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China's Economy - An Overview for Business Students


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This revision presentation provides an overview of some of the key features of China's economy. It looks at China's economic growth; the impact of urbanisation and investment in infrastructure; China's record on poverty and the creation and use of China's substantial foreign currency reserves. It also looks at rising wage costs in China and the need for China to rebalance its economy reducing reliance on investment and increasing the role of consumption in economic activity.

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China's Economy - An Overview for Business Students

  1. 1. Some Key Features of China’s Economy AQA BUSS4 Research Theme 2014
  2. 2. Two centuries ago, China was by some distance the world’s largest economy!
  3. 3. China’s global economic influence and power has returned and is unmistakeable!
  4. 4. China remains a Communist state dominated by the Chinese Communist Party but it is also an increasingly open economy where trade accounts for over 70% of GDP
  5. 5. China has achieved a consistently high rate of economic growth in recent decades
  6. 6. In 2010 China overtook Japan to become the 2nd largest economy and sustained the global economy during the financial crisis BRICS: China’s economy is now bigger than Brazil, Russia and India combined!
  7. 7. China has added the equivalent of an economy the size of Portugal every years since 1979
  8. 8. In 2011 China overtook he US to become the world’s producer of manufactured goods
  9. 9. Made in China – the Factory of the World – but for how much longer?
  10. 10. Much of China’s economic growth has been driven by massive investment in infrastructure
  11. 11. For example, China plans to build 56 new airports & relocate/expand 91 others by 2015
  12. 12. China is investing over $300bn in building high speed rail to connect all of its major cities
  13. 13. As a result of rapid economic growth, significant progress has been made in reducing poverty in China
  14. 14. Levels of extreme poverty have fallen dramatically in China in the last 30 years
  15. 15. However, economic growth is now slowing down: a lower target rate of growth of 7% has been set
  16. 16. Since 1978 China has experienced the largest migration in human history
  17. 17. Between 2001 and 2010 migration contributed nearly 20% of China's economic growth
  18. 18. China's intense programme of urbanisation has pushed up consumption and increased income per person
  19. 19. However mass internal migration has created significant social problems
  20. 20. Approximately 1 in 10 people in the world now live in a Chinese city Cities with more than a million people in 2011 USA (9) European Union (18) China (93) New York: 8.2 Los Angeles: 2.8 Chicago: 2.7 Houston: 2.1 Philadelphia: 1.5 Phoenix: 1.4 San Antonio: 1.3 San Diego: 1.3 Dallas: 1.2 London: 7.8 Berlin: 3.5 Madrid: 3.3 Rome: 2.5 Paris: 2.2 Hamburg: 1.8 Budapest: 1.7 Vienna: 1.7 Warsaw: 1.7 Shanghai: 19.5 Beijing: 15.0 Guangzhou: 10.4 Shenzhen: 10.2 Chongqing: 9.7 Wuhan: 8.9 Tianjin: 8.5 Dongguan: 7.1 Chengdu: 6.3 Bucharest: 1.7 Barcelona: 1.6 Munich: 1.3 Milan: 1.3 Prague: 1.2 Sofia: 1.2 Brussels: 1.0 Birmingham: 1.0 Cologne: 1.0 Foshan: 6.2 Nanjing: 5.6 Haerbin: 5.4 Shenyang: 5.4 Hangzhou: 5.1 Xi’an: 4.8 Shantou: 4.0 Zhengzhou: 3.7 Qingdao: 3.6
  21. 21. China’s economic growth provides the tantalising prospect of demand from 1 billion consumers
  22. 22. The growth of the consumer “middle class” in China is driving phenomenal purchasing power
  23. 23. …although it depends on how you define “middle class”
  24. 24. In many market sectors, China is now an emerged rather than emerging market
  25. 25. China has invested an average of 8.5% of GDP in infrastructure investment in the last two decades
  26. 26. …and it plans to continue massive investment in key infrastructure projects
  27. 27. China is now looking to rebalance its economy away from investment and towards consumption
  28. 28. Despite rapid economic growth, price inflation has remained quite low in recent years
  29. 29. However, as the Chinese economy matures, wages have started to rise significantly
  30. 30. Chinese labour force is forecast to decline after 2015
  31. 31. The shift in China to a higher-wage economy will put pressure on existing business models there
  32. 32. As China grows old, dependency ratios will rise; an aging workforce will be less mobile & probably demand higher wages
  33. 33. China’s rapid growth has helped it develop massive reserves of foreign currency
  34. 34. China’s persistent current account surplus has filled the reserves!
  35. 35. China now has over $3.6 trillion of foreign exchange (forex) reserves
  36. 36. China’s reserves have grown tenfold in the past decade due to a large trade surplus and strong capital inflows
  37. 37. China is investing its reserves in assets outside China through sovereign wealth funds
  38. 38. China also uses massive foreign exchange purchases to hold down the value of its currency
  39. 39. A weaker Chinese currency (Yuan) helps keep Chinese exports cheap in overseas markets
  40. 40. China continues to attract high levels of FDI (foreign direct investment)