Making%20Sense%20of

1
Making Sense of Chinas Economic Reform Initial
Success and Current Danger
Zhiyuan Cui School of Public Policy and
Management Tsinghua University Beijing, China
2

• China A New Workshop of the World
• Shunde in the Pearl River Delta, microwave-oven
• capital of the world, with 40 of global
  production
• in a single giant factory
• Shenzhen makes 70 of the worlds photocopiers
• Dongguan has 80,000 people working in a single
• factory making running shoes
• Zhongshan is the home of the worlds electric
  lighting
• industry

3
Hourly Wages in the Garment Industry, 2002
Hourly wages (US)
China 0.68
India 0.38
Pakistan 0.41
Indonesia 0.27
Malaysia 1.41
Thailand 0.91
Dominican Republic 1.65
South Africa 1.38
4
India, China and Kerala Selected Comparisons
India China Kerala
Estimated proportion of the population living below the international poverty line, 1997-8 () Annual growth rate of per-capita GDP () 1980-90 1990-99 Life expectancy at birth, 1999 (years) Infant mortality rate, 1999 (per 1,000 live births) 44.2 3.7 4.1 63 71 18.5 8.6 9.6 70 30 n/a 2.3 5.1 74 14
Source J. Dreze and A. Sen, India Development
and Participation, p.115.
5
Literacy Rates in India, China and Kerala
1981-2 Female Male 1990-1 Female Male
Adults (age 15) India China Kerala Adolescents (age 15-19) India China Kerala 26 55 51 79 71 86 43 66 85 96 92 95 34 62 68 87 84 93 55 75 92 97 98 98
Source J. Dreze and A. Sen, India Development
and Participation, p. 117.
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Sen on Chinas Pre-reform and Post-reform
Connection
It may have been very far from Maos own
intentions to develop literacy and basic
health care in ways that would help to promote
market-based, internationally- oriented
enterprises (though that dialectical contrariness
must have some interest for a Marxist
theorist). But these structural achievements
in the pre-reform period have certainly served
as direct and valuable inputs in fostering
economic performance in post-reform China. In
drawing lessons from China, these apparently
contrary interconnections can be particularly
important.
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Sweden 25, India 32.5, United States 40.8, China
44.7, Brazil 59.1
Gini Coefficient for Chinas Income Distribution
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Chinas GDP and Export Growth Rates, 1990-2004
Year GDP GDP Exports Exports Exports China Share in World Exports () Chinas Ranking in World Exports
Year RMB billion Yuan Growth Rate () RMB Billion Yuan USD Billion Dollar Growth Rate () China Share in World Exports () Chinas Ranking in World Exports
1990 1855 3.8 298.6 62.1 18.2 1.8 15
1991 2162 9.2 382.7 71.8 15.7 2.0 13
1992 2664 14.2 467.6 84.9 18.2 2.3 11
1993 3463 13.5 528.5 91.7 8.0 2.5 11
1994 4676 12.6 1042.2 121.0 31.9 2.9 11
1995 5848 10.5 1245.2 148.8 23.0 3.0 11
1996 6788 9.6 1257.6 151.0 1.5 2.9 11
1997 7446 8.8 1516.1 182.8 21.0 3.3 10
1998 7835 7.8 1522.4 183.7 0.5 3.4 9
1999 8207 7.1 1616.0 194.9 6.1 3.6 9
2000 8947 8.0 2063.4 249.2 27.8 4.0 7
2001 9731 7.5 2202.4 266.1 6.8 4.3 6
2002 10517 8.3 2694.8 325.6 22.4 5.1 5
2003 11739 10.2 3628.8 438.2 34.6 5.9 4
2004 13687 9.9 4910.3 593.3 35.4 6.5
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Chinas GDP and Export Growth Rates, 1990 - 2005

10
Export Structure of Chinas Top Five Exporting
Provinces
Guangdong Jiangsu Shanghai Zhejiang Shandong
Exports in 2003 (million ) As of Chinas Total Exports 152,848 (34.88) 59,140 (13.50) 48,482 (11.06) 41,603 (9.49) 26,573 (6.06)
Primary Goods As of total exports 4,001 (2.62) 1,136 (1.92) 1,232 (2.54) 2,450 (5.89) 5,367 (20.2)
Manufactured Goods As of total exports 148,847 (97.28) 58,004 (98.08) 47,250 (97.46) 39,153 (94.11) 21,206 (79.8)
General Trade Exports As of total exports 29,192 (19.1) 22,480 (38.01) 19,417 (40.05) 34,195 (82.19) 14,007 (52.71)
Imported-Materials-Processing Exports As of total exports 84,172 (55.07) 30,426 (51.45) 27,631 (56.99) 6,093 (14.65) 8,452 (31.81)
Supplied-Materials-Processing Exports As of total exports 33,973 (22.23) 6,162 (10.42) 27,631 (56.99) 1,190 (2.86) 3,929 (14.78)
State-owned Enterprises Exports As of total exports 40,553 (26.53) 12,186 (20.6) 15,188 (31.33) 13,303 (31.98)
Collective-owned Enterprises Exports As of total exports 5,601 (3.66) 3,413 (5.77) NA 7,262 (17.46)
Private Enterprises Exports As of total exports 11,299 (7.39) NA NA 7,938 (19.08)
Foreign-funded Enterprises Exports As of total exports 95,373 (62.4) 41,135 (69.56) 30,813 (63.56) 13,050 (31.37)
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The Share of Primary Goods and Manufactured Goods
in Chinas Exports 1988-2005

Year
12
Share of General Trade and Processing Trade in
Chinas Total Exports 1989-2005
13
The Share of Chinas General Trade and Processing
Trade Exports by the Ownership of Enterprises,
2004
General Trade Exports
Processing Trade Exports
P 2.9
C 2.5
State- Owned 13.5
Private 22.9
State-owned 41.7
Sino-foreign cooperation 25.5
Solely foreign-invested 55.7
Collective 9.4
Solely foreign- invested 10.7
Sino- foreign Cooperation 15.2
Note Processing Trade includes both
pure-assembly and import-and-assembly processing.
Under pure-assembly regime a foreign
buyer supplies a plant in China with inputs and
hire the plant to process them into finished
goods while under import-and-assembly regime the
plant in China imports inputs, processes them,
and sells the processed goods to a foreign buyer.
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Export Structure of Chinas Top Five Exporting
Provinces
Guangdong Jiangsu Shanghai Zhejiang Shandong
Exports in 2003 (million ) As of Chinas Total Exports 152,848 (34.88) 59,140 (13.50) 48,482 (11.06) 41,603 (9.49) 26,573 (6.06)
Primary Goods As of total exports 4,001 (2.62) 1,136 (1.92) 1,232 (2.54) 2,450 (5.89) 5,367 (20.2)
Manufactured Goods As of total exports 148,847 (97.28) 58,004 (98.08) 47,250 (97.46) 39,153 (94.11) 21,206 (79.8)
General Trade Exports As of total exports 29,192 (19.1) 22,480 (38.01) 19,417 (40.05) 34,195 (82.19) 14,007 (52.71)
Imported-Materials-Processing Exports As of total exports 84,172 (55.07) 30,426 (51.45) 27,631 (56.99) 6,093 (14.65) 8,452 (31.81)
Supplied-Materials-Processing Exports As of total exports 33,973 (22.23) 6,162 (10.42) 27,631 (56.99) 1,190 (2.86) 3,929 (14.78)
State-owned Enterprises Exports As of total exports 40,553 (26.53) 12,186 (20.6) 15,188 (31.33) 13,303 (31.98)
Collective-owned Enterprises Exports As of total exports 5,601 (3.66) 3,413 (5.77) NA 7,262 (17.46)
Private Enterprises Exports As of total exports 11,299 (7.39) NA NA 7,938 (19.08)
Foreign-funded Enterprises Exports As of total exports 95,373 (62.4) 41,135 (69.56) 30,813 (63.56) 13,050 (31.37)
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Vertical Specialization
Intermediate goods
Country 1
A
Domestic intermediate goods
Capital and labor
B
C
C
Final goods
Country 2
D
Domestic sales
E
Country 3
Exports
Country 1 produces an intermediate good and
exports it to Country 2. Country 2 combine the
imported intermediates with capital and labor
(value added) , and domestically produced
intermediate inputs to produce a final good
(gross output). Finally, Country 2 exports some
of the final good to Country 3.
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Two Example Areas of Foreign-Invested Processing
Exports
Guangdong In 2003, solely foreign-invested
processing exports accounts for 72.3 of its
total processing exports, being 85.4 billion
US barter terms of trade deteriorated from 1
in 1998 to 0.65 in 2003 value- added in
processing exports has been kept at
18 Suzhou In 2004, foreign-invested
processing exports accounts for 97 of its
total processing exports, being 40.3 billion
US in high-tech industry and machinery and
electronic industry it accounts for 98 and
96, respectively value-added in processing
exports has dropped from 63.5 in 1998 to 14
in 2004
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The Problematic Future of Suzhous Industrial
Development under Foreign-Invested Processing
Exports

• Crowding-out domestic firms
• Low local content
• No new land available for future development

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Washington Consensus v.s Beijing Consensus

• WC (1) Liberalization
• (2) Privatization and
• (3) Stabilization
• BC (1) Innovation/Experiment
• (2) Equity
• (3) Asymmetric Defense Strategy