Transcript China Econ Overview

Globex 2016
China’s Economy:
Growth and Global Connections
Prof. Susan Mays
[email protected]
WeChat: susanmays
China’s Economy (2 or 3 credits)
1. Let’s get started!
2. Student introduction activities
3. Topic: China economic overview
4. Speaker sessions and company visit administration
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China has had four very different economic systems in
less than 100 years
1978-Present
3
PRC Reform Era, >35 years – Deng ushers in an “open
door” policy which allows for reform of the centrally
planned economy, market growth, and foreign trade
1949-1978
PRC High Socialism, <30 years – Mao pursues centrallyplanned, socialist development, emphasizing industry
& infrastructure for a closed, self-reliant society
1911-1949
Instability, ~40 years: China’s economic growth is
thwarted due to warlord disputes, the Sino-Japanese
War (1937-1945), and the civil war between the
Guomingdang and the CCP
1644-1911
The Qing Dynasty: a mainly agricultural economy but
one with significant trade, including foreign trade
1980s: SEZs for trade; originally Shenzhen, Zhuhai, Shantou, &
Xiamen, near HK-MC-TW; later Hainan Island & Shanghai’s Pudong
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Note the locations of Taiwan, Hong Kong, and Singapore
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Hong Kong is on the southeast coast of China, near new-ish
city of Shenzhen and the province of Guangdong
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$US Billions
Opening in the 1980s, but mainly from 2000, China’s economy
has grown rapidly & become increasingly globally integrated
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1980 1985 1990 1995 2000 2005 2010 2013 2014
(1) Date sources: tradingeconomics.com; China’s General Administration of Customs; World Bank.
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GDP
Foreign Trade
In 2Q of 2010, China surpassed Japan to become the world’s
2nd largest economy
~GDP
($b)
~GDP/cap
($000)
~GDP
(PPP, $000)
1. US
17.9
55.8
17.9
55.8
2. China
10.9
8.0
19.5
14.1
India
2.1
1.6
8.0
6.2
3. Japan
4.1
32.5
4.7
38.1
4. Germany
3.4
41
3.8
46.9
5. UK
2.8
43.8
41.2
6. France
2.4
37.7
41.2
Notice that China’s ~GDP/capita is
relatively low)
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~GDP/cap
(PPP, $000)
China’s GDP growth has surpassed forecasts…
BRIC, GDP Forecast, shown in US$ trillion1
$25
United States
China
India
Germany
$20
$15
$10
$5
$0
(1) Goldman Sachs’ Global Paper No. 99, October of 2003.
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Japan
Today let’s review “three moves”
1. Moving to the cities
2. Moving “up the value chain”
3. Moving into a mixed economy
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1. Moving to cities: largest migration in history, in 2016
we think ~260mm+ migrant workers in China’s cities
Millions of Migrant Laborers
in Chinese Cities
 Lack hukou, so lack services
 Abuses and insecurities
 Education:
64% middle or high school
300
250
200
150
 Changing demographics:1
• ~65% not in mfg
• mostly >30, married, w/ jobs
100
50
0
1982 1985 1988 1994 1997 2003 2006 2012 2014
More migrant workers are bringing
spouses and children and are
staying longer in urban areas
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(1)
(2)
Author’s estimates from various sources.
Estimates from data in Chinese Academy of Social Sciences, Li Chunling, “Institutional and Non-institutional Path: Different Processes of Socioeconomic Status Attainment of
Migrants and Non-migrants,” 2012.
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0
oung 27men
and women from the countryside pouredLikeinto
the
factories and constru
June, 2013
1 are
(cont.):
tothe
cities,
China’s
totaleconomic
urban now far o
There
anShenzhen
estimated 262With
millionand
rural moving
migrant
workers in China.
They
have
been the
engine ofof
China’s
spectacular
ies such
as
Dongguan,
population
migrant
workers
growth over the last two decades but, because of the household registration system, they are still marginalized and discriminated
na as a
whole,
migrants
now
make
about
third
of parents
the
urban
populatio
against.
Their children
have limited
access
to education
and up
healthcare
and canone
be separated
from their
for
years on
end.
population
likely
crossed
the
50%
mark
in total
2010-2011
Urbanisation and the household registration system
opulation with an urban hukou in China – as a percentage of total population in China
In 1958, the Chinese government formally reintroduced the household registration (Hukou 口) system. Household registers had
been used by Chinese authorities for millennia to facilitate taxation and control migration. This new hukou system was designed by
the Communist government with three main purposes in mind: government welfare and resource distribution, internal migration
control and criminal surveillance. Each town and city issued its own hukou, which entitled only its registered residents access to
social welfare services in that jurisdiction. Individuals were broadly categorised as "rural" or "urban" based on their place of
residence. Moreover, the hukou was hereditary: children whose parents held a rural hukou would also have a rural hukou
irrespective of their place of birth.
The hukou system was supposed to ensure that China’s rural population stayed in the countryside and continued to provide the
food and other resources that urban residents needed. However, as the economic reforms of the 1980s gained pace, what the cities
needed most was cheap labour. And so began what is often described as one of the greatest human migrations of all time.
Hundreds of millions of young men and women from the countryside poured into the factories and construction sites of coastal
boom towns. In many cities such as Shenzhen and Dongguan, the population of migrant workers now far outstrips those with an
urban hukou. And in China as a whole, migrants now make up about one third of the total urban population. See graph below.
Actual urban population and population with an urban hukou in China – as a percentage of total population in China
ng, 2012. “Crossing the 50 Percent Population Rubicon: Can China Urbanize to Prosperity?” Eurasian Geography and Econo
Source: Updated from Chan, Kam Wing, 2012. “Crossing the 50 Percent Population Rubicon: Can China Urbanize to Prosperity?” Eurasian Geography and Economics, Vo1.53, No.1, pp.63-86.
12 into
As migrant
flooded
the cities, it became
clear that
that hukou
restrictions restrictions
on internal migration were
only
ed
the workers
cities,
itintobecame
clear
hukou
onnotinternal
migration we
1 (cont.): Moving to cities; internal labor migration…
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2. Moving “up the value chain”: China’s labor has moved
from agr > mfg > services, with services >44% by 2015
 Labor pool is about 1 billion;1 non-agr increased by about 50 percent from 2000-2010
Share of GDP3
100%
1980
2000
75%
2008
50%
West 2008
25%
0%
Agriculture
Industry
Services
Share of Employment3
100%
1980
2000
75%
2008
West 2008
50%
25%
0%
Agriculture
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Industry
Services
(1) China’s National Bureau of Statistics, 2011.
(2) OECD Economic Surveys: China 2010, page159, Figure 6.2 from China Statistical Yearbook 2009.
(3) OECD Economic Surveys: China 2002, page 8, Table 1, from China Statistical Yearbook 2000; CIA World Fact Book 2008.
3. Moving to a “mixed” economy, from state ownership
Transition: GDP by Ownership Form1
100
80
60
40
20
0
1978
1985
1990
1995
1997
1999
State Sector
Private Sector
Other*
In recent years, analysts estimate that
the state sector is responsible for about 40% of GDP
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(1) “Other” includes urban collectives, cooperatives, & township/village enterprises (per China Statistical Yearbook, 2004), &“private sector” includes: joint ownership, LLCs, share holding corp.s, private enterprises, enterprises funded from HK,
TW, and Macau, & self-employed people. Graph data from China Statistical Yearbook, 2000 & 2004.
(2) OECD Economic Surveys: China 2009, pages 27, 106, 160, Figures 1.3, 4.4A, and 6.3, from China Statistical Yearbook 2009, CEIC, National Bureau of Statistics Industrial Microdatabase, and Joint NBS-OECD analysis.
3 (cont.): Moving to a “mixed” economy: orgs have different
ownership forms, w/ differing practices & cultures
Various ownership forms in China:
 Private Chinese companies
 Private “Chinese” companies
 Joint ventures (Sino-foreign)
 Multi-national companies (MNCs); wholly foreign owned enterprises (WFOEs)
 State owned enterprises (SOEs)
 State invested companies
 Other forms
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~40% of China’s economy
WTO entrance in 2001 furthered and formalized foreign
trade and aspects of the private sector
 China had to: 1) lower tariffs, 2) allow foreign firms to sell directly to the Chinese domestic
market, and 3) open the telecom and finance sectors to more foreign competition
 China’s leaders believed that foreign competition would further domestic reforms
Foreign Direct Investment (FDI), in BoP1
300
US$ Billions
250
200
150
100
50
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 '0 10 11 12 13
(1) Data source: World Bank, see data.worldbank.org, “balance of payments” includes non-cash investments and commitments.
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Three consequences
1. Higher incomes…and consumer spending
2. Mega cities…and mega infrastructure
3. Global integration…and globalizing institutions ???
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1. Higher incomes: Incomes have increased substantially, so
demand for consumer products is rising
Annual Disposable Income Per Capita1
Gini Co-efficients
for Income Inequality2
25,000
.40 in 2001
.47 in 2009
.478 in 2012
.41 in 1997
United States
.45 in 2007
~.46 in 2012
20,000
Chinese Yuan
China
Urban Income ~ 3x Rural
Latest Data 2013:
Urban: Y29,945 = ~US$4,325
Rural: Y8,896 = ~US$1,428
15,000
10,000
5,000
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 9 10 11 12 13
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(1)
(2)
National Bureau of Statistics China; People’s Daily; tradingeconomics.com; data trend combines rural and urban averages.
IMF; World Bank; CIA; over 600 million internet users; RMB up 30% since 2005; over 270mm rural migrant workers in cities; migrant worker income tends be between rural and
urban averages.
1. Higher incomes, yet China still has great contrasts…
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2. “Mega-cities”: China’s urbanization creates demand for
infrastructure, energy, and public services
3 of the world's top 6 “City Clusters” (a.k.a. megalopolises or mega-regions):
•
The Pearl River Delta, ~120 million (~200?), near Hong Kong:
•
The Yangtze River Delta, ~88 million (~120?), near Shanghai:
•
The Bohai Rim, ~66 million, near Beijing:
__________________________________________
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•
5 cities of over 10 million
• versus 3 in India, 2 in the US, Japan, and Brazil
•
14 cities of over 5 million, over 20% of the world total
•
41 cities of over 2 million, 20% of the world total
2. “Mega-cities”: State-owned banks turn household savings
into loans for gov-financed city infrastructure (& SOEs)
LARGE STATE OWNED
LARGE STATE OWNED
ENTERPRISES
LARGE
STATE OWNED
ENTERPRISES
ENTERPRISES
FAMILY
FAMILY
FAMILY
IMF Working Paper, “Is China Over-investing and Does it Matter?,” 2012
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STATE
OWNED
BANKS
GOV. FINANCED
INFRASTRUCTURE
3. Global integration: global & high-value business links
are supported by growth in higher education & China’s HR
Enrollment in Postsecondary Institutions (1,000s)
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3. Global integration, yet China is relatively restrictive for
FDI
Source: Rhodium Group, Hanemann and Bao, “A New Momentum for FDI Reforms in China,” 2013
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In the past 15 years, China’s economy has sustained
growth, despite fundamental weaknesses in China’s system
A few examples of major debates…
 Rule of law (lacking)
 Export-led development (over reliance on low-wage manufacturing)
 Financial system (capital markets and the banking system are inadequate)
 “State capitalism” (growing and inefficient)
 Corruption: both political and economic
 Over-investment and too-high capital formation (versus a consumer driven
economy)
 Foreign companies: face new obstacles, less favoritism
 Environmental degradation: food supply, air and water pollution
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Today: “three moves” and “three outcomes”
1. Moving to the cities
2. Moving “up the value chain”
3. Moving into a mixed economy
1. Higher incomes…and consumer spending
2. Mega cities…and mega infrastructure
3. Global integration…and globalizing institutions?
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