Relations between politics and economy

The great ideological cycle

Integration into global economy

Challenge from global economy

Adapting to new circumstances in domestic market

Chinese Macroeconomic Survey and Globalization

PoliticPoliticss and Economyand Economy Adapting economic development to Adapting economic development to

political needspolitical needs Competing groups in the leadership Competing groups in the leadership

cause changes in economic policycause changes in economic policy Political influence on economy Political influence on economy

results in economic cyclesresults in economic cycles The trend of ideologization drifts The trend of ideologization drifts

economy away from realistic frameseconomy away from realistic frames

The The GGreat reat IIdeological deological CCycleycle Postwar development starts on a very solid Postwar development starts on a very solid

economic groundeconomic ground Under the pressure of ideology the Under the pressure of ideology the

development follows political cyclesdevelopment follows political cycles Economic system moves into ever more Economic system moves into ever more

unrealistic spheresunrealistic spheres Ideological cycle comes to culmination in Ideological cycle comes to culmination in

Pi Lin pi Kong campaign in 1974Pi Lin pi Kong campaign in 1974 Reforms cause the decline of ideological Reforms cause the decline of ideological

cyclecycle

The End of IThe End of Ideological deological CCycleycle With refoWith reforrms polms poliitical cycles started to tical cycles started to

follow the dynamics of economyfollow the dynamics of economy After ideological pressure reached the After ideological pressure reached the

limit of tolerance both started to declinelimit of tolerance both started to decline The ideological influence disappeared in The ideological influence disappeared in

mid 90-ties when Chinese economy mid 90-ties when Chinese economy became normalbecame normal

Ideological cycle ended with economy Ideological cycle ended with economy back in realistic framesback in realistic frames

Integration into global economyIntegration into global economy Member of World BankMember of World Bank Member of International Monetary Member of International Monetary

FondFond Member of WTO since 2001Member of WTO since 2001 World bigWorld bigggest exporting countryest exporting country China’s purchases of crude oil and China’s purchases of crude oil and

raw materials influence world pricesraw materials influence world prices Growing importance of China as Growing importance of China as

investor in Africa and Latin Americainvestor in Africa and Latin America

ResuResults of Reform Policylts of Reform Policy Three decadesThree decades growth rate more than growth rate more than

9% per year9% per year Growing regional differences Growing regional differences betweenbetween

coastal regions and inland Chinacoastal regions and inland China Growing social differences: GINI index: Growing social differences: GINI index:

4488 Growing pressure on ecosystems, Growing pressure on ecosystems,

energyenergy,, and raw material resources and raw material resources Big migrant workersBig migrant workers’’ population: 211 population: 211

millionmillion

China’s Position in World China’s Position in World EconomyEconomy

World’s second largest economyWorld’s second largest economy For the last 3 decades world fastest For the last 3 decades world fastest

growing economygrowing economy World’s largest marketWorld’s largest market with biggest with biggest

potential for expansion over next 20 potential for expansion over next 20 yearsyears

World’s largest exporter: World’s largest exporter: 99% of world % of world exportexport

World’s biggest foreign currency World’s biggest foreign currency reserves: reserves: $3.236$3.236 trillion on 31 trillion on 31stst December 20December 201111

Advantages Advantages of large systemof large system Relies on enormous domestic marketRelies on enormous domestic market More self-sufficient then small More self-sufficient then small

systemsystem Less dependent on foreign trade and Less dependent on foreign trade and

less vulnerable to foreign influencesless vulnerable to foreign influences Greater inertia of the systemGreater inertia of the system More opportunities for investmentMore opportunities for investment More possibilities for protectionMore possibilities for protection Can concentrate more resources to Can concentrate more resources to

achieve strategic purposesachieve strategic purposes

Challenge from global Challenge from global economyeconomy

From mid 90ties on Chinese development From mid 90ties on Chinese development is increasingly determined by global is increasingly determined by global situationsituation

Affected by Asian financial crisis in 1997Affected by Asian financial crisis in 1997 Adapting to the world monetary systemAdapting to the world monetary system Growing dependence on the conditions of Growing dependence on the conditions of

world marketsworld markets Adapting to the Adapting to the glglobal financial obal financial systemsystem

The Challenge of the World The Challenge of the World Financial CrisisFinancial Crisis

The concept of neo-liberalism in global The concept of neo-liberalism in global economy proved to be insufficienteconomy proved to be insufficient

Lack of global economic coordination and Lack of global economic coordination and financial controlfinancial control

China was less affected by the crisis then China was less affected by the crisis then most other countriesmost other countries

China maintained more than 8% GDP growthChina maintained more than 8% GDP growth Because of financial protection China was Because of financial protection China was

not affected by financial crisisnot affected by financial crisis China was affected mainly by shrinking China was affected mainly by shrinking

foreign markets foreign markets

China in Times of the World China in Times of the World Financial CrisisFinancial Crisis

China increased domestic spending China increased domestic spending mainly by new investment in mainly by new investment in infrastructureinfrastructure

Many foreign owned export oriented Many foreign owned export oriented production lines closed downproduction lines closed down

Some 25 million migrant workers lost Some 25 million migrant workers lost jobs and returned to their homes in jobs and returned to their homes in villagesvillages

When economic situation improved many When economic situation improved many of migrant workers didn’t want to return, of migrant workers didn’t want to return, because of new opportunities near homebecause of new opportunities near home

For the first time China is experiencing For the first time China is experiencing lack of cheap labourlack of cheap labour

GDP Production structure GDP Production structure 20112011

0

5

10

15

20

25

30

35

40

Strukture of labor force

Agriculture

Industry

Services

0

5

10

15

20

25

30

35

40

45

50

Strukture ofGDP by sector

Agricult.

Industry

Services

GDP Consumption StructureGDP Consumption Structure

0

10

20

30

40

50

60

2000 2007 2010 2011

Investment

Consumption

Government

Net export

Problems of domestic Problems of domestic marketmarket

Problems of overheated economyProblems of overheated economy Problems of poluted environmentProblems of poluted environment Extremely high proportion of Extremely high proportion of

investment: over 40% since 2003investment: over 40% since 2003,, 46,2% in 201046,2% in 2010, and 54.2% in 2011, and 54.2% in 2011

Growing problem of inflationGrowing problem of inflation Problems of uncontrolled local Problems of uncontrolled local

borrowingsborrowings High tensions in house constructionHigh tensions in house construction The pending real estate bubbleThe pending real estate bubble

Requirements for future Requirements for future growthgrowth

Greater importance to the growth of Greater importance to the growth of domestic demanddomestic demand

Continuing the process of Continuing the process of urbanisationurbanisation

Adjusting of investment policy and Adjusting of investment policy and consolidation of real estate marketconsolidation of real estate market

Introduction of social security system Introduction of social security system for all social groupsfor all social groups

Smaller social differences by Smaller social differences by increasing the income of workersincreasing the income of workers

Creating wider middle classCreating wider middle class

Adjustments to the Adjustments to the changing global marketschanging global markets

China should play a stronger role in China should play a stronger role in world monetary systemworld monetary system

Growing importance of AGrowing importance of Assian,ian, African, African, and Latin American markets. and Latin American markets.

Labor intensive production will become Labor intensive production will become less competitiveless competitive

China will have to change the structure China will have to change the structure of its export industriesof its export industries

ChinaChina bbeecoming stronger foreign coming stronger foreign investorinvestor

The Concept of Greater ChinaThe Concept of Greater China

China economically integrated with China economically integrated with Taiwan, Hong Kong, Macao, and Taiwan, Hong Kong, Macao, and partly Singaporepartly SingaporeP.R. China and Taiwan signed P.R. China and Taiwan signed Economic Cooperation Framework Economic Cooperation Framework Agreement ECFA in June 2010Agreement ECFA in June 2010The Greater China totalsThe Greater China totals 16% of 16% of world export and $3.757 trillion of world export and $3.757 trillion of foreign currency reserves on 31foreign currency reserves on 31stst December 2010December 2010

Faster Economic Integration in Faster Economic Integration in East AsiaEast Asia

Creation of Common market in Creation of Common market in Southeast Asia basing on ASEANSoutheast Asia basing on ASEAN

Further integration of Mainland Further integration of Mainland China, Taiwan, and Hong Kong China, Taiwan, and Hong Kong economieseconomies

Free trade agreements – Taiwan Free trade agreements – Taiwan entering via Chinaentering via China

Faster integration into broader Faster integration into broader regional economic zoneregional economic zone: ASEAN+3: ASEAN+3