China

1
Chinas Development

• Trends, Issues and Progress

2
Chinas Economic Nodes
3
Development Background

• Even before economic reform began in 1970s,
  Chinas economy had large share of industrial
  outputalmost 50 of GDP
• Unusual because vast majority of people work land
• Share of agriculture has gradually fallen from
  33 in 1985 to 15 in 2002
• Structure of Chinas secondary industry changed
  fundamentally during 1980s

4
Growing Role of Private and Collective
Enterprises

• Until 1978 industry dominated by large
  state-owned enterprises (SOEs)
• Since then manufacturing output has been produced
  by collective enterprises under aegis of local
  governments-particularly township and village
  enterprises (TVEs)
• But increasingly by private entrepreneurs or
  foreign investorseither wholly owned or in joint
  ventures

5
Value of Chinese Exports and Received FDI,
1983-2002 (Billions of US)
6
Hungry Dragon Chinas Demand for Raw Materials

• Chinas booming economy driving up prices
  minerals and metals
• Oil imports rose by 30 in 2003 exceeding those
  of Japan
• Raises problems of supply bottlenecks and
  encourages local growth of needed resources

7
Transport Logjam

• Strained by rapid growth Chinas transport system
  has bogged down
• Railroads are so overburdened that power plants
  in southern China have trouble getting coal from
  the north
• This has caused brownouts forcing factories to
  operate on limited schedules
• Overloaded heavy duty trucks are breaking down
  roads and enforcement of weight limits forcing
  trucks to make more trips

8
Shipping Growth

• Huge need for raw materials and production of
  finished goods has fueled a new demand for the
  worlds shipping industry
• This has produced a major pressure on Chinas
  port system
• Shortages of trucks and rail cars are preventing
  distribution of shipments from overseas
• Imported iron ore and steel clog docks and new
  arrivals are forced to wait as long as a month at
  a cost of up to 100K a day per vessel

9
Other Impacts of Transport Congestion

• But exports of shoes to furniture have not been
  affected. Because these goods are containerized
  and loaded on different trucks to different
  specialized ports
• Chinas boom has pushed up global commodity
  prices and freight rates all over the world
• Rising freight rates have hurt competitiveness
  of some US agricultural exports to China grain
  from Gulf Coast to China now costs 70/ton as
  opposed to 18/ton in last two years
• Collision between Chinas booming private sector
  benefiting from foreign investment and older,
  less prosperous aspects of economy
• Much recent investment in China has gone to roads
  and not railways. Chinese railways are in public
  sector and form monopoly

10
The Role of Ports

• The cargo port in Zhanjiang, a southern city in
  China. Foreign investment in China for the first
  11 months of last year totaled 47 billion
  Chinese officials had predicted 57 billion for
  the entire year.

11
Huge Need for External Resources

• Despite the deep energy resources, such as
  coal, which are available in Shansi
  province, the rapid economic growth has
  forced China to import coal. A power plant in
  Guangdong Province in southern China is
  importing coal from as far as Australia

12
Shanghais Visionary Thinking

• Grand vision- build it and they will come!
• 1990 plan successful to turn marsh and old
  factories into new financial district-Pudong
• Major financial and retail complexes
• Worlds tallest hotel- 54 floors

13
Shanghais Maglev System

• German produced mass transit- magnetic levitation
• Worlds first in commercial service
• Reaching 270 mph
• 20 mile, 8 minute journey to airport from center
  of Shanghai
• Cost of one way ticket is 10 but only 4,000
  passengers on a typical day less than 1/6th of
  capacity

14
Problems of the Boom

• Critics, even some Chinese leaders, are saying
  that heavy state investment has led to waste and
  has not improved incomes of vast majority of
  Chinese people
• Promise to overhaul urban and rural welfare
  payments, improve grain production, reduce rural
  taxes and improve education
• Perhaps simply clever public relations for CP
  but many of 800 million outside wealthy
  coastal nodes have stagnant incomes