IBUS30004_Notes-on-Readings.docx - Week 1 Required 8-things you need to know about China\u2019s economy(article China was the world\u2019s largest economy in

IBUS30004_Notes-on-Readings.docx - Week 1 Required 8-things...

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Week 1 Required 8-things you need to know about China’s economy (article) China was the world’s largest economy in 1820 and is the second largest today. 1820 - Greece revolting against Roman empire - Brazil declared independence from Portugal - England opened the first modern railway - China in Qing dynasty in 3 rd century of imperial rule – largest share of global GDP Now - China lifted more people out of poverty than any other country (800million) - 1978 China = poor - GDP growth close to 10% until 2014 - Development driven by coastal east - Rural west lagging behind - Income per capita below world average - ¾ of world poverty reduction in 1990-2005 attributed to China Poverty reduction attributable to; - China = world manufacturing hub (labour intensive, export-led production of cheap goods) - ¾ of industrial production was accounted for by centrally controlled SOE’s following centrally planned output targets. - Collectivised Ag. = norm Deng leadership - Liberalise price (dual system initially) - Sub-national governments were granted greater fiscal autonomy & incentives to drive growth - Expanding private sector - Open to trade supported by the introduction of a closed by modernising banking system China experienced a marked slow-down of GDP growth - 2016 – slowed growth since 1990 - decline in manufacturing and construction output - key ingredients for long-run growth o labour peaked in 2012 and declining o productivity driven by domestic innovation, development can no longer stem from knowledge transfers. Catching up is easier than pushing innovation further. Manufacturing will drive growth until basics are met only. o capital China total debt = 237% of total GDP. Domestic demand and investment are growing again, flowing mainly into housing and property development. Private sector is the main driver of growth and employment - 2010 – 2012 private sector firms = 2/3 ¾ of China’s GDP & 90% of exports - Tertiary sector = 80% of economic profit and 36.1% of employment - 33% employed in Ag, 30.3% in industry - consumption expenditure is predominately going into services (edu=40%) - consumption as a share of GDP has risen for 5 years - services = driver in jobs, 1% increase in services output = 1,000,000 jobs - 1% increase in industrial output – 500,000 jobs
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China developing middle class consumers - growth in services = growth in wealth and disposable household income - China – high savings rates @ 50% of GDP Growth slow-down dampening industrial output and SOE profitability - Healthcare, tech, education and entertainment = fastest growing sectors - Growth slow-down is particularly impacting heavy industries strategically important and SOE dominant - Heavy industry is over-capacity but low productivity - 2007-2008 closures and mergers of SOE’s and stimulus package - SOE = less profitable than private and have a greater share of loss making companies - Surge in bankruptcies to target unprofitable companies (small to medium SOE’s) China = largest exporter, 2 nd largest importer of merch goods - Sig impact on world economy 2ns largest provider and top receiver of FDI - Has world largest foreign exchange reserves @ 3.21 trillion USD
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