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Modern Chinese Economy

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Morgan Dick

on 13 May 2011

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Transcript of Modern Chinese Economy

We all know who this guy is We know this guy. But what about this guy? His name is Wen Jiabao China's current Prime Minister, who in March announced his country's new 5-year economic plan 7% growth between 2011-2015 less than in the last 5 years, when China had 11% growth which goes to show that for China, the way it grows is now as important as how fast it grows in 2010, China passed Japan in ranking to become the world's 2nd largest economy Who's Right: Michael or Oscar? usually predicted that it will overtake the United States by around 2020 "State-directed Capitalism"

since the 80s China has made attempts to de-Mao the communist economy and make it closer resemble capitalism
a combo of public and private ownership exists today
unusual since China, a one-party state, is nowhere near democratic Social Effects Private vs. Public

state-owned enterprises (SOEs) include the big banks, heavy industry (eg. oil) - and these state banks play right into the SOE's hands
98% of finance industry is state-owned, but
The number of private businesses grew by 30% between 2000 and 2008 - now make 60-70% of economy Industry Distribution

Roughly half the work force is engaged in agriculture - even though it contributes to only 13% of GDP
Among world's largest producers of several crops: rice, corn, wheat, soybeans, cotton
Industry contributes 46% of GDP: mining/ore processing, textiles, apparel, telecommunications
China is the world's largest exporter, its biggest partner being the United States
underdeveloped service industry Businesspeople in China

Small businesses in China operate much differently than in Canada or the US
Businesses can be built and liquidated very quickly
Business owners get investment money fast (at high, flat rates)
Often sell-off stock only once to "legitimise" the business and gain capital
Tax is an important source of revenue for the government - made it just under $1 billion in 2009
Income tax is progressive between 5% and 45% Humanitarian issues

restricted freedoms of speech, the press, assembly, association, religion, privacy, worker rights
coercive birth limitation (one-child policy)
lengthy detention, reported forced confessions, highest rates of execution 1989 Tiananmen Square Protest to demand economic + political freedoms
in part a response to high inflation and the hardships that accompanied it Disparity

huge difference in wealth between the easterly, coastal provinces and the inland rural provinces
In 2003 World Bank estimated that 152 million Chinese live below the US $1 per day poverty line - mainly in these rural regions Cultural Attitudes

In his address, Wen Jiabao talked about innovation, prosperity, and China as a Xiaokang society - a Confucian term about doing well enough to be able to sit back and enjoy
Is this attitude possible? The Kinks Consumption

More than $2 trillian will be required to build the electricity infrastructure necessary by 2030
This will facilitate approx. 15,000 extra megawatts per year
Most of the current energy supply is from coal - China is its largest world consumer and producer Pollution

health toll on the population
90% of urban water bodies are polluted (industry + infrastructure)
estimated that pollution costs the economy 7-10% of its GDP each year Inflation

Big inflation on the horizon, with the housing market bearing the brunt
Puts a left-leaning government in a sticky spot
To tax income, or not to tax income? Air quality concerns By Sakshi Sharma, Sarah Thomson and Morgan Dick Recent History 1980s

agricultural reforms: dismantling the commune system
new household-based system
self-management for SOEs
results? average annual growth rate of 10% in agriculture/industry
reforms to banking, price-setting, and labor systems
...but with price reforms set too advanced, inflation became the problem 1990s

after a brief economic slowdown in the laste 1980s, the economy grew on avg. 10% each year between 1990 and 2004
After Tiananmen Square, the role of ideology in the economic system started to shrink
Competition and entrepreneurialiship injected into the economy allowed it to skyrocket The Recession

Even China's own growth rate was impacted by the 2008 recession
Exports fell dramatically - coal by as much as 50% - but the country was protected by its reduced dependency on commodity markets
Unemployment, even in the cities, helped spark the establishment of more welfare - (stimulus spending) Martin Jacques on "Understanding the Rise of China" SOEs are less efficient and make less money than their private counterparts - and this is nothing new. Post-Mao, China made various attempts to untangle the communist economy with market-oriented reforms, with the eventual aim of more productivity better living standards greater technology Know Before You Go... China President: Hu Jintao!
Population: 1.3 billion (2009)
Government: Communist Party of China (4-9 old dudes), State Council (50 members), People's Liberation Army (enforces decisions)
GDP: US $6.872 trillion But let's not forget the level of intensenesss to be found here...
According to one author, 50 of China's most powerful political figures have encrypted "red machines" - red 4-digit phones that only call each other China has been under crazy pressure from Washington this week calling for the appreciation of its currency
the yuan has been kept intentionally undervalued to attract foreign investment + trade - United States is understandably hestitant to grant them this power
with inflation looming, the government is now conceding - to reduce the cost of imports In the news In early 2009, PM Jiabao pledged to increase spending on social programs despite a troubled world economy
This constituted an increase of 17% on social spending
Of late a focus is being placed on compulsory rural education
In 2008, a 5-year plan was implemented to form country-wide universal health care The Economy of Today's China
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