Overview of China's Economic Growth

Naixiang Feng School of International Studies University of Business and EconomicsPhone: 861064495551; Fax: 861064493201 August 17 , 2011Email: nxfeng@yahoo.com; fengnaixiang@uibe.edu.cn

A PREVIEW ◆ China Profile◆ China’s Economic Overview◆ China’s Five-year plan

◆Brief History of Chinese Economy ◆1911-1949: Old China ◆1949: PRC established, new China set up ◆1950-1953: Korean War ◆1958-1962: The Great Leap Forward Movement (Three years’ National Disaster) ◆1966-1976: the Cultural Revolution ◆1978 : Deng’s Reform

◆ The Chinese governmental and bureaucracy system ◆ The Communist Party of China ◆ Generations of New China’s Leadership

◆ China’s Political Structure◆ Problems◆ Conclusion

China ProfileChina Profile

World largest developing Country◆population: over 1.3 billion (Mexico times 12)

◆23 provinces (including Taiwan)

◆4 Municipalities: Beijing, Tianjin, Shanghai, Chongqing

◆5 Autonomous Regions: Xinjiang, Inner Mongolia, Tibet, Ningxia and Guangxi

◆2 Special Administration Area: Hong Kong, Macao

China ProfileChina Profile

• 7 regionsNortheast ,Northwest, North China, East China,South China,Middle China, Southwest

• Income Level: 4,283 GDP per capita in current dollar (2010), Mexico ( $9,242) about 56% residents living in rural area• Human development index: 0.663 (0.902-US) (0.750-Mexico)• Rank: 89th of 169 (2010), USA: 4th, Mexico: 56th ( Source: http://hdr.undp.org/en/statistics/)

China ProfileChina Profile

Open-door Policy-----1978 Accession into WTO-----in Dec.2001 The special administrative regions Hong Kong (1997) Macao (1999)

China Economic Overview• Population: 1.3 billion • GDP: $5.9 trillion (2010) ,2nd largest economy (Mexico $1 trillion , 14th economy)

– agriculture: 10.9%– industry: 48.6%– services: 40.5%

• Labor force:– agriculture: 39.5%– industry: 27.2%– services: 33.2%

China Economic Overview

China’s GDP increased from $1.1 trillion to $1.6 trillion from 2000 to 2004, $3.43 trillion in 2007,$4.33 trillion in 2008, $4.9 trillion in 2009, $5.9 trillion in 2010

China's foreign-exchange reserves jumped more than $200 billion in 2004 to reach $609.9 billion, $1.5 trillion at the end of 2007, $1.94 trillion 2008, $2.8 trillion in 2010, $3.2 trillion on July, 2011

China has about $4.5 trillion (2010) in personal savings and a saving rate of close to 50%.

Source: National Bureau of Statistics of China

China Economic Overview

The World Bank's Figures China's new status is not surprising. China has been the

world's leading producer of steel, copper, aluminum, cement, and coal for several years. As a consumer, China surpassed Japan as the globe's second largest importer of petroleum in 2005. In 2006, China surpassed Japan as the world's No. 2 auto market, with total sales of 7.2 million vehicles and production of 7.3 million. In 2009, China surpassed the United States as the World’s No.1 auto market, with total sale and production both over 13 million. In 2010, China’s car production and sales reached 18 million respectively.

China Economic Overview

• In 2006, the number of overseas tourists grew by 3.9% to 125 million, and foreign exchange earning increased by 15.9% to US$33.9 billion.

• In the first nine months of 2007, the number of overseas tourist increased by 5.9% to 97.7 million and foreign exchange earning increased by 12.2% to 27.9 billion.

• According to the World Tourism Organization, China remained the 4th most popular tourist-destination (behind France, Spain and the US) in the world in 2005.

China’s Five-year plans The 1st Five-Year Plan (1953-1957) The 2nd Five-Year Plan (1958-1962) The 3rd Five-Year Plan (1966-1970) The 4th Five-Year Plan (1971-1975) The 5th Five-Year Plan (1976-1980) The 6th Five-Year Plan (1981-1985) The 7th Five-Year Plan (1986-1990) The 8th Five-Year Plan (1991-1995) The 9th Five-Year Plan (1996-2000) The 10th Five-Year Plan (2001-2005) The 11th Five-Year Plan (2006-2010) The 12th Five-Year Plan (2011-2015) Source: http://sientechina.china.com.cn/english/features/guideline/156529.htm

China’s Five-year plans China, economically extremely backward before 1949,

has become one of the world's major economic powers with the greatest potential, and the overall living standard has reached that of a fairly well-off society. In the 22 years following reform and opening-up in 1979 in particular, China's economy developed at an unprecedented rate, and that momentum has been held steady into the 21st century.

Despite the warning of overheated economy, China’s GDP growth was 11.2% in the last five-year plan (2006-2010)

Brief History of Chinese Economy

• When China launched Industrial Movement, Japan started its Meiji Restoration

• In 1911, Qing Dynasty Collapsed, Foundation of Republic of China-ROC.

• In 1919,after WWI, New Culture Movement ,May 4th Movement, Science and Democracy were introduced to China.

• Afterward, Communism was introduced to China

Brief History of Chinese Economy

• Second round industrialization in 1920s-1930s by domestic private capital.

This process was suppressed by government-back capital and foreign capital and suspended by following 2 wars.

– 1937-1945, WWII, Anti-Japanese Invasion War– 1946-1949, Liberalization war between national troops and

communist troops (Civil War)• Foundation of PRC,1 October,1949

1949: PRC is established

On October 1, 1949, in a grand ceremony witnessed by crowds of Beijing people in Tiananmen Square, Mao Tse-tung (Mao Zedong) , Chairman of the Central People's Government, solemnly proclaimed the founding of the People's Republic of China (PRC).

Mao Tse-tung

(Mao Zedong) (1893-1976)

National flagNational flag

National emblemNational emblem

1950—1953: The War to Resist U.S. Aggression and Aid Korea

In 1950, China intervened in the Korean War to save the North Koreans from being wiped off the map, and by 1953, the Korean War was over (actually, South Korea and North Korea are still technically at war with each other, even though the fighting stopped in 1953).

Brief History of Chinese Economy

• Transit from market economy to central planning economy from 1950-1956

– 6 years transition-socialistize• Maoist Economy (Planning Economy),1956-1978 Industrialization in 1950s jeopardized Sino-USSR relationship from 1958 Great Leap-forward Movement in 1959 3 year natural disaster 1959-1962 Culture revolution,1966-1976 Mao Zedong died in Sep.1976 and end of Mao

era

1958—1962: The Great Leap Forward Movement

In 1958, Mao, who was growing increasingly distant from Moscow, launched the Great Leap Forward. The idea was to mobilize the peasant masses to increase crop production by collectivizing the farms and use the excess labor to produce steel. What ended up happening was the greatest man-made famine in human history. From 1958 to 1960, poor planning and bad management managed to starve 30 million people to death. Officially, the government blamed it on "bad weather."

Brief History of Chinese Economy• The Cultural Revolution (1966-76) further altered the

objectivity of historians. In the years after the death of Mao Zedong in 1976, however, interest grew within the party, and outside it as well, in restoring the integrity of historical inquiry.

• This trend was consistent with the party's commitment to "seeking truth from facts."

• As a result, historians and social scientists raised probing questions concerning the state of historiography in China.

• Their investigations included not only historical study of traditional China but penetrating inquiries into modern Chinese history and the history of the Chinese Communist Party.

1966—1976: The Cultural Revolution

In 1966, Mao launched the Great Proletarian Cultural Revolution. The origins of the Cultural Revolution are vague, but probably stem, in part, from a growing separation between Mao's clique and the rest of the CCP. Mao called upon students to rebel against authority, and they did, forming units of Red Guards. China promptly collapsed into anarchy. Schools shut down, offices closed, transportation was disrupted -- it was so bad that even today, the full history is still far from known.

In terms of the chaos, blood, and destruction, it was comparable to the French Revolution, though it lacked the same political impact. At one point, Red Guards were fighting pitched battles with Government troops outside of the Foreign Ministry building. Later on in the Cultural Revolution, Red Guard units ended up fighting each other for supremacy. In the summer of 1967, there were massive riots in both Hong Kong and Macau.

Brief History of Chinese Economy

• On one hand, Mao created a strong central government, ended China's foreign domination, and began a process of determined Soviet-style industrialization.

• On the other hand, his revolutionary vision led to the death of millions (the two worst periods were the Great Leap Forward of 1958-1961 and the Great Proletarian Cultural Revolution of 1966-1969), the destruction of traditional Chinese culture, and a new political culture of fear and extreme conformity

Deng Xiaoping and “Opening up to the Outside World”

• Deng’s reform • In 1978, Deng Xiaoping created the Open Door Policy, and

China began to open to the outside world. Tourism was allowed, students began to go overseas, special economic zones were established, and joint ventures with foreign firms were encouraged to bring in foreign technology, investment, managerial know-how, and market access.

• He emphasized that state firms and government agencies should be led by those who had some expertise, not just by those who showed the proper revolutionary fervor.

• He encouraged the elimination of the rural communes, and land was turned over to the rural household (for production and income, but not for real ownership). Agricultural productivity jumped dramatically, and free markets were created to sell food. A large surplus of rural workers began to pour into other economic activities.

Progressive Opening

Bohai Sea Economical Circle

Yangtze River Delta

Pearl River Delta

Three Delta Regions

Northeast China Revital ization

West China Development12 provinces participation

The Chinese governmental and bureaucracy system

The key points are as follows: The Chinese government has considerable powers. The Chinese government also has great authority. Good relationship with the government is a must to

create a favourable business environment

The Chinese governmental and bureaucracy system

THE COMMUNIST PARTY OF CHINA• Political power in China has always resided

firmly with the central government, and with the Chinese Communist Party.

• This feature of the Chinese political system has remained fundamentally unaffected by the economic reforms. It is obviously still a one-party system, and it can be extremely repressive when the political authority of the Chinese Communist Party is challenged.

The Chinese governmental and bureaucracy system

THE COMMUNIST PARTY OF CHINA Over 80 millions members One-party system 8 democratic parties who form a alliance

with CPC

The Chinese governmental and bureaucracy system

THE COMMUNIST PARTY OF CHINA founded in 1 July 1921. First National

Conference with13 representatives. established its army in 1 August 1927 party branch at company level in Army in

fall,1928 Long March from 1935-1936 from Jiangxi

to Shanxi, about 12500km Mao Zedong was appointed as leader in

1935

THE COMMUNIST PARTY OF CHINA 1937-1945, Anti-Japan Invasion War

1945-1949,Civil War PRC founded in 1 Oct,1949

Command Economy since 1956 1966-1976,Culture Revolution In 1976,Mao Zedong Died, Mr.Hua Guofeng

succeeded In 1978,Deng Xiaoping initiated Reform and

Open-door policy

THE COMMUNIST PARTY OF CHINA 1989-2002, Jiang Zemin as General

Secretary8 November 2002, 16th national conference

of CPC, Hu Jintao as General Secretary Xi jinping is now Vice President of China,

and will succeed Hu in 2012

Generations of leadershipMao Zedong(1893-1976) Deng Xiaoping(1904-1997)

Generations of leadership

Jiang Zemin (1926- ) Hu Jintao (1942- )

Generations of leadership

Hu Jintao (1942) Xi Jinping (1953- ) Li Keqiang (1955- )

The Chinese governmental and bureaucracy system

Bureaucracy has been a feature of China for millennia. The 1949 revolution brought some changes, mainly in the nature of education and the way in which bureaucrats were selected; the ideology changed, but the bureaucracy remained.

Bureaucracy can intervene in the business operation of FDI in different ways. And authority is used differently. Foreign investors need to work out in advance the interests of each participating (and possibly competing) branch of government.

China’s Political Structure

The Communist Party of China

The Constitutional System

The National People’s Congress

Chinese People’s Political Consultative Conference (CPPCC)

The State Council

China’s Political Structure

The Communist Party of China

The People’s Congress

Chinese People’s Political Consultative Conference (CPPCC)

Local Government

Secretary Chairman

Governor

Chairman

China’s Political Structure

Precisely: Precisely: --- provinces, autonomous regions

and municipalities directly under the Central Government

---cities with districts and autonomous prefectures

---counties, autonomous counties and cities

---townships, ethnic townships and towns.

Ethical Problems Corruptions Intellectual property rights violation Pollution of the environment Contaminated food and stuffs

Contaminated Baby Milk Powder (Melamine) Injecting water into meat to increase its weigh Toys

Other Problems

• Growing Income Inequality (the Gini coefficient has reached 0.5 in China, overtaking the recognized warning level of 0.4)

• The three disparities in China 1. Coastal region and hinterland 2. the rich and the poor 3. the urban and the countryside. • Housing Price• Social Security. Rapid ageing of the populations will

mean pay as you go pension schemes will become unsustainable

• Education

Conclusion

• The economic reform since 1978 is a great success.• The prospects for continued rapid growth of the Chinese

economy are excellent.• The political situation is stable with successful power

transition.• China’s standing in the world is getting big.• The problems are under the control of the Chinese

government.• Yet China has a long way to go to become real economic

powerful country in terms of per capita income.

Thank you for your attention.

Questions?