Transcript No Slide Title

Social Economic Development
Understanding a Development Miracle
——China
Agenda
 China’s Economic Growth: A Review
 The Key Elements for China’s Growth
China’s Economic Growth: A Review
Economy
The largest
Exporter
second largest
Importer
1st~25th
26th~50th
Per capita GDP (PPP)
51st~75th
76th~100th
China’s Economic Growth: A Review
General description
The People's Republic of China is the world's second largest economy
after the United States. It is the world's fastest-growing major economy
with average growth rates of 10% for the past 30 years. China is also
the largest exporter and second largest importer of goods in the world.
China became the world's top manufacturer in 2011, surpassing the
United States. The country's per capita GDP (PPP) is $7,518 (IMF 93rd
in the world) in 2010.
China’s Economy prior to the start of economy reform
1930s---1949
China’s economy experienced modest, but significant, growth in the
decades prior to the outbreak of full-scale war with Japan in 1937.
The pattern of pre-World War Ⅱ economic advance reflected China’s
openness to international trade and investment. Prewar expansion
clustered around two growth poles: the Yangzi Delta area centered
on Shanghai and the northeastern provinces.
Northeastern provinces
Yangzi Delta Area
Shanghai was
the largest and
most prosperous
city in the Far
East during the
1930s
•
Modest but significant economic growth in 1930s, that were
not regained for over sixty years
•
The economy was heavily disrupted by the war against Japan and
the Chinese Civil War from 1937 to 1949.
1949-1978
 The new China moved to create an economic system largely
modeled after Soviet experience. Soviet advisers and Soviettrained specialists worked to establish new institutions organized
around annual and five-year plans, extensive state ownership,
central control over prices, and material balance plans that issued
specific directives governing the allocation of major inputs,
products, and financial flows.
Failures of planed system
Food scarcity: Chinese villager and city dwellers
Inefficient industry associated with Soviet-style central planning
Underdevelopment of services
Isolation from the international economy
Substantial difference between the rural and urban sectors
1978-1990
 Reform in the countryside: Beginning with the poor
mountain areas of Anhui and then spreading across the
country. Farmers were able to keep the land's output after
paying a share to the state. This move increased
agricultural production, increased the living standards of
hundreds of millions of farmers and stimulated rural
industry.
 Reforms were also implemented in urban industry to
increase productivity. A dual price system was introduced.
Private businesses were allowed to operate and they
began to make up a greater percentage of industrial
output.
 Special economic
zones were set up to
absorb foreign direct
investment: All of these
places provide favored
tax treatment and other
advantages for foreign
investment. Laws on
contracts, patents, and
other matters of concern
to foreign businesses
were also passed in an
effort to attract
international capital to
spur China‘s
development
Shen Zhen: from fisherman village to a modern city
SHANGHAI: Pudong new district
1990-2000
 In the 1990s, the Chinese economy continued to grow at a
rapid pace, at about 9.5%, accompanied by low inflation. The
Asian financial crisis affected China at the margin, mainly through
decreased foreign direct investment and a sharp drop in the
growth of its exports. However, China had huge reserves, a
currency that was not freely convertible, and capital inflows that
consisted overwhelmingly of long-term investment.
------ Financial system burdened by huge amounts of bad
loans.
-----Massive layoffs stemming from aggressive efforts to
reform SOEs
-----Over half of the China’s SOEs were inefficient and
reporting losses.
2000-2010
 The large-scale privatization continued and the number of
SOEs decreased.
 Entry into the WTO in 2001
 Reform in the banking system
 The 11th Five-Year Economic Plan aimed at building a “
harmonious society”
 China launched its Economic Stimulus Plan to specifically
deal with the Global financial crisis of 2008–2009 .
Map of countries by GNI per capita compared to China
Date: 26 September 2010
Source:http://en.wikipedia.org/wiki/File:Chi_world_GNI_percapita.PNG
GDP (10 billion RMB)
3405
4000
3500
3000
2500
2000
992
1500
1000
500
36.4
186
0
China’s GDP growth since 1978
Source: China statistical yearbook 2010
GDP per head (RMB)
23708
7858
381
1644
China’s GDP growth per head since 1978
Source: China statistical yearbook
Economic performance since reform
 Rapid growth has elevated hundreds of millions from absolute
poverty.
year
1980
1990
2001
2009
Poverty ratio in
county
40.65%
10.55%
4.75%
3.8%
 China’s economy has abandoned its former isolation in favor
of deep engagement with world markets
year
Before 1978
1985
1995
2009
(Export+Import)/GDP
<10%
22.9%
38.7%
44%
Economic performance since reform
 The slow retreat of planning has cumulated into a
dominant role for market outcomes.
 Markets for products, labor, and materials are well
developed and increasingly competitive.
 Private entrepreneurs continue to push into sectors
formerly reserved for public enterprise.
Social economy
Founded in 1949
• Foreign
economy
Socialist transformation in 1958 Reform and opening up in 1978
• State-owned
economy
Lef
t
• Bureaucrat
Confiscat• State-owned
capitalism
economy
ed
economy
Private ownedProtected
• Private owned
economy (weak)
economy
•
• Private owned
economy
• State-owned
economy
• Foreign
economy
• Feudalism
economy
Protected• Individual
• Farmers and
economy
handicraftsman
•Sino-foreign
economy
• Individual
economy
• Collective economy
Internal-oriented
public-owned economy
Planed economy
• Collective
economy
Outward-oriented
economy with
coexistence of
various economic
composition
Market economy
The Key Elements for China’s Growth
1. Stable political environment and successive economic policy
 Deng was a pragmatic leader, known less of his
ideological commitment than his slogan: "Who cares if a
cat is black or white, as long as it catches the mice."
Once he consolidated his power, he began to put his
pragmatic policies to work.
 Despite Deng's death in 1997, reforms continued
under his handpicked successors, Jiang Zemin and Zhu
Rongji , who were ardent reformers.
 The conservative Hu and Wen Administration adopted
more egalitarian and populist policies
2. Market incentives mechanism
Particularistic contracting: These contracts grandfathered in
each firm’s existing situation, giving that firm incentives to
improve profitability from the current achieved level.
Particularistic contracting spread to millions of family farms,
hundreds of thousands of state enterprises.
Dual track: Firms operated on both a plan and a market track
under dual track policy. Each firm had to first fulfill its
preexisting plan contracts. Above this base, firms were allowed
to produce for the market at market price. This enabled price
liberalization.
Privatization: For example, for the first decades of reform at
the local level, township and village enterprises were
encouraged. They accounted for a very large share of industrial
output growth in China.
3. Decentralized experimentation
Special economic zones
Reform from county to urban areas
Reform from costal areas to central or west
Let some people get rich first
4. Capital stock
-----High savings. High savings accelerates the rapid
capital formation, which has played a major role in China’s
economic growth.
------Massive capital inflow. Foreign investment has
become an important driving force for China’ s economic
growth, which brings the capital ,technology and job
opportunities.
5. labor and human capital
-----Cheap labor cost. A huge amount of rural population in
China provides the cheap labor for the foreign and
domestic companies.
------Human capital. The education system and the
investment in human capital improve the quality of human
resources in China. The improved human capital becomes
the driving force for innovation.
6. Urbanization
As one of the most important result of market oriented
reform, urbanization was accelerated during the reform
period. Millions of rural residents have transferred to urban
areas, which has sustained increasing labor supply to the
rapid growing industrial and service sectors.
7. Infrastructure
In the past decades, many rural places’ economic growth is benefit
from better infrastructure. Meanwhile, infrastructure investment
forms part of total capital stock.
8. Huge domestic market
China has a huge population, and the domestic market is very
important for foreign companies and domestic competitors.
9. Political competition
Officials at all levels are striving to outdo its neighbors and rivals
in expanding the infrastructure and absorbing the investments.