banks aren't being
paid back the loans they sent out to
construction companies. No one is
making money in this market, only
Optimism Towards Xi's Reform
Doubts About Xi's Reform
by beneficiaries of the old system
Unrealistic expectations as a result of his
reluctance to give up government control
He has a vision, but
lacks a real plan
"...few details on the sequencing and time table for reforms."
Lack of urgency
as a leader to be taken seriously
Steps taken to
address past issues
New "leading small group" and State Security Commission
Bold reform plans
"This is by far the most ambitious, comprehensive reform plan that I've ever seen,"
Diluting Government Control
"...economic reform is a necessary tool to ensure the longevity of the present political system."
"...proclaiming sweeping goals, without providing any road map at all for getting there."
Three Main Roles
- State Supporting Strategic Industries
- State-controlled Special Economic Zones
- Government Role in Creating Joint Ventures
- Aim= attract foreign investment/technology (joint ventures)
- SEZ's part of export-oriented strategy
- Incentives for foreign investors:
labor, land use, tax incentives
Creating Joint Ventures
- Partnership between foreign and chinese investors
local work force/ facilities, good relationships, entry to industrial sectors
conflicting interests, cost, division of profits, risk with intellectual property
NC: Until there are specific and realistic policies in place to work towards President Xi's ideas, there is no real reason to believe that reform will come quickly enough to save China from economic collapse.
joint venture failure
- Jeep could set up offices in Beijing, but after a few years, Chinese take over
- Safeguard intellectual property
Different priorities and goals
- Additional Problems:
CH consumers couldn't afford, culture clash in work site
- Negotiations over exit conditions
Largest exporter of goods in the world.
Starting in 2011, China became the world’s No. 1 trader, surpassing the U.S., and the world’s No. 2 economy, topping Japan.
Transitioning from an investment-driven to a
Reducing monopoly power
Lending through non-state banks
Private sector taking the lead in
A comprehensive reform plan was introduced to put China’s public finances on a more stable footing.
For 2015–16 average growth is expected to ease to slightly above 7 percent
GP: Not necessarily boom, but slowed down growth doesn't mean bust. 2nd largest economy would need catastrophic event to bust, largest exporter maintains external stability. "China will be lucky to grow over 7%. Despite that, China will continue to be the world’s fastest growing major economy this year and next, and arguably into 2016 as well, says Bill Adams, senior international economist for PNC Financial in Pittsburgh."
LB: China has a rocky road ahead of them because of the many issues that they need to take care of, but in the long run their growth outlook is solid.
Without policy action, the slowdown in China’s potential growth in the medium term could be more severe.
Growth is now decelerating toward 7%
(with his reforms)
International Economists say direction of the Chinese economy is plainly downward.