Chinese Economy Structure, Reform and the Challenges. Laike YANG East China Normal University

Transcription

1 Chinese Economy Structure, Reform and the Challenges Laike YANG East China Normal University

2 Outline Part I. Chinese Economic Structure Part II. Chinese Economic Reform Part III. Chinese Economy: The Challenges East China Normal University, Shanghai

3 Part I Chinese Economic Structure East China Normal University, Shanghai

4 Economic Structure: Origins and Components of GDP Origins of GDP (2009) % of total Components of GDP(2006) % of total Agriculture 9.6 Private consumption 36.4 Secondary industry 46.8 Government consumption 13.7 Service 43.6 Gross fixed investment 40.9 Net Exports 7.8 Sectoral structure of GDP Components of Demand for output Source: EIU East China Normal University, Shanghai Page 4

5 Economic Structure: Origins and Components of GDP Compare with that of US, JP The United States GDP by sector agriculture (0.8%), industry (12.6%), services (87.5%) Components of GDP private consumption (69.9%), government expenditure (19.2%), investment (16.4%), Net export (-5.8%) Japan GDP by sector agriculture (2.1%), industry (21%), services (76.9%) Components of GDP private consumption (56.8%), government expenditure (17.9%), investment (20.1%), Net export (1.2%) East China Normal University, Shanghai Page 5

6 Economic Structure: Origins and Components of GDP Compare with that of India India GDP by sector agriculture (16.6 %), industry (27.6 %), services (55 %) components of GDP private consumption (62%),government expenditure (12%), investment (28%), Net export (-2%) East China Normal University, Shanghai Page 6 Source: EIU

7 Understand The Economic Structure of China During the stage of economic takeoff, a high savings rate is needed Consumption (domestic demand) S So that a big capital surplus Drive of economic growth Investment (domestic demand) I FDI China has a high savings rate, but not a good financial system to transfer the savings to investment Net export (overseas demand) So that a big capital deficit The US has no savings, but they have a good financial market East China Normal University, Shanghai Page 7

8 Savings Rate Of Selected Developing Countries % Gross domestic saving as % of GNP, 2004 East China Normal University, Shanghai Page 8

9 Net National Savings of the United States % Net National Savings to Gross National Income East China Normal University, Shanghai Page 9

10 Part II Chinese Economic Reform China before the reform (video show) East China Normal University, Shanghai

11 The Chinese Reform: Questions to answer What has been reformed and what hasn t? politics vs. economy trade vs. financial system What comes first and what comes last? efficiency or equality first SEZ (Special Economic Eone) Why is it successful? gradualism vs. big bang the role of FDI and trade East China Normal University, Shanghai Page 11

12 The Chinese Economic Reform: The Order regional reform order from coast to inland 4 Special Economic Zones (SEZs) 14 coastal cities Hainan coastal area Pudong, Shanghai East China Normal University, Shanghai Page 12

13 The Chinese Economic Reforms: The Order regional reform order from coast to inland Western Development Strategy inland area Revitalize The Old Northeast Industrial Bases Rise of Central China Plan East China Normal University, Shanghai Page 13

14 Western Development Strategy (launched in 2000) The policy covers 6 provinces (Gansu, Guizhou, Qinghai, Shaanxi, Sichuan, and Yunnan), 5 autonomous regions (Guangxi, Inner Mongolia, Ningxia, Tibet, and Xinjiang), and 1 municipality (Chongqing). This region contains 71.4% of China's mainland area, but only 28.8% of its population, as of the end of 2002, and 16.8% of its total economic output, as of East China Normal University, Shanghai Page 14

15 Revitalize The Old Northeast Industrial Bases (launched in 2003) Revitalize The Old Northeast Industrial Bases ( 振兴东北老工业基地 ), is a policy adopted in 2003 to rejuvenate the industrial bases in the northeastern China. It covers 3 provinces: Heilongjiang, Jilin, and Liaoning. East China Normal University, Shanghai Page 15

16 Rise of Central China Plan launched in 2006 it covers 6 provinces: Shanxi, Henan, Anhui, Hubei, Hunan, and Jiangxi. East China Normal University, Shanghai Page 16

17 The Chinese Economic Reform: The Approach The Approach the big bang theory vs. gradualism liberalize the economy but control the politics putting the efficiency first ( white cat / black cat theory) "I don't care if it's a white cat or a black cat. It's a good cat as long as it catches mice. (Deng Xiaoping) Let part of the people get rich first (Deng Xiaoping) exploring the way Cross the river by feeling the stones (Deng Xiaoping) The Goal: 4 modernizations modernization of agriculture, industry, science & technology and the military The Strategy socialist market economy East China Normal University, Shanghai Page 17

18 Socialist Market Economy What is socialist market economy? it is practiced in China as well as in Vietnam. major industries are owned by state entities, but compete with each other within a set by the market. the state does not routinely intervene in the setting of prices East China Normal University, Shanghai Page 18

19 The Chinese Reforms: Agriculture Sector Economic Reform :agriculture chinese economic reform start from rural area household responsibility system (Cheng Bao system). TVE s What is TVE? Where are they now? East China Normal University, Shanghai Page 19

20 The Chinese Reform: SOEs SOE reform progress in China can be divided into two periods. first stage ( ) relaxing restrictions, give the managers more decision-making power 11 th National Congress of the Communist Party (NCCP),1978. to introduce the responsibility system to industrial sectors - to let enterprise have self-determination, and let enterprise have more financial capacity through tax reduction. separating the governmental function from managerial function reform had been carried out for ten years with dissatisfactory results. East China Normal University, Shanghai Page 20

21 The Chinese reforms: SOEs second stage (1992--)---institutional reform: privatization. The 14th NCCP, Corporatisation the SOEs Corporatise the SOEs, sell shares to private sector The 15th NCCP, the new strategy: Keep the large ones and let go the small ones (Zhuada Fangxiao). control the strategic sectors and release the competitive sectors control the enterprises but not necessary own the company (control more than 51% of the share) In May 2003, China established the State-owned Assets Supervision and Administration Commission (SASAC). SASAC acts as a shareholder of state assets to overcome the fragmentation of state ownership arrangement. since then, the SOEs are performing very well. East China Normal University, Shanghai Page 21

22 The Chinese Reform: Pricing System state controlled pricing system government decides about the input and output prices dual-track pricing system some goods and services were allocated at state controlled prices, while others were allocated at market prices. over time, the goods allocated at market prices were increased merger the two tracks together until the early 1990s, almost all products price were market decided. How to evaluate the dual-track pricing system? It helped SOEs to survive the most difficult time. But it also caused very big problems particularly the corruption which led to the Tiananmen square event. East China Normal University, Shanghai Page 22

23 The Chinese Reform: Foreign Trade System before 1978, foreign trade was under strict state control state trading system high tariff rate numerous non tariff barriers reform before WTO accession liberalizing the state trading system eliminating trade barriers after WTO accession tariff reduction designated trading products Designated trading refers to the government designating some companies to act on behalf in the import/export of certain products state trading refers to the monopoly of in certain products East China Normal University, Shanghai Page 23

24 The Chinese Reform: Foreign Trade System year Reduction in the average tariff rate level ( ) Average tariff for all products Average tariff for industrial products Average tariff for agricultural products East China Normal University, Shanghai Page 24

25 Part III Chinese Economy: the challenges and new direction East China Normal University, Shanghai

26 The Challenges 1. Economic Structure 2. Income Disparities 3. Macroeconomic Stability 4. Trade Conflicts 5. Intellectual Property Right Protection and Innovation 6. Labor Protection 7. Resources, Energy and Environmental Issues 8. Economic Development Model East China Normal University, Shanghai Page 26

27 The Challenges 1. Economic Structure Consumption, Investment, Net Export manufacturing industries vs. services East China Normal University, Shanghai Page 27

28 The Challenges 2. Income Disparities although in general, all Chinese people benefit from the fast economic growth, but the urban-rural income disparity has been increased recently. urban GDP per capita in Shanghai is more than USD 10,000 per year, but in west China, the province like Guizhou it is just over $1,000 per year. urban incomes are 3.33 times those of rural residents, up from 2.5 in the urban per capita net income stood at 17,175 yuan ($2,525) last year, in contrast to 5,153 yuan in the countryside, with the urban-to-rural income ratio being 3.33:1, according to the latest figures from the National Bureau of Statistics. East China Normal University, Shanghai Page 28

29 A Long Period Observation East China Normal University, Shanghai Page 29

30 The Challenges 3. Macroeconomic Stability stock market---still far from a mature market speculation vs. investment transparency (false information exploded) policy influence less supervised East China Normal University, Shanghai Page 30

31 The Challenges 3. Macroeconomic Stability stock market---still far from a mature market real estate market the housing prices in big cities went up about 3-10 times variously in last 10 years the prices of real estate are far too high for the ordinary people international standard: house price= 6 x annual family income in Shanghai: it is about 20 times East China Normal University, Shanghai Page 31

32 Real Estate Market like crazy The housing prices in Shanghai (within inner ring road) 25, ,000RMB/M ,000-60,000RMB/M ,000-35,000RMB/M ,000-25,000RMB /M ,000~5,000 RMB /M2 East China Normal University, Shanghai Page 32

33 The Challenges 3. Macroeconomic stability stock market---still far from a mature market real estate market inflation threat ,3 1,5 1,4 1, ,8 2,2 2,7 3,3 3 3,4 8,7 8,3 8,5 6,5 6,2 6,5 6,9 6,5 7,1 7,7 7,1 6,3 5,6 4,9 4,4 4,64 CPI 2,4 1,2 1 0,6-1,6-1,2-1,5-1,4-1,7-1,8-1,2-0,8-0,5 1,9 1,5 2,7 2,4 2,8 3,1 08' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' CPI East China Normal University, Shanghai Page 33

34 The Challenges 4. Trade Conflicts trade balance China s currency issues trade and unemployment anti dumping, countervailing and safeguards textile & apparel East China Normal University, Shanghai Page 34

35 The Challenges 5. Intellectual Property Rights IPR infringement: not only hurt the foreigners between 15% and 20% of all products made in China are copies, about 8% of China s annual GDP. it is estimated that China s domestic film industry lost about $1.5 billion to piracy in about 50% of pirated films in China are Chinese movies. a study estimates that a 10% reduction in China s PC software piracy would raise its GDP by $20.5 billion and create an additional 355,179 jobs. East China Normal University, Shanghai Page 35

36 The Challenges 6. Economic Growth and Labor Abuse on average, Chinese immigrate workers work 6.29 days/week, 8.93 hours/day. the average wage is 966 Yuan per month (about 100 Euro or 130 USD), more than 50% of them earn less than 800 Yuan/month, 19.67% earn less than 500 Yuan per month. East China Normal University, Shanghai Page 36

37 The Challenges 7. Resource Energy and Environment Issues Behind the economic miracle.. China is now the largest SO 2 and CO 2 emitter in the world the only target which was not reached in china s 10 th FYP was the emission-reduction target. in China s 340 cities,more than 30% of them with an air quality below level 3,it covers about 40% of china s city population, and about 100 million people East China Normal University, Shanghai Page 37

38 Literature Asian Development Bank, 2010, Asian Development Outlook 2010: the People s Republic of China, Asian Development Bank, Manila. Angus Maddison, 2007, Chinese Economic Performance in the Long Run. Chapter 3 and Chapter 4, OECD Publishing, Paris. Tom Rawski, 2001, What Is Happening to China s GDP Statistics?, China Economic Review, 12(4). Thierry Apoteker Consultant, 2006, Reading Between the Lines of China s New GDP Statistics. Dilip K. Das, 2008, The Chinese Economic Renaissance, Palgrave Macmillan, New York. Mona Harddad, 2007, Trade Integration in East Asia: The Role of China and Production Networks, World Bank Policy Research Working Paper Dick K. Nanto, Emma Chanlett-Avery, 2006, The Rise of China and Its Effects on Taiwan, Japan, and South Korea: U.S. Policy Choices. Congress Research Service. Loren Brandt and Thomas G. Rawski, 2008, China s Great Economic Transformation, Cambridge University Press. Wing T. Woo, 2006, The Economic Impact of China s Emergence as a Major Trading Nation, in Lok Sang Ho and Robert Ash (eds), China, Hong Kong, and the World Economy, Palgrave. Chad P.Bown and Rachel McCulloch, 2009, U.S.-Japan and U.S.-China Trade Conflict: Export Growth, Reciprocity, and the International Trading System, World Bank, Washington D.C. K.C. Fung, Hitomi Iizaka, Sarah Tong, 2002, Foreign Direct Investment in China: Policy, Trend and Impact. In: Global Economic Review 33:2 (2004), pp Joanne Guth and Melissa Ginsberg, 2004, Energy Use in China: Trends in Oil Demand and Imports, International Economic Review (Washington, D.C.) / Nov-Dec, Yongding Yu, 2007, Global Imbalances: China s Perspective, paper presented at the Peterson Institute for International Economics, Washington, D.C. Vivien Foster, William Butterfield, Chuan Chen, and Nataliya Pushak, 2008, China s emerging role in Africa, GRIDLINES, No.42. Barry Naughton 2007, The Chinese Economy. Transition and Growth. MIT Press, Cambridge MA and London. East China Normal University, Shanghai Page 38