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4-14 - China Continued SEZs External Relations Openness to...

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China, Continued – SEZs External Relations Openness to trade: Now: (X+M)/Y > 50% Pre 1979: (X+M)/Y < 10% ??????? SEZs at the beginning were not developed at all 1986, SEZs expanded to all provinces along the coast This was when cross trade with Taiwan actually occurred 1994, currency devaluation and liberalization This might have had helped cause of the Asian Financial Crisis But devaluation might not have been that profound – most trade was occurring at the lower rate already (swap rate?) Two effects: Trade before 1979 not specialized – trade in small amounts of different products Nowadays, much more specialized FIEs account for more than half of Chinese exports Most of what goes on in China is processing and assembly Thus, many Made in China products are actually very low Chinese value added A currency appreciation can cause labor to become more expensive, but inputs become cheaper Most of the trade jobs in China came from other low-income countries like Indonesia, not US Noland’s calculations: 90% of it was at the expense of other countries, e.g. Indonesia and Malaysia A few years later, dropped to 75% But US exports many high technology goods, although overall imports more than exports, but export jobs pay higher wage, overall probably better for US – but contributes to income inequality in the US Because of the way trade has developed, it has increased income inequality in China – huge development on the coast, interior very backward still I. Contemporary Issues A. 8-10% annual growth B. Pre-1978 China was aberrant i. Low income with suboptimal policies, but high literacy, numeracy, functioning government C. Afterwards, income takes off, converging to US D. Many positive changes: i. Life expectancy over 70 years ii. Adult literacy in the 80% region iii. Poverty lowered greatly iv. Personal freedoms increased enormously
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E. But political structure has not changed greatly F. Challenges China faces: Three ongoing economic challenges i. Ongoing restructuring of state-owned enterprises (SOEs) 1. Shed 45 million jobs in SOEs 2. Many remaining SOEs are tied to subnational governments 3.
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