Inflation and unemployment affect China's economy in several ways: 1) Inflation is caused by excess money supply growth and a weak currency which increases domestic prices. Unemployment rises as demand for goods declines with higher prices. 2) Unemployment is worsened by a deflationary environment where companies don't hire, and by a mismatch between the skills of workers and the needs of employers. 3) Both inflation and unemployment negatively impact China's economy by lowering standards of living and damaging the domestic economy. Tighter monetary policies are needed to control money supply and inflation.

1. How Inflation And Unemployment
Affect To China Economy
Awesome Team
Tống Trần Thanh Phương (Leader)
Trần Hữu Minh Quân
Cao Đăng Khoa
Phạm Châu Bảo Khoa
Trương Trần Ngọc Son

2. Part I : Introduction
BACKGROUND
•Only 30 years of construction, China's economy has changed rapidly. In 2001,
China joined the WTO.
•First proposed referring to the concept of "the world's factory".
In 2007 export turnover reached 2,170 billion, up 107 times compared with
1978. Since 1994, China became the country with the largest foreign currency
reserves in the world.
•In 1983, FDI( Foreign Direct Investment) of China reached 916 million, 2007
reached 74.8 billion, up 81 times and attracted over 770 USD billion from FDI
(average growth rate of 20.1% annually)

3. Problem Statement: How to solve the deep
effects of inflation and unemployment to the
• Inflation get highest level from 2009-2011 around 5.4%
• Foods and expensive goods cause increase in cost of living and become a hot
political issue in China.
• Continually increasing reserve requirement and interest rates, tightened lending
credit real estate.
The main reason is excess liquidity:
• China was forced to implement the policies to loosen monetary and finance
• Stimulate market activities, more effective workshops, and greater demand for
labor.
Economic?

4. • Make the demand for goods declined, rising prices, and lead to disinflation.
• Improve the material and spiritual life of society.
• Attract large number of people of working age migrants from remote rural areas
to urban areas.
• Make the business of the enterprise slowdown as cause difficulties in solving
unemployment.
• Raising wages, narrow the gap between the rich and the poor, reduce China's
dependence on the manufacturing sector.

5. The average income of Chinese
people.
• In 2005, the average monthly income of Chinese is
about 1291 Yuan or about 142.5 USD.
• The policy of society is not suitable to develop
economy.
• High inflation brings the impulse of macro-economic.

6. Part II: Definitions, concepts and
theories:
• Definition of the block of currency M1, M2, M3
• Money supply: The total supply of money in circulation in a given
country's economy at a given time.
• Inflation: upward price movement of goods and services in an economy, usually
as measured by the CPI and the PPI.
• CPI: consumer price index.
• The unemployment rate: The percentage of the total labor force that is
unemployed but actively seeking employment and willing to work.
• GDP= C + I + G + (X- M)

7. Definitions, concepts and theories:
• GNP = C + I + G + (X - M) + NR
• Gross National Income (GNI): total income for a country adding all other monies
received excluding net taxes.
• Phillip curve: A curve that relates the tradeoff between unemployment and
inflation.
• Short-term Phillips curve (SP): describes the relationship of the Inflation caused
by demand and unemployment.
• Long-term Phillips curve (LP): describes the relationship between inflation and
unemployment in the long term.

8. Part III: METHOD
How are inflation and unemployment rate affect
to China’s economy ?

9. PartIV: Main Findings
4.1 Inflation
4.1.1 The basic factors causing long-term inflation:
•The growth rate of the money supply (M2) was higher
than GDP.
•The issuance of banknotes is more than the actual
needs.
•The ratio of the M2 increased too fast.

10. The money supply (M2) and inflation chart (%)

11. 4.1.2 Weakness in remaining currency:
•Keeps the Yuan weak or lower than USD
•The increase price of assets
•The cause of the bubble in China

12. The money supply of China and US between 2005 and 2010 (%)

13. 4.1.3 High price and wages:
•The escalation of prices of key commodities
•Uses many tricks to increase food productivity
•The new generation of workers

14. 4.2 The unemployment rate:
•China has launched many solutions in order to help reduce their country’s
unemployment rate in 2010

15. THE CAUSES OF UNEMPLOYMENT
4.2.1 Poor quality in training labor force:
•Education in China is backward
•Education programs in China are inefficient, not
practical.
•Training programs is not helpful, less effective.

16. THE CAUSES OF UNEMPLOYMENT
4.2.2 Deflation:
•Advantage of China's cheap labor was no longer so
many companies do not hire more workers.
•The unemployment rate increase.

17. 4.3 CONCLUSION:
• The Inflation and unemployment affect to
the Economic:
Causing a negative impact on the domestic
economy.
People’s standards of living are lower.

18. THE END.
Thank you all for
listening!
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