Transcript Perfect Competition and Its Equilibrium

An Overview of the Chinese Economy in the Past
30 years, Some Experiences and Lessons for
Government and Businessmen
Dr. Hongjun Zhao
Professor of Economics and Development
Shanghai University of International Business and Economics
[email protected]
May 12, 2013
Topics
 How did China Make its Economy Successful since 1978?
 How did government and businessmen interact well with
each other in this process?
 Some experiences and lessons for government and
foreign businessmen
1
I. How did China Make its Economy Successful since 1978?
 FDI in flow as the share of GDP since 1978
Export and Import since 1978
Exp. & Imp. in current or constant price
China’s GNP and GDP
GDP in current US$
Urban, Rural disposable income
Fixed assets investment
Fiscal income
GDP growth Rate
China’s growth compared to others
Female and male life expectancy since reform
Why did China make so much progress?
 Backward advantage
 Open up policy
 Decentralization
 Government’s good policy
 Citizen and peasants can choose their occupation,
making their economic decision relatively freely
How did the government make these work?
 Government realized that if there were no economic
reform, China will still lag behind, even fall apart like the
Former Soviet Union, East European Countries
 Policies and Institutions matter
 Household Responsibility System was launched since 1978
 Town Village Enterprises (TVE) promotion Act have been
passed since 1983
 Urban financial reform, exchange reform, foreign trade reform,
real estate reform ect since 1986
 Fiscal decentralization since 1994
 Market-oriented+ Government-supported
The wars in Chinese History
1884-1893
1794-1803
1704-1713
1618-1627
1528-1537
1438-1447
1356-1365
1270-1279
1180-1189
1090-1099
1000-1009
917-926
829-838
739-748
649-658
560-569
470-479
385-394
295-304
205-214
115-124
250
25-34
66-57
156-147
246-237
Domestic Wars
300
numbers of domestic war
200
150
100
50
0
Foreign invasion and aggressions
Why was Chinese government so strong to do so?
Government
Confucianism dominated
Bureaucrats
Meritocrats
Schools/University
merchants
Peasants
Favorable geography for agriculture
II. How did Government and businessmen
interact well with each other since 1978?
 In Chinese history, government suppresses
businessmen and business activity all along the
Chinese history
– Businessmen have to go out of city or town to trade with each
other
– Businessmen’s property tax was raised by at least 50% since the
W. Han
– Business activities, such as trading, with aim of maximizing profit
were not encouraged
– why so?
 The rank of businessmen in society was the lowest
one
 Very important goods such as salt, iron, wine were
monopolized by government
 Only one social upward mobility
Imperial examination Champion (598-1905A.D)
Government deregulated planning economy since 1978
 Household Responsibility System was launched since
1978
– Peasant becomes the “real” farmer, extra produces are their own
surplus, therefore profit
– Peasants could sell their produce surplus to market
– Town and village could set up enterprises, TVE promotion Act
have been passed since 1983
– Rural banks relaxed their loan requirements to peasants, and
TVE
Double-track pricing system
 1981, extra production of oil was permitted to export at
international price
 1983, extra production of petroleum and coal could be
sold out to private dealers
 1984, extra production of industrial materials could be
sold out at 20% price mark-up
 1985, extra production of industrial materials could be
sold out at market price
 1988, price ceiling was imposed in industrial materials
 1989, the price of most products was marketized
Market-oriented Institutional Reforms
 Urban financial reform, more banks available
 Exchange reform, managed fluctuation
 The monopolized Foreign trade system was marketized
 More FDI, joint-ventures were welcome
 Fiscal decentralization since 1994
 Every city, province could make their own economic decision
relative independently
Government-Business Interaction
 Infrastructure Investment, helping G provide public
service, earning profit
 Made in China, contributing to consumption,
manufacturing, employment, earning profit
 Service in China, research, consulting, training,
purchasing
Government and business relation in the new times
Government
Business,merchants dominated
Bureaucrats
Meritocrats
Schools/University
merchants
workers
Peasants
Favorable geography for agriculture
III. Some Experiences and Lessons for Government and
Businessmen
 Joint-ventures are more preferred to wholly foreignowned enterprise
 Well government-business relationship is welcome
everywhere
 Paying more attention to Chinese governmental and
industrial guidelines
 Localization is one of the very important strategies
for Chinese market
 “Made in China” faces more competition
 Service in China is one of the good choice for
investment in China
My study on Chinese Economy