Chinese Economy

1
Chinese Economy
2
Policy Objectives

• Two goals
• Equality
• Prosperity
• Side-effects
• Equality loss of incentives to produce
• Prosperity rise of income differentials
• Two goals in policy
• Maos years Equality
• Post-Mao era prosperity

3
Economic Policies 1949-1950

• Policy of restoration
• Inflation control
• Rebuilding war-torn infrastructure
• Policy of Economic Unification
• Currency unification
• Nationalization of banking system
• Price setting

4
Agriculture 1949-1978

• CCP Wartime Policy
• Land redistribution
• Rural Social Reform
• Classification of rural population
• Six classes
• Landlords
• Semi-landlords
• Rich peasants
• Middle peasants

5
Agriculture 1949-1978

• Classification of rural population
• Six classes
• Poor peasants
• Laborers
• Land Reform (1949-1951)
• Fulfill CCP Promise of Land to Peasants
• Build CCP authority in rural areas
• Eliminate the influence of landlord class

6
Agriculture 1949-1978

• Problems of Land Reform
• Shrinking farm size capital accumulation
  difficulty
• New frictions class stratification
• Disputes over production tool use
• Emergence of new rich peasants
• Reducing production enthusiasm
• Severe food shortage in urban China
• Increased rural consumption

7
Agriculture 1949-1978

• Policy Measures
• Collectivization
• Mutual aid teams (MATs) (1951)
• 5 to 10 households
• Lower-level agricultural producers cooperatives
  (APCs) (1953)
• 10 to 35 households
• Higher-level of APCs (1955)
• Peoples Communes (1958 )
• 5000 households

8
Industry 1949-1976

• Central Planning
• A command economy
• Production targets
• Resource allocation
• Level of consumption
• Channels of distribution
• Nationalization (1956)
• State sector better promotes productivity
• Nationalization fortifies state control of urban
  sector

9
Industry 1949-1976

• Disappearance of Private Sector (Bn yuan)
• Year State Private1949 3.07 3.211951 9.09 6.0
  21953 19.36 7.171956 35.02 8.661957 37.85 .7
  51958 96.57 .581959 131.32 1976 256.76

10
Post-Mao Economic Policies

• Stagnation Economic Reform
• Maos economic performance (1949-1976)
• Rural production stagnation
• Severe food shortage in rural regions
• Some 400 million in stark poverty
• Massive exodus to Hong Kong, N Korea
• Socialist tyranny of scarcity
• Compulsory state procurement
• State rationing system
• Isolation in international economic relations
• Foreign trade insignificant

11
Post-Mao Economic Policies

• Agricultural Reform
• Contract Responsibility System
• Dissolution of Peoples Communes
• Diversified economy
• The Private Sector
• Private sector part of socialist economy
• 1983, 17 million in private sector
• 2003, 27 million
• 63.3 of Chinas total businesses
• 59.2 of Chinas economy

12
Post-Mao Economic Policies

• The Private Sector
• 70 of GDP private contributions (2004)

13
Economic Growth

• Foreign/External Investment
• 1984, 1.3 billion
• 1986, 1.7 billion
• 1987, 2.3 billion
• 1990, 3.5 billion
• 1992, 11.0 billion
• 1993, 27.5 billion
• 1996, 41.7 billion
• 1998, 45.5 billion
• 2002, 55.0 billion
• 2003, 53.5 billion

14
Economic Growth

• Import Export Trade (in US)
• 1978 20.6 billion
• 1980 38.1 billion
• 1985 69.6 billion
• 1990 115.4 billion
• 1995 280.8 billion
• 1998 323.9 billion
• 2004 1.1 trillion
• Foreign Exchange Reserve
• 2006 1,000 billion
• 40 exported to US

15
Economic Growth

• China Word in Trade Relations
• By 2006, China had been 1st trading partner of
• European Union
• Japan
• South Korea North Korea
• Mongolia
• Vietnam
• By 2006, China had been a top partner of
• Australia
• USA
• Pakistan

16
Economic Growth

• Resource Consumption (2004)
• Grain Consumption
• China 382 million tons USA 278 million tons
• Meat Consumption
• China 63 million tons USA 37 million tons
• Steel Use (2003)
• China 258 million tons USA 104 million
  tons
• Coal Use (million tons of oil equivalent)
• China 800 USA 574

17
Economic Growth

• Resource Consumption (2004)
• Oil Consumption (million barrels per day)China
  7 USA 20
• Fertilizer (million tons)China 40 USA 20

18
Economic Growth

• GDP growth
• 1978 2002 GDP 9.4 on average

19
Economic Growth

• Per capita GDP

20
Economic Structural Change

• GDP by Sector (1978)

21
Economic Structural Change

• GDP by Sector (2004)

22
Challenges of Future Growth

• Challenges of Continuous Growth
• Declining growth rate
• Employment challenges
• Large lay-offs
• Declining reemployment rate
• Pension funds inadequacy
• Increasing number of new workers
• Rural development challenges
• Environmental ecological devastation

23
Challenges

• Rural development challenges
• Increasing income gap w urban areas
• Declining peasant income

24
Challenges

• Growth in Gini Coefficient
• 0perfect equality 1perfect inequality
• 1978 .18
• 1990 .36
• 1999 .43
• 2004 .52