Transcript Chinese Economy: Geographical Settings

Chinese Economy:
Introduction
Junhui Qian
2014 September
Chinese Economy
• The most populous country (1.3 billion)
• The most rapidly growing economy (10% since 1978)
• The largest trading nation in the world (USD 3.87 trillion in volume)
• In terms of aggregate output, China is second only to the US.
• In terms of output per cap, China is still a “lower middle income
country” (The World Bank).
Transition and Development
• Before 1978, the key words were revolution, socialism, Maoist
radicalism.
• After 1978, the key words were gradualist reform (“crossing the river
by groping for stepping stones”), opening, and development.
• The first stage of reform and opening achieves the transition from a
socialist command economy to a market economy.
• The second stage, which is ongoing, would achieve sustainable
development from a middle-income country into a high-income
country.
Why China Grows So Fast?
• Rapid growth of inputs (capital, labor)
• Successful transition from socialism to market economy
• The market works
• Gradualist reform is superior over “shock therapy”
• A revival of traditional economic relationship
• Value on education, social trust, connection with oversea Chinese, etc.
The Geographical Setting
Provinces and Regions
• China has 31 province-level administrative units, including 22
provinces, 4 municipalities under national supervision, and 5
autonomous regions of ethnic minorities.
• There are large and small ones, old and new ones, rich and poor ones.
• Macro-regions:
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North China (“the center plain”, 中原)
Lower, Middle, and Upper Yangtze’s
Northeast (Manchuria)
Northwest
Far South, South East (“the maritime China”)
Southwest
The Maritime China
• John King Fairbank suggested that “maritime China” was a distinct
region and subculture within Chinese civilization.
• Homeland of most of the overseas Chinese who left China before
1949.
• Include Guangdong, Fujian, and part of Zhejiang.
• Four special economic zones (SEZs): Shenzhen, Zhuhai, Shantou, and
Xiamen.
• Important links with Hong Kong and Taiwan.
The Chinese Economy Before
1949
Historical Division
• Dynasties (before 1911)
• Republic of China (1911-1949, 1949- on Taiwan)
• People’s Republic of China (from 1949, on mainland)
The Traditional Economy
• High-productivity traditional agriculture
• The commercialized countryside
• Sophisticated institutions (Money, large organizations, advanced commercial
procedures, legal and customary institutions, banks)
• Competitive markets (competitive markets for products, land, and labor;
social mobility)
• Small-scale household economy
Paper money of
Ming Dynasty
A Traditional Bank
A Certificate of Tax
Crisis of the traditional economy
• Population growth on the limited land and stagnant technology
• “The Chinese peasant is like a man standing on tiptoe up to his nose in
water—the slightest ripple is enough to drown him.” (Tawney, 1930s)
• Failure of government
• Cycle of dynasties
• Too small (around 1800, one government worker per 32,000 people)
• Challenge from the west
• The opium import caused a monetary deflation.
Why the Industrial Revolution Did Not
Originate in China?
• Needham’s puzzle: Why was China's science and technology so far in
advance of other civilizations historically, only to fall in modem times?
• Justin (Yifu) Lin points to the missing scientific revolution in China,
which in turn may be due to the contents of civil service exams and
the criteria of promotion.
• Read Lin (1995).
1912-1937
• Rapid industrialization (8%-9% annual growth in factory production)
• Treaty ports (e.g., Shanghai)
• Manchuria
• There were two good intervals:
• 1914-1918 (WWI)
• 1927-1937 (“The Nanjing Decade”)
• Modern education expanded rapidly.
• Open to the world
• About 100,000 Chinese students went abroad (Japan, US, Europe)
• As of 1936, around 370,000 foreigners were resident in China
• Shanghai was the financial center of the far east.
1937-1949
• War-time economy
• Increased State Intervention
• Before the war, there had been no significant public sector
• By the early 1940s, state-run firms accounted for 70% of all capital and 32% of
all labor in unoccupied area.
• Hyperinflation (See the tables in next two slides, from《中国中央银
行研究》)
Summary
• Geographically, China is big, rugged, and diverse.
• The traditional economy is household-based and agricultural. The
modernization of Chinese economy had been bumpy, frequently
interrupted by wars and revolutions.
• People’s Republic of China was founded in desperate economic
situation.