Can China become the next economic superpower Zhihong Yu GEP, School of Economics University of...
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Transcript of Can China become the next economic superpower Zhihong Yu GEP, School of Economics University of...
Can China become the next economic superpower
Zhihong Yu
GEP, School of EconomicsUniversity of Nottingham
Quand la chine s'éveillera, le monde tremblera
When China wakes up, the world will shake
Napoleon , early 19th century
Outline1. China’s rise and integration into the world
economy
2. Drivers behind China’s economic miracle
3. Challenges to China’s sustainable economic growth
4. The current financial crisis and China’s role in the world economy
Outline1. China’s rise and integration into the
world economy
2. Drivers behind China’s economic miracle
3. Challenges to China’s sustainable economic growth
4. The current financial crisis and China’s role in the world economy
The rise of Chinese Economy
NB: GDP measured in real terms (PPP)
1978:Reform and open policy
1839: Opium War
GDP AT MARKET PRICES ($bns)
$100
$1,000
$10,000
$100,000
2000 2010 2020 2030 2040 2050
China India Germany Japan UK US
Source: Goldman Sachs
The rise of Chinese Economy
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
GROWTH OF REAL GDP PER HEAD (per cent a year)
1971-80 1981-90 1991-2000
Source: World Bank
The rise of Chinese Economy
China’s integration into the world Economy
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
$900.0
RISE OF CHINESE EXPORTS(rolling 12 months, $bn)
US Japan Germany France UK China Canada
China’s integration into the world Economy
RISE OF CHINESE IMPORTS(rolling 12-months, $bn)
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
$1,400.0
Jan-
90
Jul-9
0
Jan-
91
Jul-9
1
Jan-
92
Jul-9
2
Jan-
93
Jul-9
3
Jan-
94
Jul-9
4
Jan-
95
Jul-9
5
Jan-
96
Jul-9
6
Jan-
97
Jul-9
7
Jan-
98
Jul-9
8
Jan-
99
Jul-9
9
Jan-
00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
US Germany Japan UK Canada China France
China’s integration into the world Economy
INWARD FDI STOCK 2002 ($bn)
$1,351
$637
$452 $448 $433 $401
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
US UK Germany China Hong Kong France
Source: UN World Investment Report
China’s integration into the world Economy
China’s integration into the world Economy
Rank Country Billion USD (end of month)
1 People's Republic of China $ 3,305
2 Japan $ 1,303
3 Eurozone $ 936
4 Saudi Arabia $ 541
5 Russia $ 514
Top Countries by Foreign Exchange Reserves (March 2012)
Top Foreign holders of U.S. Treasuries (March 2009)
Holder Total
China $767.9 Billion
Japan $686.7 Billion
Caribbean $213.6 Billion
OPEC $192.0 Billion
Russia $138.4 Billion
United Kingdom $128.2 Billion
China’s integration into the world Economy
Poverty reduction in China
Source: Qian Yingyi , 2009
Summary
China is the world’s third largest economy,
and top three largest exporter in manufacturing
has uninterrupted growth (average 10% per year) since 1979
has the world’s largest foreign exchange reserve (most in US dollars)
has lifted hundreds of millions of people above poverty
The Puzzle of China’s Rise China’s economic miracle is not anticipated
by economists
“ No observer,participant,or analyst, either in Beijing or elsewhere , anticipated China’s enormous surge, now entering its fourth decade, which has rocketed the People’s Republic to unprecedented global prominence”
- Thomas Rawski
Outline1. China’s rise and integration into the world
economy
2. Drivers behind China’s economic miracle
3. Challenges to China’s sustainable economic growth
4. The current financial crisis and China’s role in the world economy
Drivers of China’s rise Successful transition reform planned
to market economy Opening up to the world under in
the new era of globalisation
Transition from Planned to market economy
Problems of the planned economy pre-1978
Coupons of the Planned economy
Problems of the planned economy pre-1978 Reform strategy : options faced by Deng
Gradualism v.s. Big Bang Economic reform first vs. Political reform first
Transition from Planned to market economy
Problems of the planned economy pre-1978 Reform strategy : options faced by Deng
Gradualism v.s. Big Bang Economic reform first vs. Political reform first
Unusual path of transition based on experimentalism 1979-1992: the first stage, reforming the planning
system Agriculture, market price liberalisation, profit incentives in state enterprises, special
economic zones, financial reform
1993-present: the second stage, building the market system
Privatisation of state enterprises, FDI and trade liberalisation, constitutional amendments on private ownership , WTO entry
Transition from Planned to market economy
Transition from Planned to market economy
Transition from Planned to market economy
China’s opening up to the world economy
Trade liberalisation
China’s opening up to the world economy
China’s opening up to the world economy
Trade liberalisation Foreign direct investment liberalisation
China’s opening up to the world economy
China’s opening up to the world economy
China’s opening up to the world economy
“Forward” truck (1980s)Shanghai General Motor(2008)
Outline1. China’s rise and integration into the world
economy
2. Drivers behind China’s economic miracle
3. Challenges to China’s sustainable economic growth
4. The current financial crisis and China’s role in the world economy
Problems of China’s sustainable growth
Low GDP per capita and rising inequality
Problems of China’s sustainable growth
Problems of China’s sustainable growth
Problems of China’s sustainable growth
Low GDP per capita and rising inequality Heavy state intervention and the rule of
law
Problems of China’s sustainable growth
Problems of China’s sustainable growth
Problems of China’s sustainable growth
Low GDP per capita and rising inequality Heavy state intervention and the rule of
law Growth mainly depends on
inputs/capital accumulation, rather than innovation and technology
SAVINGS AND INVESTMENT 2001 (share of GDP)
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%
China
East Asia & Pacific
Middle East & North Africa
Japan
Europe and Central Asia
Eurozone
India
South Asia
Latin America
US
Gross domestic savings rate Gross capital formation
Problems of China’s sustainable growth
Source: Qian 2009
Problems of China’s sustainable growth
Low GDP per capita and rising inequality Heavy state intervention and the rule of
law Growth mainly depends on inputs rather
than technology Political reform lagging behind
economic reform
Problems of China’s sustainable growth Political conflicts increased by seven folds in the last
decade according to police record Poor ability of the government to manage conflicts Long run growth at risk in the absence of a stable
political environment
Outline1. China’s rise and integration into the world
economy
2. Drivers behind China’s economic miracle
3. Challenges to China’s sustainable economic growth
4. The current financial crisis and China’s role in the world economy
Financial Crisis and China
Effects of the financial crisis on Chinese economy
China’s response to the crisis China’s role in stabilising the world
economy during the current crisis
Effects of the crisis
Response to the crisis
China’s role in stabilising the world economy
Q2-2007
Q3-2007
Q4-2007
Q1-2008
Q2-2008
Q3-2008
Q4-2008
Q1-2009
Q2-2009
Q3-2009
Q4-2009
Q1-2010
-5
0
5
10
15
China
United Kingdom
United States
European Union
Japan
GDP growth rate (%)
China’s role in stabilising the world economy
Conclusion• China has achieved unprecedented economic
success in the last three decades .
• China is already a major economic power, but still not a superpower
• There are many severe pitfalls which China has to overcome before it can become an dominant player in the international economic scene on a sustained basis
• China can not save the world from the crisis , but it can, and should, help by playing a responsible role in the stabilising the world economy in the years to come.
