Development of China - An Economy in Transition

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Development of China- An Economy in Transition

• Kennyzhang_at_asiapacific.ca

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3 Purposes

• To Know China
• China matters
• To Know Chinas Development
• Development matters
• To Know Chinas Development Impacts on Us
• Are we prepared?

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5 Topics

• Why China?
• Why development?
• What happened to Chinas development?
• What next? New challenge ahead
• Summary

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1. Why China?

• 1.1 Facts
• Where? http//china.scmp.com/map/
• What? http//www.asiapacificbusiness.ca/background
  ers/pages_contents.cfm?ID_Briefing1
• Country Comparisons http//www.asiapacificbusines
  s.ca/backgrounders/compareIE.cfm

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1. Why China? (contd)

• 1.2 Nicknames
• Awaken Dragon
• History Land Population Economy see 2.2.2.
• Growth Engine http//www.business-standard.com/u
  pdates/news.asp?story3084
• GDP growth 7.6 (98-02) 3 times of world average
• Top FDI Recipient
• US52.7b/7 (2002), 57b (2003)
• Global Factory http//news.bbc.co.uk/2/hi/busine
  ss/2415241.stm
• Labour cost, production chain, export
• Threaten to the World
• Domestic crisis (population, energy, food,
  economy) global integration (trade, currency)
  rising powerful state (economy and military)

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2. Why Development?

• 2.1 Long term trend
• 2.2 Chinas position past present

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2.1 Long-run of Economic Growth- Selected
Countries
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2.2 Chinas Development Position

• Fast growth
• Large scale
• Low level
• Source http//www.adb.org/Documents/Books/Key_Ind
  icators/2003/default.asp

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2.2.1 GDP and GDP Per Capita Growth Rate (PPP)
1700-1995
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2.2.2 Share of GNP (PPP)
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2.2.3 GDP Per Capita (PPP) 1700-1995
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Source MOFCOM, China, at http//www.mofcom.gov.cn
/table/jcktj/lszl/lszlqxt.html
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3. What Happened?

• Economic Reform
• Transition to the market
• Global Integration

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3.1 History of Chinas Development

• First Five-Year Plan (1953-1957)
• A new economic order modeled on the Soviet Union
  example, emphasizing the development of
  capital-intensive heavy industry
• Great Leap Forward (1958-1960)
• The break away from the Soviet model and
  introduction of a new program aimed at rapidly
  raising industrial and agricultural production
• Cultural Revolution (1966-1976)
• The pursuit of Maos own development strategy of
  a self-reliant economy and political struggle
• Economic Reforms (1978- )
• To move the economy from a planned economy to one
  that is more market-oriented

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3.2 Economic Reforms

• Rural reform
• Increase of agricultural production and rural
  income
• Open-door policy
• Turnaround from an inward-looking, self-reliant
  economy to one that participates in the world
  economy (foreign trade, FDI, and SEZs)
• Industrial reform
• Enterprise reform and price reform
• Financial reform
• Companys responsible for financial performance
  and borrow money from banks raise capital at the
  stock market

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3.2 Economic Reforms (Contd)

• SOEs reforms
• Ownership/Assets restructuring
• Western China development
• Regional development
• WTO accession
• Trade policy change, legal reform, structure
  adjustment
• Go Global strategy
• Outward investment, cross-board MAs, overseas
  listing

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3.3 Model of China Development

• 1 Socialist planned economy
• Government planning is basic means of allocating
  resources
• Production quotas quantity rather than quality
• Suppress consumption to increase saving invest
  in heavy industry
• Self-reliant and uninvolved in foreign economic
  relation
• Results
• Shortage in supply production and consumption
  goods
• Slow and unstable economy growth

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3.3 Model of China Development (contd)

• 2 Socialist market economy
• Market is basic means of allocating resources
• State controls at the macroeconomic level
• Economic structural Reform
• Results
• Competition establishment of the diversified
  ownership
• Efficient profit maximization
• Open involved in foreign economic relation
• Fast economy growth

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Comparison of Two Development Models
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4. New Challenges Ahead

• Population and environmental pressures
• Employment insecurity
• Growing inequality and poverty
• Macroeconomic instability stemming from
  incomplete reforms/transitions
• International player economically and politically

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4.1 Population and Environmental Pressures

• Large in (1.3 b)
• Low rate (lt1)
• Low urbanization (30)
• Migrant labour (100 million)

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4.2 Employment Insecurity
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4.3 Growing Inequality Per Capita Annual Income
of Urban and Rural Household and The Related Index
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5. Summary

• China matters in many ways
• A faster developing China is better off for all
• China strategy is a must