Transcript China Economyx

Some Key Features of
China’s Economy
AQA BUSS4 Research Theme 2014
Two centuries ago, China was by some distance
the world’s largest economy!
China’s global economic influence and power
has returned and is unmistakeable!
China remains a Communist state dominated by the
Chinese Communist Party but it is also an increasingly
open economy where trade accounts for over 70% of GDP
China has achieved a consistently high rate
of economic growth in recent decades
In 2010 China overtook Japan to become the 2nd largest
economy and sustained the global economy during the
financial crisis
BRICS: China’s economy is now bigger than Brazil,
Russia and India combined!
China has added the equivalent of an economy
the size of Portugal every years since 1979
In 2011 China overtook he US to become the
world’s producer of manufactured goods
Made in China – the Factory of the World –
but for how much longer?
Much of China’s economic growth has been
driven by massive investment in infrastructure
For example, China plans to build 56 new
airports & relocate/expand 91 others by 2015
China is investing over $300bn in building high
speed rail to connect all of its major cities
As a result of rapid economic growth, significant
progress has been made in reducing poverty in China
Levels of extreme poverty have fallen
dramatically in China in the last 30 years
However, economic growth is now slowing down:
a lower target rate of growth of 7% has been set
Since 1978 China has experienced the
largest migration in human history
Between 2001 and 2010 migration contributed
nearly 20% of China's economic growth
China's intense programme of urbanisation has pushed
up consumption and increased income per person
However mass internal migration has
created significant social problems
Approximately 1 in 10 people in the world
now live in a Chinese city
Cities with more than a million people in 2011
USA (9)
European Union (18)
China (93)
New York: 8.2
Los Angeles: 2.8
Chicago: 2.7
Houston: 2.1
Philadelphia: 1.5
Phoenix: 1.4
San Antonio: 1.3
San Diego: 1.3
Dallas: 1.2
London: 7.8
Berlin: 3.5
Madrid: 3.3
Rome: 2.5
Paris: 2.2
Hamburg: 1.8
Budapest: 1.7
Vienna: 1.7
Warsaw: 1.7
Shanghai: 19.5
Beijing: 15.0
Guangzhou: 10.4
Shenzhen: 10.2
Chongqing: 9.7
Wuhan: 8.9
Tianjin: 8.5
Dongguan: 7.1
Chengdu: 6.3
Bucharest: 1.7
Barcelona: 1.6
Munich: 1.3
Milan: 1.3
Prague: 1.2
Sofia: 1.2
Brussels: 1.0
Birmingham: 1.0
Cologne: 1.0
Foshan: 6.2
Nanjing: 5.6
Haerbin: 5.4
Shenyang: 5.4
Hangzhou: 5.1
Xi’an: 4.8
Shantou: 4.0
Zhengzhou: 3.7
Qingdao: 3.6
China’s economic growth provides the tantalising
prospect of demand from 1 billion consumers
The growth of the consumer “middle class” in
China is driving phenomenal purchasing power
…although it depends on how you define
“middle class”
In many market sectors, China is now an
emerged rather than emerging market
China has invested an average of 8.5% of GDP in
infrastructure investment in the last two decades
…and it plans to continue massive
investment in key infrastructure projects
China is now looking to rebalance its economy
away from investment and towards consumption
Despite rapid economic growth, price inflation
has remained quite low in recent years
However, as the Chinese economy matures,
wages have started to rise significantly
Minimum wages in China are growing fast
Source: KPMG 2013
Chinese labour force is forecast to decline
after 2015
The shift in China to a higher-wage economy will put
pressure on existing business models there
As China grows old, dependency ratios will rise; an aging
workforce will be less mobile & probably demand higher
wages
China’s rapid growth has helped it develop
massive reserves of foreign currency
China’s persistent current account surplus
has filled the reserves!
China now has over $3.6 trillion of foreign
exchange (forex) reserves
China’s reserves have grown tenfold in the past decade
due to a large trade surplus and strong capital inflows
China is investing its reserves in assets outside
China through sovereign wealth funds
China also uses massive foreign exchange
purchases to hold down the value of its currency
A weaker Chinese currency (Yuan) helps keep
Chinese exports cheap in overseas markets
China continues to attract high levels of FDI
(foreign direct investment)