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Progress of China’s Economic Reform and Opening Up

Progress of China’s Economic Reform and Opening Up. MA XIAOFANG PhD, Associate Professor Department of Economics Chinese Academy of Governance 03/09/2013. Curriculum Vitae. Education Background : 2005- 2008 Phd in Economics , China Renmin University

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Progress of China’s Economic Reform and Opening Up

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  1. Progress of China’s Economic Reform and Opening Up MA XIAOFANG PhD, Associate Professor Department of Economics Chinese Academy of Governance 03/09/2013

  2. Curriculum Vitae Education Background: 2005- 2008 Phd in Economics , China Renmin University 2001-2002 Msc. in International Banking and Finance Studies, Southampton University in UK Work experience: 2006- Associate professor, Economics Department, Chinese Academy of Governance 1999-2006 lecturer, Economics Department, Chinese Academy of Governance Research Focus: Macro-economy, Financial markets, risk management, banking regulation.

  3. Contents • China’s economic achievements from 1978 • Three stages of China’s R&O • Current situation of economy • Guiding concept of the 12th five-year plan • Targets of the 12th five-year plan

  4. GDP growth (1978-2011) (100M Yuan)

  5. The second biggest economy in the world • The annual average growth rate of GDP is 9.7% after 1978 • GDP of 2010 is 39800 billion yuan, which is 109 times of 1978 • The second biggest economy by the end of 2010 • The growth rate is 2.5 times of that of the world

  6. Fiscal revenue (1978-2011) (1M Yuan)

  7. Fiscal revenue (1978-2011) • The annual average growth rate of FR is 13.45% after 1978 • FR of 2011 is 10374 billion yuan, which is 78 times of 1978

  8. Export and import (1978-2011) (1M Yuan)

  9. Export and import (1978-2011) • The trade volume of export and import was 2974 billion US dollar in 2010, ranked second in the world • The annual average growth rate of E&I is 16.8% after 1978, the trade volume of 2010 was 143 times of 1978 • Chinese export ranked 32th in the world in 1978 • Chinese export ranked first in the world in 2010

  10. China’s export commodities structure (1980-2010)

  11. Products made in China account for the share in international market

  12. China’s ten big trade partners

  13. Foreign Exchange Reserves • The annual average growth rate of FER is 36.74% after 1978 • 3200 billion US dollars reserve by the end of 2011, ranks first in the world

  14. improvement of people's living conditions unit: yuan

  15. Comprehensive reform model on national income distribution form (after 2003) Abolishing agriculture taxes • Abolishing 4 kinds of taxes of agriculture, including agriculture tax, slaughter tax, animal husbandry tax and special tax • Abolishment of all these taxes releasing 133.5 billion yuan of farmers’ burden • Government increasing 60 billion yuan direct subsidies

  16. A story Mr li, A farmer , planted 5 acres of rice. Every year he can get 350 yuan subsidies for planting from government and net income of 2000 yuan from cultivating. He said, after attending the countryside cooperation medical treatment, he got 50% to 75% of reimbursement from medical fee, but every year he only needs to deliver 10yuan. In addition, all the study incidental expenses and book expenses are exempted during the students’ compulsory education period. Reading rooms are built in the villages. Drinking system and public transportation are more convenient.

  17. Contents China’s economic achievements from 1978 Three stages of China’s R&O Current situation of economy Guideline of the 12th five-year plan(2011-2015) Targets of the 12th five-year plan (2011-2015)

  18. Three stages of China’s R&O From planed economy to socialist market economy • Stage 1: 1978 to 1992. Primary stage • Stage 2: 1992 to 2001. Deepening stage • Stage 3: 2001 to present. Opening up stage

  19. Stage 1: 1978 to 1992. Primary stage • Started from 1978, primary and experimental stage of R&O • Featuresof first stage: Loosening and activating the economy Clarifying different ideologies Reform of commodity prices Put the countryside reform first

  20. Conflicting opinion • Socialism or capitalism? • Deng’s answers: No arguments about S&C. Market economy does not stand for capitalism No matter white or black cat, the one who catches the rats are good cats Cross the river by groping the stone

  21. Reform of prices • Under planed economy, most commodity prices are under control, even a match • Then changed to two-track price mechanism • Nowadays more than 90% prices are determined by the market • Some important prices are still under control Electricity, petroleum, coal, interest rate, etc

  22. Put the countryside reform first 1.1 The household contract responsibility system • Inspiring the enthusiasm of Chinese farmers • Making tremendous achievements in the rural economy • Combining family income with production investment • Decreasing the cost of supervision and management • The peasants getting decision-making power for their production

  23. Put the countryside reform first • From1978 to1984, the annual average growth rate of agriculture output was 7.7% • From 1978 to1984, the total value of agriculture output increased 42.23%, half of which from the high efficiency of household contract responsibility system

  24. A story Thirty years ago, Mr Li, an old farmer in Jiangxi Province, used a tractor to take his bride home. When his son got married a couple of years ago, he rented ten luxurious cars on his wedding day. The old farmer said: “it is really like a dream”.

  25. Put the countryside reform first 1.2 Developing the role of local governments • Loosening the regulation of the household registration system • Guiding the orderly flow of the labor force between urban and rural areas or between regions • Promoting the transfer of surplus agricultural labor • City expansion enhancing development of property

  26. Stage 2: 1992 to 2001. Deepening stage • In 1992, Deng Xiaoping pointed out the direction of China: socialist market economy . The reform and opening up deepened Case of SOEs reform • Initially give more freedom, rights and profits to SOEs • Keeping big enterprises and sell shares of mid and small firms, more than 90% are partly or completely private owned

  27. Reform of big enterprises • Only big SOEs are kept, aiming at maintaining national pillar industries. Trying to support internationally competitive big enterprises. Now 43 enterprises in world top 500 • Change from state-owned to multi ownership: private capital, foreign capital, etc • 159 big enterprises are under control of central government, aiming at restructuring them into 80-100

  28. Reform of big enterprises • Only big SOEs are kept, aiming at maintaining national pillar industries. Trying to support internationally competitive big enterprises. Now 18 enterprises in world top 500 • Change from state-owned to multi ownership: private capital, foreign capital, etc • 159 big enterprises are under control of central government, aiming at restructuring them into 80-100

  29. Development of private economy • The ratio of private economy to GDP was only 42.8% in 2000, increased to 65% by the end of 2005. • The employment of private economy in urban areas increased from 65% in 2000 to 75% in 2005 • Private economy is more flexible and innovative, occupies the competitive fields Main products: manufacturing,light industry products

  30. Stage 3: 2001 to present. Opening up stage • In November 2001, entry WTO; in November 2006, 5-year transitional period ended. China is fully opened up, a new era comes • China is now an inseparable part of global economy. It is like a swimmer swimming from a pool to the sea. Challenges and opportunities are coming together Challenges: competition from global competitors Opportunities: bigger market, more profit, and risk diversifying

  31. Legislative build-up • Review of over 2500 laws and regulations, abolished 840, amended nearly 400, to keep in line with WTO rules; • Over 40 new legislations on opening up sectors in service trade sector covering: banking, accounting, legal service, insurance, logistics, commerce, telecommunications, architecture, tourist, transportation, etc.; • More transparency, simplification on administrative procedures;

  32. Market Access • 62.5% of service areas, extend of openness close to that of developed countries. • Areas commented: banking, insurance, securities, telecom service, distribution, etc. A few limitations in telecommunication, audio-video, construction, financial and legal services.

  33. the contribution of Different enterprises in trade volume 民营企业等6% 民营企业等 25% 国有企业20% 国有企业43% 外资企业51% 外资企业 55% 2010年 2001年

  34. From 1980’s to 1990’s, • the open policy focused on coastal regions In the 1990’s, China opened and developed Shanghai Pudong New Area In 2000, the 10th “Five Year Plan” , the strategy of “developing the western region” In 2001, China became a member of WTO

  35. Experience 1. Socialist market economy • Breaking the doctrine of socialism conflicted with market economy • From planned economy to market economy • Inspiring everyone’ s potential

  36. Experience 2.Put countryside reform first • Countryside population accounting for the majority • From traditional agricultural society to industrial society • Three stages of reform: land system reform, price reform, and comprehensive reform

  37. Experience 3. Opening up • Taking the chance of globalization • From close economy to open economy • Making up for insufficiency of capital • Alleviating the employment burden • Enhancing reform pace

  38. Experience 4. Gradual reform • Keeping good balance in reform, development and stability • From the bottom to the top • From the point to the line , then to the wide area • From the experimental area to the whole country

  39. Contents China’s economic achievements from 1978 Three stages of China’s R&O Current situation of economy Guiding concept of the 12th five-year plan Targets of the 12th five-year plan

  40. Current situation of economy 1. Economic strength has improved a lot, however, there is no dramatic change in structural imbalance and extensive mode of growth • Economic growth mainly depends on industry, agriculture as the foundation of the economy is still very weak. Living on the nature in some places is still very common. Contribution made by agricultural science is still very low. • Economic growth depends heavily on physical resource investment and cheap labour. • Weak in independent innovation , lack of core technology, insufficient famous brands.

  41. The ratio of the three industries from 1978to 2008年（%）

  42. Energy consumption ration in 3 industries from 1980to 2008

  43. Innovation and R&D Processing and assembling Branding According to the statistics, in ten big textile products in the world , the cost of china’s labor is 0.62 $/hour, this figure is only ¼ of Korea, 1/13 of USA, 1/16 of Italy, and 1/20 of Japan

  44. 2. Imbalance between urban and rural areas Since the opening-up policy, China’s urbanization increased from 17.9% to 46.6%,10 million rural residents become urban residents per year. however, the level of China’s urbanization is far behind the world average level. The annual average net income per capita for rural residents is 5153 yuan, which is less than one third of urban residents. Current situation of economy

  45. The progress of China’s urbanization

  46. Current situation of economy 3. Regional differences • Since the national strategy to develop the western part of China was implemented in 2000, western provinces has had an average annual GDP growth of 12%. Although this figure is 1.8% higher than the whole country ‘s average level, GDP per capita in the most undeveloped areas in the west is only one tenth of that in the coastal area. • In 2008, urbanization reached 56% in eastern area, but in central and western area it was 43% and 38% respectively.

  47. In the 11th Five Year Plan, economy in eastern areas in China accounts for a big proportion in China

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