China Case Study

Topics: Monetary policy, Economic growth, People's Republic of China Pages: 10 (2801 words) Published: August 7, 2013
ase StudyChina Case Study
Background of the Country and its Economy

* 2nd Largest Economy in the World. Largest Population in World * Fastest growing economy in past 2 decades averaging <10% p/a. * China has made immense economic and human growth and development in recent decades due to a combination of change in government and policies and globalization. * Is now more a Market Driven Capitalist economy and is now Globally Integrated. = Greater levels of global trade and investment. * High Growth, Better living standards, less poverty.

* Gov background, 1950 Mao Tse Tung’s great leap forward failed increasing poverty and hunger. * 1960’s Cultural Revolution failed as it isolated China from global economy. * 1978= Mao’s successor Deng Xiao Ping. ECONOMICS REFORM of CHINA between 1978 and 1997. * Included; (rapid industrialization, high economics growth, one child policy, agriculture reform, globalization, open door policy, taxation reform, banking laws, tariffs.) * Open door policy= special economics zones (sez) in southeast China where TNC’s MNC’s welcomed with cheap labor, low tax and import duties. * Agriculture Reform= abandoned commune system. Households could now produce and sell on free market as long as quota was met. Raised industrial output. * Foreign trade increased from 10% of GNP in 1978 to 36% in 1996. * Efficiency increased due to global access of skills and technology * 1992 Tariff cuts were used to increase domestic efficiency against cheap imports. Economic Growth

* Averaging over 10% p/a last 2 decades up until 2008
* 2009 growth = 9.2% due to GFC due to global integration * Government stimulus package kept china above 8% and led to stronger recovery than most countries in 2010 and 2011. * 4 main economic amendments

* Moved from planned, socialists to market based capitalist * Moved from being an economy based on agriculture to industrialize. (Rural to urbanized) * Has changed from domestic focus to global focus and integration * China is a major world economic power contributing greatly to GWP.

* GDP= 4th largest but GDP (PPP) = 2nd largest.
* Global GDP in 2010 = 13.6% of GWP, 9.4% world Goods and services, 19.7% population. * Main drivers of economic growth are trade and investment. * Rapid growth in past decades is due to export oriented economy and FDI’s. Economic Development

* Due to high levels of economic growth, high levels of development and decreases in poverty have occurred. * World bank estimates poverty reduced by 400 million people in 25 years. * Rising real income levels, life expectancy, literacy rates, and lower poverty levels. * Income and Quality of Life Expectancy

* In 25 years, life expectancy rose from 63.2 to 73.5
* GNI per capita and literacy rates increased.
* HDI in 1980= 0.368
* HDI in 2010 = 0.663 = rank 89th.
* Trend= migration from agriculture to urbanized coastal regions.

Income Distribution
- Chinas growth and development have created large, geographic income disparities. 1. Per capita incomes are higher in urban areas (south-east) compared to rural. 2. Per capita incomes are higher in southern coastal provinces of china compared to east as is south compared to north. This has been a trend throughout the globalization and as economic growth increases, so do the disparities due to faster urbanization, hence growth. 1990’s, growth was 5 times faster on coast than inland.

Trade and investment

* 2010= China contributed 13.6% global trade and 9.4% global merchandise. * 2nd largest goods trading nation
* Between 2005 and 2010, exports grew an average 20%.
* Exports grew faster than imports, which resulted in SURPLUS ECONOMY. * Majority of exports (65%) = western companies in China. * 54% of Chinese exports = MNC’s.
* Manufacturing and intermediate manufacturing goods dominate trade...
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