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Development of China - An Economy in Transition

Development of China - An Economy in Transition. Kennyzhang@asiapacific.ca. 3 Purposes. To Know China China matters To Know China’s Development Development matters To Know China’s Development Impacts on ‘Us’ Are we prepared?. 5 Topics. Why China? Why development?

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Development of China - An Economy in Transition

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  1. Development of China- An Economy in Transition Kennyzhang@asiapacific.ca

  2. 3 Purposes • To Know China • China matters • To Know China’s Development • Development matters • To Know China’s Development Impacts on ‘Us’ • Are we prepared?

  3. 5 Topics • Why China? • Why development? • What happened to China’s development? • What next? New challenge ahead • Summary

  4. 1. Why China? 1.1 Facts: • Where? http://china.scmp.com/map/ • What? http://www.asiapacificbusiness.ca/backgrounders/pages_contents.cfm?ID_Briefing=1 • Country Comparisons: http://www.asiapacificbusiness.ca/backgrounders/compareIE.cfm

  5. 1. Why China? (cont’d) 1.2 Nicknames: • “Awaken Dragon” • History; Land; Population; Economy; see 2.2.2. • “Growth Engine”http://www.business-standard.com/updates/news.asp?story=3084 • GDP growth 7.6% (98-02); 3 times of world average • “Top FDI Recipient” • US$52.7b/7% (2002), $57b (2003) • “Global Factory” http://news.bbc.co.uk/2/hi/business/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)

  6. 2. Why Development? 2.1 Long term trend 2.2 China’s position: past & present

  7. 2.1 Long-run of Economic Growth- Selected Countries

  8. 2.2 China’s Development Position • Fast growth • Large scale • Low level Source:http://www.adb.org/Documents/Books/Key_Indicators/2003/default.asp

  9. 2.2.1 GDP and GDP Per Capita Growth Rate (PPP): 1700-1995

  10. 2.2.2 Share of GNP (PPP)

  11. 2.2.3 GDP Per Capita (PPP): 1700-1995

  12. Source: MOFCOM, China, at http://www.mofcom.gov.cn/table/jcktj/lszl/lszlqxt.html

  13. 3. What Happened? • Economic Reform • Transition to the market • Global Integration

  14. 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 Mao’s 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 3.1 History of China’s Development

  15. 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 • Company’s responsible for financial performance and borrow money from banks; raise capital at the stock market

  16. 3.2 Economic Reforms (Cont’d): • 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 M&As, overseas listing

  17. 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

  18. 3.3 Model of China Development (cont’d) • #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

  19. Comparison of Two Development Models

  20. 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

  21. 4.1 Population and Environmental Pressures • Large in # (1.3 b) • Low rate (<1%) • Low urbanization (30%) • Migrant labour (~100 million)

  22. 4.2 Employment Insecurity

  23. 4.3 Growing InequalityPer Capita Annual Income of Urban and Rural Household and The Related Index

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

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