Transcript Topic 5 China: The Awakening Giant

GEOG 113C – Geography of East and Southeast Asia
Professor: Dr. Jean-Paul Rodrigue
Topic 5 – China, the Awakening Giant
A – The Chinese World
B – The Path to Chinese Development
C – Selected Problems and Issues
Hofstra University, Department of Global Studies & Geography
A. THE CHINESE WORLD
1. Unity and Diversity
What characterizes Chinese geography and in which way it has been a factor of unity
and diversity?
2. Chinese Demography
How does China cope with its huge demography?
3. Communist China
How communism has changed the Chinese society?
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity
■ A change in emphasis
• Conventional perspective:
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China was presented mainly from a political and historical perspective.
Imperial history.
Communism (Maoism); a centrally planned economy.
Political movements that impacted the society (e.g. Great Leap Forward,
Cultural Revolution, Open Door Policy).
• A rural society isolated from the outside world.
• In today’s China, this perspective has almost become irrelevant.
• Emerging perspective:
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Economic forces at play.
A China that has become the industrial motor of the global economy.
Unique social issues linked with industrialization and urbanization.
Growing player in regional geopolitics.
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity
China: 3.7 million square miles
Gobi Desert
65% mountainous
USA: 3.6 million square miles
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity
Arable land: 12%
Arable land: 25%
© Dr. Jean-Paul Rodrigue
Main Rivers of China
Heilong Jiang (Amur)
China's border with Russia
Huang He (Yellow River)
Can carry up to 40% sediment weight
(highest in the world).
Subject to flooding, especially in its delta.
Changed course many times.
Chang Jiang (Yangtze)
Longest river, China’s main street (6,300 km).
Pearl River delta system
Most productive and sustainable ecosystem
in the world.
Rice paddies and fish ponds.
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity
■ The Grand Canal
Beijing
Tonghui Canal
(Yuan)
Yongji Canal
(Sui and Yuan)
Yellow Sea
Old course of
the Yellow River
(Song)
Yongji Canal
(Sui)
Jiao-Lai Canal
(Yuan)
Jizhou Canal
(Yuan)
Tongji Canal (Sui)
Jizhou
East China
Sea
Luoyang Kaifeng
Bian Canal
(Song)
Huaiyin
• Achievement of Imperial
hydrological engineering.
• First segments completed around
602 AD (Sui Dynasty).
• At its peak during the Ming
dynasty (1368-1644 AD).
• Totaled about 2,500 kilometers,
1,700 still in use today.
• Grain distribution through the
empire, notably its capitals.
Chuzhou
Yangzhou Canal
(Song and Yuan)
Yangzhou
Jiangnan Canal
Suzhou
(Sui, Song and Yuan)
400 km
Hangzhou
© Dr. Jean-Paul Rodrigue
The Chinese Realm
Turkic
53% of the population speaks Mandarin.
Han China: 92% of the population
Minorities dominantly live in
mountainous or arid regions.
Mongols
Takla Makan
Gobi
Koreas
Highland China
Han
Tibetan
Tai
Miao-Yao
Taiwan
© Dr. Jean-Paul Rodrigue
The South China Sea – A Contested Area of the Chinese
Realm
Paracel Islands
Spartly Islands
Important shipping lanes.
Oil and natural gas reserves.
Fishing areas.
High biodiversity (coral reefs)
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity: Main Agricultural Regions
China feeds approximately 25% of the
world’s population with about 7% of
the world’s arable land.
North: continental climate growing
wheat, sorghum and corn.
South: subtropical climate growing rice.
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity
■ Chinese Cuisine
• Food and tastes are a cultural expression.
• Reflects the complexity of the country.
• Diversity of the climate, products and customs:
• Each cuisine has its own set of base elements (grains, meats, vegetables,
oils and spices).
• Strive for harmony of sight, smell, taste and texture.
• 8 regional / provincial cuisines:
• Shandong, Sichuan, Guangdong, Fujian, Jiangsu, Zhejiang, Hunan and
Anhui.
• Two main local cuisines (Beijing and Shanghai).
• Many minorities cuisines.
• Long history of famines and food shortages:
• Anything edible will be used.
• Parts of animals which are often discarded will be used (feet, head,
tendons, tripes).
• The wok: a fuel efficient form of fast cooking.
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity: The Three Chinas
Western China
Sparsely populated.
Region of minorities.
Most mineral resources
The Interior
Agricultural and demographic
hearth.
Poor and rural China.
Coastal China
Forefront of modernization.
Political and economic center.
Rich, urbanized and open to the world.
© Dr. Jean-Paul Rodrigue
1. Unity and Diversity: China’s Main Contrasts
• Rural Interior /
Urbanizing Coast.
• Wheat Growing North /
Rice Growing South.
• Authoritarian
Government / Opening
of the Economy.
• Command economy
versus market forces.
• Isolation versus
openness.
Geography
Economy
Politics
Society
• Inward-Looking History /
Outward-Looking Future
• Hans / Minorities.
© Dr. Jean-Paul Rodrigue
2. Chinese Demographics
■ Demographics...
• More people than the combined population of Europe, the
Americas and Japan.
• Any change has global ramifications.
• The demography of China is a powerful trend (1.32 billion):
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About 14-17 million people are added each year in the 1980s.
Average of 13 million people per year in the 1990s.
10 million people per year in the 2000s.
Expected to peak at about 1.45 billion by 2030.
Projection figures are revised downward (2000-2006: 100 million less in
2050).
• 400 million Chinese live in towns and cities (30-35%).
• 64% of the population lives in rural areas (950 millions).
• 343 million females are in their reproductive age.
© Dr. Jean-Paul Rodrigue
The Population of China, 0-2050
1600
2030
2050
1400
2000
1995
The population exploded after 1949.
Population control was secondary.
Mao Zedong saw numbers as a
workforce and a way to fight the
Soviet Union and the United States.
Calls for women to “breed for the
motherland”.
1200
1000
1981
1970
800
600
1953
1949
1851
1911
1812 1887
400
200
1210
755
0
500
700
1083
900
1100
1381
1300
1562 1650
1500
1753
1700
1900
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Chinese Population, 1949-2008 (in millions)
(projections to 2050)
1500
1400
1300
1200
1100
1000
900
800
700
600
500
1945
1955
1965
1975
1985
1995
2005
2015
2025
2035
2045
© Dr. Jean-Paul Rodrigue
© Dr. Jean-Paul Rodrigue
Population Density of China and Most Populous
Provinces
Excessive concentration: 50% of the
population lives on 8.2% of the land.
Bulk of the population along the coast.
East China accounts for 90% of the
population.
56%, about 728 million, are living in
mountainous areas.
High density rural areas.
© Dr. Jean-Paul Rodrigue
2. Chinese Demographics
■ Current issues
• Population growth undermines Chinese development (education,
health, energy, food, transportation).
• About 10 million persons reach the job market each year.
• Increasing ethnic diversity:
• The government had not enforced the One Child Policy among the
country’s 55 recognized minority groups.
• They had increased their share of still predominantly Han population to
9.4% in 2005 from 6.7% in 1982.
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Missing female population.
Sustaining agriculture.
Coping with huge urban growth.
Nutrition transition: growth of “western diseases” (obesity,
diabetes).
© Dr. Jean-Paul Rodrigue
Population Pyramid of China, 2005
6
9
Female
14
Male
75-79
9
10
15
18
21
70-74
19
22
65-69
60-64
30
29
55-59
42
42
40
39
50-54
45-49
52
50
40-44
63
60
60
57
35-39
30-34
48
46
49
25-29
53
20-24
65
60
15-19
54
49
10-14
50
44
5-9
44
70
80+
50
38
0-4
30
10
Millions
10
30
50
70
© Dr. Jean-Paul Rodrigue
Population Pyramid of China, 2050
46
80+
35
34
38
70-74
42
43
65-69
56
55
60-64
49
46
50
37
45-49
41
40-44
45
45
35-39
30-34
41
Male
42
50-54
48
46
Female
46
55-59
41
44
70
41
75-79
39
25-29
37
36
37
37
36
35
34
35
35
34
20-24
15-19
10-14
5-9
0-4
30
10
Millions
10
30
50
70
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Millions
2. Chinese Demographics
6.1
6
5
4.8
4.5
4
3.8
3.2
3
2.6
2.2
2
1.5
1
0
1.05
0.9 0.950.975
6.3
■ Education
• Traditionally perceived as a path
to self improvement
(Confucianism).
• College attendance: 20% in 2005
from 1.4% in 1978
• Produces 440,000 engineers per
year (10 times more than the
US).
• Low quality of many college
degrees (rote learning).
• High unemployment among
recent graduates (26% found
employment in 2008).
• Tremendous incurred costs.
© Dr. Jean-Paul Rodrigue
2. Chinese Demographics
■ Surplus labor in rural areas
• Development of the rural economy and the higher rate of birth.
• Large numbers of surplus rural labor:
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Many rural provinces have an excess population they cannot sustain.
Difficult situation in the country side as China is running out of land.
Need to transfer from the agricultural to a non-agricultural sector.
Increased urbanization.
• About 20 million people per year migrated from the interior to the
coastal areas.
© Dr. Jean-Paul Rodrigue
2. Chinese Demographics
100%
■ Aging of the population
• China is in its peak active
population years, to last until
about 2015.
• Then, a rapid shift is expected.
• 65 years old or older:
90%
80%
70%
60%
• 87 million in 2000.
• 112 million in 2010.
• 340 million in 2050.
50%
40%
30%
• Providing social security and
services to a huge elderly
population.
• High savings rate a positive
factor.
20%
10%
0%
0 to 14
15 to 64
65 and over
© Dr. Jean-Paul Rodrigue
3. Communist China: the Path to the PRC
Event
Implications
Geography
Large country; development of a canal system
Large internal market; central
government; self sufficiency
Political and social
system
Unified since 221 BC; Civil bureaucracy and
meritocracy; Cultural superiority complex
(sinocentrism)
National identity; Selfimprovement; Unwilling to trade
Technological
innovation
Leader up the to 15th century; Lagging behind
until the late 20th century
Possibility of an industrial
revolution; Economic opportunities
missed
Foreign relationships Core civilization of the region; Never
colonized; Forced to open port cities after
1842
Key events
Foreign nations as vassals;
Hostile relationships with foreign
powers
1433 – Ming Emperor ends international trade; Isolation of China; Forced to open
1839-1842 – First Opium War; 1910-1949 –
markets; Adoption of Marxism.
Civil Wars; 1949 – PRC founded
© Dr. Jean-Paul Rodrigue
3. Communist China
■ Chinese flag
• Red: the color of revolution.
• One large star: communist party.
• Four stars: four classes : the workers, the peasants, the petty
bourgeois, and the “patriotic capitalists”.
■ Communism and China
• The Marxist ideology is of western origin.
• Leninism (Soviet Union after 1917):
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Compatible with the Chinese ideology.
Absolute central power.
Bureaucracy.
Social division of the society.
Economic and social control.
© Dr. Jean-Paul Rodrigue
3. Communist China
■ Maoism
• Mao (1893-1976) had evolved a Chinese Communist alternative
that reflected China’s different demography.
• Core goals:
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Economic self-reliance.
Power derived from numbers.
Labor-intensive rather than technologically advanced development.
Local community effort.
• Concept of “mass-line” leadership:
• Integrated intellectuals with peasant guerrilla leaders as a fundamental
economic and social strategy.
• Launched programs of industrialization and collectivism.
© Dr. Jean-Paul Rodrigue
3. Communist China: Maoist Movements
Movement
Nature
Impact
The “Hundred
Flowers” (1956)
Intellectuals invited for constructive
criticism.
Some party leaders criticized for
corruption and incompetence.
Followed by repression, with many
intellectual labeled as “rightists”. No
tolerance of dissent or criticism.
The “Great Leap
Forward” (1957-59)
Supposed to industrialize the
countryside. Over-inflated industrial
and agricultural quotas.
Forgery and exaggerations of
agricultural production figures. Resulted
in the largest famine in human history.
About 30 million died of starvation.
Sino-Soviet Break
(1960)
Ideological differences.
Removed Soviet aid and technical
personnel. Increasing border clashes.
No global “unified” communist bloc.
The “Great Proletarian
Cultural Revolution”
(1966-1976)
Ideological demagogy by Mao to
maintain power. Millions of youths (the
Red Guards) were mobilized.
Plunged the country in a turmoil.
Factions fought to control the
government. Party-state machinery was
crippled and many Party veterans were
purged.
© Dr. Jean-Paul Rodrigue
3. Communist China
■ Development strategies
• Based on the Soviet model.
• Collectivization:
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Land was expropriated.
Farming was collectivized.
Industries were reorganized as state-owned communal enterprises.
Immobility of the population.
• Emphasis on “heavy industry” and as source of employment:
• Redistribution of economic activities in the interior.
• Fear of war and vulnerability of the coast.
• Dramatic social changes:
• Education: formal state education (politically-oriented).
• Religion: abolition but some level of tolerance.
• Population growth: favorable policies.
© Dr. Jean-Paul Rodrigue
3. Communist China
■ Reforming China (Deng Xiaoping, 1904-1997)
• Initiated important agricultural and industrial reforms (1978).
• Opened China to the outside world for trade and technology:
• Different from Mao’s view of self-determination.
• Characterized by pragmatism:
• “It is not important if the cat is black or white, as long as it catches mice”.
• Establishment of “socialist market economy” to help China’s development.
■ Decollectivization (1978-)
• Many farms reverted to families.
• Land leased.
• Growth in Coastal zones:
• Major cities.
• Special economic zones.
• Most important migratory movement from the countryside to the cities in
history.
© Dr. Jean-Paul Rodrigue
Administrative Divisions of China
5 Autonomous Regions
Recognition of minorities.
Buddhist Tibetans (Xizang).
Muslim Uygurs (Xinjiang).
Mongols (Inner Mongolia).
4 Municipalities
Beijing, Tianjin, Shanghai and
Chongqing; China’s most
prominent cities.
22 Provinces
7-100 million people.
Similar to US states.
Taiwan
“Rebellious
Province”
2 Special Administrative Regions
Hong Kong and Macao.
“One country, two systems”.
© Dr. Jean-Paul Rodrigue
B. CHINESE DEVELOPMENT
1. Rural Development
What is the structure and challenges of Chinese agriculture?
2. Urbanization
What is the nature and extent of urbanization in China?
3. Industrialization
How China was able to industrialize?
4. China and the Global Economy
How China is becoming a leading element of the global economy?
© Dr. Jean-Paul Rodrigue
Challenges for Chinese Agriculture
Challenge
Issues
Agricultural productivity
Consolidation of agricultural plots (economies of scale);
Better irrigation; Appropriate storage and transport
Agricultural output
Coping with population growth (10 million per year);
Coping with changes in the Chinese diet (more meat)
Urbanization,
industrialization and
transport
Decreased agricultural land in the most productive areas;
Development (land use changes) around cities.
Environmental
degradation
Contamination of soils and water supply.
Dependency
China is now a net importer of grain; By 2030, China
would need to import the current global grain production;
Finding reliable suppliers.
© Dr. Jean-Paul Rodrigue
Production and Yield of Paddy Rice in China, 1961-2009
250
Millions
70,000
Yield (kg / hectare)
60,000
Production (tons)
200
50,000
40,000
30,000
150
100
20,000
50
10,000
0
0
© Dr. Jean-Paul Rodrigue
50,000
45,000
40,000
35,000
30,000
140
Yield (kg / hectare)
Production (tons)
Millions
Production and Yield of Wheat in China, 1961-2009
120
100
80
25,000
20,000
15,000
60
40
10,000
5,000
0
20
0
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Meat Production, United States and China 1961-2009 (in
tons)
Millions
90
80
China
United States
70
60
50
40
30
20
10
0
© Dr. Jean-Paul Rodrigue
1. Rural Development
■ Rural-Urban Migrations
• Conventional situation:
• China fixed its population to its place of work and residence.
• Food tickets were only valid at the place of residence.
• Residence permit necessary to obtain food (permit not transferable).
• Emerging situation:
• Possible to transfer the residence permit if a sum is paid.
• Surplus labor in the countryside moved to cities in order to occupy lowe
wages jobs (construction, manufacturing and services).
• Migrants around 100-120 millions (about 10% of the population).
• 20% of agricultural workers take at least of month off per year to work
outside the farm.
• About 250-300 million peasants may have left the countryside by 2010.
• Possibility of a reverse migration:
• Sharp drop in exports by the end of 2008.
• Unemployed workers returning to the countryside.
© Dr. Jean-Paul Rodrigue
2. Urbanization
100
% Population Urban
■ Urbanization concern
• Historically underrepresented:
• Most of the labor in the countryside.
• Urbanization accelerated only after
1978.
90
80
70
• 32% urbanization level (2000), or
400 million urban residents.
• 40 million new urban residents
between 2001-05 (official).
60
50
40
• The reality is more likely to be 5070 millions.
30
• 50% urbanization level to be
reached by 2030.
• Urbanization occurred at the
expense of highly productive
agricultural areas.
20
10
0
Urban
Rural
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1000
1961
1964
1967
1977
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
2023
2026
2029
2032
2035
2038
2041
2044
2047
2050
Urban and Rural Population in China, 1961 - 2050
1200
Rural
Urban
800
600
400
200
0
© Dr. Jean-Paul Rodrigue
2. Urbanization
Beijing
The political center.
Imperial capital transformed
into a national capital.
Shanghai
The head of the dragon
(Yangtse).
The industrial center.
The new financial center.
Gateway to Central China.
Guangzhou
Old commercial city.
New industrial center (Pearl
River Delta).
Gateway to South China.
© Dr. Jean-Paul Rodrigue
3. Industrialization
■ Urban industrial economy (1950-1980)
• Creation of vast administrative units.
• The work unit (Danwei):
• In industry, services and administration.
• Controlling the population through geographical fixation.
• Stability and material security provided.
• Workers class is the outcome of the communist government:
• Regrouping of labor in industrial units.
• Employment was guaranteed for life:
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•
Employees have a set of social benefits.
Health, retiring, housing, education, vacations, preferential prices on food.
Transmission of the job to a member of the family.
Promotions were done by the social position and respect of ideology.
Having a job in a State enterprise was to possess an “iron rice bowl”.
© Dr. Jean-Paul Rodrigue
3. Industrialization
■ Open Door Policy and economic development (1980-)
• Employment problems:
• Increasing since the 1960s because of demographics.
• The State sector was not capable to absorb all the new workers.
• Inefficiency of the State sector with diminishing returns (classic central
planning conundrum).
• Collective and private enterprises:
• Growth occurring in the labor intensive light industrial sector.
• The share of the industry outside the State control has gone from 20% of
industrial production in 1978 to 70% in 1993.
• Private enterprises account for growing share of the industrial output.
• 1978-2001: 200 million Chinese have been lifted out of absolute
poverty.
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Integration to the global economy
• Economic growth is mainly driven by exports:
• China contributed to 25% of the world’s GDP growth (1995-2002).
• With no welfare state, no labor unions and an enormous supply of both
labor and savings, “communist” China is a capitalist's paradise.
• Lessons from the past:
• Each time China opened to the outside, a period of relative prosperity
resulted.
• Each time China closed to the outside world (e.g. the Great Leap Forward
and the Cultural Revolution) was a period of instability.
• The CCP is embracing this form of development:
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Insuring improvements in the population’s welfare.
Insuring the growth of the economic power of China.
Insuring technological development.
Insuring their own survival / legitimacy.
© Dr. Jean-Paul Rodrigue
Major Components to Price Reductions by the Chinese
Manufacturing Sector, 2005
Lax Environmental Regulations
2.3%
Lax Health & Safety Regulations
2.4%
FDI
3.1%
Counterfeiting & Piracy
8.6%
Undervalued Currency
11.4%
Industrial Network Clustering
16.0%
Export Industry Subsidies &
Preferences
16.7%
Wages
39.4%
0%
10%
20%
30%
40%
50%
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Growing consumption of resources
• Economic growth has increased China’s consumption of
resources:
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•
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•
“The Dragon is hungry”.
Second largest consumer of oil after the United States.
Energy supply problems with increasing blackouts.
Completion of a natural gas pipeline in 2004 (Tarim Basin to Shanghai).
• Driving up global commodity prices:
• Increased global competition caused by China.
• Fear that China may “export inflation”.
• China may hit a “resource wall” inhibiting future developments.
© Dr. Jean-Paul Rodrigue
China’s Share of the World Commodity Consumption,
c2009
Cattle
Oil
GDP (PPP)
Chickens
Wheat
Population
Soybeans
Rice
Nickel
Eggs
Copper
Aluminium
Zinc
Lead
Steel
Pigs
Coal
Iron Ore
Cement
9.5
10.3
13.6
15.6
16.6
19.4
24.6
28.1
36.3
37.2
38.9
40.6
41.3
44.6
45.4
46.4
46.9
47.7
53.2
0
10
20
30
40
50
60
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China’s Endowment in Strategic Mineral Resources,
2007
35
Copper
Coal
65
145
0
Nickel
33
Bauxite
34
15
Zinz
Gold
1
Platinum
0
67
58
25
Reserves Years
7
Import Dependency
100
37
Iron Ore
0
52
50
100
150
© Dr. Jean-Paul Rodrigue
Crude Oil Production and Consumption, China, 19802009 (in 1,000 of barrels per day)
10,000
9,000
8,000
Production
Consumption
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
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China’s Crude Oil Imports, 2004
Brazil
Malaysia
Norway
12%
Indonesia
14%
45%
Congo
Vietnam
Sudan
29%
Russia
Iran
Angola
Oman
Middle East
Africa
Western Hemisphere
Asia-Pacific
Saudi Arabia
0
5
10
15
Percentage
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Growth of international trade
• Tremendous growth of China’s involvement in international trade
over the last 25 years.
• Exploitation of comparative advantages.
• Export oriented (neomercantilist) “strategy”:
• China is the world’s 3rd largest exporter (2005), 7.3% of the world’s trade.
• Exports account for 40% of the GDP while this share was 5% in 1978.
• However, 90% of exports are by foreign owned factories.
• United States:
• Most important trading partner.
• Account for 40% of China’s exports and 10% of its GDP.
• American corporations benefiting tremendously from low costs.
• The European Union the second.
• Japan the third.
© Dr. Jean-Paul Rodrigue
15
-15
10
-20
5
-25
0
-30
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
20
Jan-87
Jan-86
Jan-85
Monthly Trade between China and the United States,
Millions of USD (1985-2011)
35
5
30
0
25
-5
Exports
Imports
-10
Balance
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Shifts in international trade
• Decrease of raw materials:
• From 50% of exports in 1985 to 15% in 1995 to 2.5% in 2005.
• Increase in manufactures:
•
•
•
•
•
97% of the value of exports.
Consumption goods (shoes, toys).
Textiles and clothes.
Low level electronics.
12% of exports are bought by Walmart.
• Energy and raw materials imports:
• 1/3 of its oil.
• Second largest oil importer after the United States.
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ World dominance in manufacturing
• Two processes:
• Addition of new manufacturing activities either the outcome of FDI or
internal investments (modern facilities).
• The closing down of many manufacturing activities, mainly the outcome of
Chinese competition and/or comparative advantages.
• Examples:
•
•
•
•
•
•
•
50% of the world's TVs (80 million).
60% of the world's cell phones.
50% the world's shoes (and 95% of those sold in the United States).
80% of the toys.
90% of the sporting goods sold in the United States.
100% of Levi's blue jeans are now made in China.
70% of Wal-Mart products made in China.
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Labor issues
•
•
•
•
•
•
China supplies a gigantic quantity of labor.
200 million people in the countryside are without work.
Constant flow from the interior (poorer provinces).
Often woman to work in factories for about 3 years.
Come back to their villages/towns to marry or start businesses.
Flows of capital that is used for familial capital investments
(housing, agriculture).
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Wages
• Extremely low wages that are kept low because of rural to urban
migration and population growth.
• Between $60 and $85 a month.
• The rest of the developed world cannot compete.
• Selling itself with diminishing returns.
• Many factories offer “free” room and board.
• Strong inflationary pressures having an impact on wages:
• Rising cost of living in manufacturing (coastal) regions.
• Rising energy and food prices.
• The same basket of goods can be as expensive in China than in the United
States.
• Doubling of wages between 2005 and 2008.
• Relocation of some manufacturing activities in Vietnam.
© Dr. Jean-Paul Rodrigue
Hourly Cost of Wages and Benefits, 2004 ($US)
0
10
20
30
40
50
Germany
$49.60
Japan
$40.96
United States
$36.55
Brazil
$5.87
South Africa
$5.48
China
60
$1.96
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Mechanisms for opening to the outside world
• Rely on extraterritoriality and Foreign Direct Investments (FDI).
• Gain capital and investment.
• Using the Chinese diaspora:
• Chinese living abroad with substantial business experience.
• About 75% of FDIs initially came from Hong Kong and Taiwan.
• Facing high wages, high land values and scarcity of available space for
development.
■ Geographical concentration
• Guangdong, Fujian and Shanghai:
• Account for 50% of FDIs.
• Coastal provinces account for 85%.
• 80% of FDIs are coming from Asia (Hong Kong, Taiwan).
• 20 to 30% of the international trade concerns the Pearl River
Delta.
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ FDI Phases
• 1st phase (1978-1995):
•
•
•
•
Labor-intensive / low technology sectors.
Comparative advantages of China.
China received 4.1% of the world’s FDIs in 2000 (ranked 6th).
Often used to develop joint ventures / subcontracting.
• 2nd phase (1995-):
•
•
•
•
•
•
•
Shift towards added value goods is observed.
Basic to intermediate electronics (keyboards, mice, etc.).
An expertise in many sectors has been developed.
Integration in global commodity chains.
World’s largest manufacturer of consumer electronics.
About half of the world's DVD players are now made in China.
Emergence of a knowledge industry.
© Dr. Jean-Paul Rodrigue
Value of Chinese Exports and Received FDI, 1983-2009
(Billions of $US)
1,600
1,400
120
Exports
100
FDI Inflows
1,200
800
60
600
40
400
20
200
0
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Exports
1,000
FDI
80
© Dr. Jean-Paul Rodrigue
Extraterritoriality: China’s Special Economic Zones
Zones in which laws are different from
China’s economic laws.
The goal is to increase foreign
investments.
Subject to a different taxation regime;
little or no taxes on exports
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Purchase of foreign assets
• Accumulation of gigantic foreign reserves ($US 1.3 trillion in
2007).
• Recycling income from exports.
• Initially involved mainly in T-bills and debt instruments.
• Move to secure strategic resources:
• Oil, mines, lumber, food supply.
• New Chinese presence in Latin America, Africa and Southeast Asia.
• Purchase of foreign technology and brand names:
• Lenovo acquired IBM personal computing division (2004).
• Little known Chinese manufacturers seeking an international recognition.
© Dr. Jean-Paul Rodrigue
Acquisitions by Chinese Oil and Gas Companies, 20082009
Year
Company
Acquisition
Value ($ billion)
2008
Sinopec
60% of AED Oil Ltd, Australia
0.56
2008
CNOOC
100% of Awilco Offshore
2.5
2008
Sinopec
100% of Tanganyika Oil, Syria
1.8
2009
Sinochem
100% of Emerald Energy, Syria and
Columbia
0.88
2009
CNOOC, Sinopec
20% of Angola’s Bloc 32 from Marathon Oil
1.3
2009
Sinopec
100% of Addax Petroleum, Calgary
7.2
2009
CNPC,
PetroChina
96% of Singapore Petroleum
2.0
2009
CNPC,
KazMunaiGaz
50% of MangistauMunaiGaz, Kazakhstan
3.3
2009
CNPC,
PetroChina
60% of Athabasca Oil Sands, Mackay River,
Dover Projects, Canada
1.9
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Trade and tourism
• Very difficult for a Chinese to go outside China until recently.
• Closed under communism (1949-1978):
• Only 210,000 Chinese people were allowed to go abroad.
• About 7,000 a year.
• Mainly diplomatic personnel.
• Open door (1979-1985):
• 50,000 per year in the 1979-1985 period.
• Students and trade personnel.
• Economic reforms (1986-2001):
• 18.1 million people were approved to go outside China.
• Average of 1.13 million annually.
• Mainly for educational and business purposes.
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
• A maturing industry (2001-):
•
•
•
•
•
•
•
•
•
Emerging middle class allowed to travel with a visa.
In 2001, four million Chinese went overseas for tourism.
20 million in 2003.
26 million in 2004.
31 million in 2005.
57 million in 2010.
Proximity effect.
30-50% go to Hong Kong or Macao.
Travel mostly organized as tightly scheduled group tours, Europe being the
most popular foreign destination.
© Dr. Jean-Paul Rodrigue
4. China and the Global Economy
■ Over optimistic views on China?
•
•
•
•
Analogies with Japan during the 1980s.
“Resources wall” (energy and food shortages).
National inequalities (civil unrest).
Over dependence on foreign markets for exports:
• Triggers protectionist forces.
• Low profit margins (less than 5%).
• Large misallocations of capital (export based / real estate).
• Large debt by state enterprises:
• Non-performing loans.
• Fiscal irresponsibility.
• Little profits in spite are massive investments.
• The Yuan is a fiat currency like many others:
• Money printing (inflation) by the government is rampant.
• De-industrialization of some manufacturing clusters.
© Dr. Jean-Paul Rodrigue
C. SELECTED PROBLEMS AND ISSUES
1. Family Planning
What was the One Child Policy and how it impacted the Chinese society?
2. Modernization
What are the challenges of modernization in China?
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ Early 1970s
• Known as the “later-longer-fewer program”.
• Authorized age of marriage 25 for men and 23 for women.
• Wait later to begin their families, allow for longer spacing in
between children, and have fewer children overall.
• Began to reduce fertility levels.
• Not fast enough to really slow down population growth due to the
demographic momentum that had already developed.
■ End of 1970s
• Government began to promote the two-child family throughout the
country.
• Slogan “One is best, at most two, never a third”.
• Contributed to fertility decline but, again, not rapidly enough.
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ One Child Policy
• Launched in 1981 when the population reached 1 billion:
• Initial goal: Stabilize China’s population at 1.2 billion.
• Revised goal: Keep China’s population under 1.4 billion until 2010.
• Population expected to stabilize around 1.6 billion by 2050.
• Under the responsibility of the State Family Planning Commission
(SFPC):
• Population control perceived from a strategic point of view.
• Employers and neighborhood committees had to enforce guidelines.
• Great variations in performance between the country’s urban and
rural areas.
• Possible to enforce in China (totalitarian).
• Would have been impossible in most other places.
© Dr. Jean-Paul Rodrigue
Regulation of the One Child Policy
Authorization for
marriage
25 years for male
and 23 years for
female.
Students and
apprentices not
allowed to marry.
Monitoring
menstrual cycles
Monitored by the
work unit.
Contraceptive use
mandatory
IUD used for women
with already one
child.
Incentives for
sterilization after the
birth of the first child.
Couples with two or
more children had to
have one partner
sterilized (women
80% of the time).
All pregnancies
must be authorized
Unauthorized
pregnancies had to
be aborted.
7th, 8th or 9th month
abortions are legal.
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ Urban areas
• Small sized apartments.
• Improving one’s status and level of consumption.
• Easier control from the government.
■ Rural areas
• Families want more children to work the family plots and sustain
parents when they get old.
• Want sons who will continue the family line and provide ritual
sacrifices to their ancestors after they die.
• Daughters are leaving their family once they marry.
• Girls are accounting for only 20 to 30% of a new demographic
class in some areas.
© Dr. Jean-Paul Rodrigue
Percentage of Women Having More Than One Child,
1998
Xinjiang
■ Fertility reduction
21.55
Tibet
26.58
Sichuan
4.19
Guangdong
12.32
Fujian
3.68
Jiangsu
2.16
Shanghai
0
Beijing
0.19
National
• Prevented about 400 million
births since 1980.
• When the program began (1970),
Crude Birth Rate was 34 and
TFR was around 6.
• Been brought down to 10 (CBR)
and 1.7 (TFR).
• About 40% of Chinese women
have been sterilized.
• About 5% of women have more
than one child.
5.1
0
10
20
30
© Dr. Jean-Paul Rodrigue
Percentage of Chinese Women with No Born Sons
by 60th Birthday
35
30
25
20
15
10
5
0
1989-1990 1991-1995 1996-2000 2001-2005 2006-2010 2011-2015 2016-2020
2025
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ Fluctuations of fertility
• Fertility has declined substantially before the OCP.
• Reached a low in 1984.
• Increased from the mid 1980s to the early 1990s:
•
•
•
•
Relaxation in enforcement in rural areas.
In 1986, 2 children per couple were allowed in rural areas.
In 1995, the restriction was lifted for urban areas.
Reductions in the authority of local officials responsible for implementing
the program.
• Sizeable age cohort entering their reproductive years:
• Baby boom of the early 1960s (about 40% of the increase was due to this).
• A decline in the age of marriage explained the other 60%.
• Nearly 75% of this increase was offset by declines in the age-specific
fertility rates.
© Dr. Jean-Paul Rodrigue
Chinese Fertility Rate, 1949-2005
8
7
6
TFR
5
4
3
2
1
0
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ Imbalanced sex ratio
• Male children are more valued.
• 120 boys for 100 girls (national average).
• Abandon or abortion of females:
• 11 million abortions a year; 1 out of 2 live births.
• “Missing female population” as girls are not declared.
• 2000: About 900,000 girls were missing (0 to 4 years group).
• Only 1% of females are unmarried by the age of 30.
■ Psychological consequences
• Currently around 70 million single child.
• 4-2-1 syndrome (4 grand parents – 2 parents – 1 child):
• “Little emperors” or “little empresses”.
• Self-centrism.
• Pressure to succeed.
© Dr. Jean-Paul Rodrigue
Males minus Females per Age Cohort, China, 2000
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
-3,000,000
-2,000,000
-1,000,000
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ Government’s response
• Well aware of the situation, but limited range of options.
• Laws giving girls and women equal rights with males.
• Propaganda and consciousness-raising slogans about the equal
value and contributions of females and males.
• Laws outlawing infanticide, prenatal sex identification, and sexselective abortion.
• Policies in most provinces allowing rural couples to have two
children, or a second child if the first is a girl.
© Dr. Jean-Paul Rodrigue
1. Family Planning
■ The Population and Family Planning Law
• One-child policy was “a policy for one generation”.
• Relaxed in the mid 1980s:
• 2 children permitted in rural areas.
• A new family planning law started in 2002.
• Same goal than the One-child policy, but offer more flexibility:
• One child, but permission may be granted for a second under specific
circumstances.
• Late marriage and childbearing.
• More flexibility for provinces, autonomous regions and minorities.
• People in reproductive age have to use contraception.
• Provisions for sex-determination and sex-specific abortions.
• Government keeping a close eye on demographics to see if
population control is required:
• Considering abandoning the one child policy (2008).
© Dr. Jean-Paul Rodrigue
2. Modernization
■ The appeal of modernization
• For the last 500 years, China developed an inferiority complex:
• Decline of China’s status as a global power.
• Humiliation by foreign powers (e.g. Opium Wars, Japanese invasions).
• Collapse of the imperial government (1912).
• Strong pressure to portray China as a modernizing nation.
• Large investments in grandiose projects:
•
•
•
•
•
•
•
Largest dam; Three Gorges Dam (2005).
Largest shopping mall; The South China Mall.
Highest railway (Tibet).
First maglev train in Shanghai (2003).
First Chinese in space (2003); spacewalk (2008).
New international airports (Beijing, Shanghai, Guangzhou).
2008 Olympics.
© Dr. Jean-Paul Rodrigue
2. Modernization
■ Development of the telecom market
• Easier and cheaper to switch to the latest technology.
• World’s largest mobile phone market:
•
•
•
•
•
376 million cell phone subscribers (2005).
25.7 mobile phones for every 100 Chinese.
4-5 million cell phones sold each month.
70% of Beijing resident have a cell phone; 60% for Shanghai (2002).
42% of the Guangdong province population; 30 million.
• World’s largest online user:
• 20% of the population uses the internet.
• 268 million users (2008).
• The “Great Firewall of China”.
• Half of the rural residents have a television.
© Dr. Jean-Paul Rodrigue
Chinese Internet Market, 2000-2008
300
25
Internet users (Millions)
Internet penetration (%)
250
20
200
15
150
10
100
5
50
0
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
© Dr. Jean-Paul Rodrigue
2. Modernization
■ Industrial development problems
• Pulling millions of Chinese out of poverty:
• More than 200 million peasants live on less than $1 a day.
• Justifies any policy and project.
• Guangdong; the Manchester of the 21st century.
• Inequality is becoming a standard:
• Wages remain $50 to $70 per month.
• With inflation, standards of living are going down.
• Industrial overcapacity:
• Over investment.
• Over supply of consumption goods, driving prices down.
• Limited profits.
• Quality issues:
• Several companies are starting to move away from China.
• Rising transportation costs.
© Dr. Jean-Paul Rodrigue
2. Modernization
■ The “business environment”
• The rule of law is not well applied.
• Local abuses and racketing:
• Local government seizing and selling land to special interests.
• Joint ventures must contribute to local development.
• Different price systems.
• New Property Law (2007):
• Protection of private property.
• Remove the power by many government entities, particularly local, to seize
property with impunity.
• Good Guanxi enables to bend most of the rules.
© Dr. Jean-Paul Rodrigue
2. Modernization
■ The parasite economy
• 73 million members of the CCP working for the government or
managing State enterprises (2007).
• Duplication of functions in every sector of the civil service at the
national, provincial and township level.
• 90% of civil servants are redundant.
• Institutionalized racketing of economic activities by all levels of
government.
• China ranks low on the international transparency index.
© Dr. Jean-Paul Rodrigue
2. Modernization
■ Environmental degradation
•
•
•
•
Limited attention placed for the protection of the environment.
Development is a priority over the environment.
Serious degradation of environmental conditions.
Air pollution:
•
•
•
•
•
China is the second largest CO2 emitter in the world.
2/3 of the Energy supplied by coal.
16 of the world’s 20 worst polluted cities.
2/3 of Chinese cities have pollution level well above national criteria.
75% of the urban population suffering from health problems.
• Water pollution:
• 20% of rivers in China are severely polluted.
• 80% cannot sustain commercial fishing.
• Energy efficiency issues.
© Dr. Jean-Paul Rodrigue
2. Modernization
■ Counterfeiting and intellectual property
•
•
•
•
One of the greatest “industrial subsidy” ever seen.
Failure to protect intellectual property rights.
Indirect involvement with hackers to steal information abroad.
Technological expropriation:
• Copy a well known product without paying any royalties or R&D costs.
• Illegal copies:
• More than 90% of the movies, music and software.
• Legal CD has a 1.2% market share.
• About 40% of pharmaceutical products.
• Two levels:
• International: software and brand names (e.g. Polo, Nike).
• National: books and music.
© Dr. Jean-Paul Rodrigue
2. Modernization
• Role of government:
• Weak (non-existent / arbitrary) legal environment.
• Counterfeiting controlled by authorities and protected by judiciary
instances.
• High levels of profits prevent any governmental intervention, except when
counterfeiting involves Chinese brands.
• Pirate DVD market mostly controlled by the military.
• Consequences:
• May impact on future economic growth.
• Firms reluctant to invest in China outside simple labor intensive processes.
• Other options (Southeast Asia, India) are available.
© Dr. Jean-Paul Rodrigue
2. Modernization
■ Speculation
• Short term perspectives of investments.
• Real estate, not production, is the favored sector:
•
•
•
•
“Development zones” are often created for this sole purpose.
Over supply of office space in many cities.
Vacancy rate of more than 25%; large non-performing assets.
People cannot afford to buy most of the housing, so real estate becomes a
speculation based solely on appreciation (not rent seeking).
• Large shopping malls projects for a customer base that does not exist.
• Stock markets:
• Market still in its infancy and low level of education of shareholders.
• The notion of “investment” is not well understood (perceived as a “surewinning” lottery.
• The stock market has been declining due to low profits, until 2006.
• Bubble of 2006-2007; and then a crash (70% drop in 2008).
© Dr. Jean-Paul Rodrigue
Shanghai Composite Index, 2000-2011 (Monthly)
6000
5000
4000
3000
2000
1000
0
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
© Dr. Jean-Paul Rodrigue
2. Modernization
■ Consumption
• Symbol of modernity and of achievement:
• Mass consumption and mass media has created needs while the
employment market offered limited opportunities to many.
• Access to new sources of information providing a globalized culture.
• Mass media is new to China and there is no tradition of consumer
behavior.
• Development of Western consuming behavior:
•
•
•
•
Fashion and beauty products.
Weddings.
Christmas (the consumption segment of it).
New housing complexes and home decoration.
• Emergence of a middle class:
• About 150-200 million as of 2010.
• A tool of social change, but also instability.
© Dr. Jean-Paul Rodrigue