MACROECONOMICS

BY :- Darshan Gadhiya
Preet Gabani
Ayush Kalathiya
Divyang Lakhani
Vikas Jindal
Harsh Patel

Economic history and growth

From its founding in 1949 until late 1978, the People's Republic of China was a
Soviet-style centrally planned economy. Following Mao's death in 1976 and the
consequent end of the Cultural Revolution, Deng Xiaoping and the new Chinese
leadership began to reform the economy and move towards a more marketoriented mixed economy under one-party rule. Agricultural collectivization was
dismantled and farmlands privatized, while foreign trade became a major new
focus, leading to the creation of Special Economic Zones (SEZs). Inefficient stateowned enterprises (SOEs) were restructured and unprofitable ones were closed
outright, resulting in massive job losses. Modern-day China is mainly
characterized as having a market economy based on private property
ownership, and is one of the leading examples of state capitalism. The state still
dominates in strategic "pillar" sectors such as energy production and heavy
industries, but private enterprise has expanded enormously, with around 30 million
private businesses recorded in 2008.
Since economic liberalization began in 1978, China has been among the world's
fastest-growing economies, relying largely on investment- and export-led
growth. According to the IMF, China's annual average GDP growth between 2001
and 2010 was 10.5%. Between 2007 and 2011, China's economic growth rate was
equivalent to all of the G7 countries' growth combined.According to the Global
Growth Generators index announced by Citigroup in February 2011, China has a
very high 3G growth rating.Its high productivity, low labor costs and relatively
good infrastructure have made it a global leader in manufacturing. However, the
Chinese economy is highly energy-intensive and inefficient.

China became the world's largest energy consumer in 2010, relies on coal to supply
over 70% of its energy needs, and surpassed the US to become the world's largest
oil importer in September 2013.In the early 2010s, China's economic growth rate
began to slow amid domestic credit troubles, weakening international demand for
Chinese exports and fragility in the global economy.

Class and income equality

China's middle-class population (if defined as those with annual income of
between US$10,000 and US$60,000) had reached more than 300 million by 2012.
[308]

According to the Heron Report, the number of US dollar billionaires in China

increased from 130 in 2009 to 251 in 2012, giving China the world's secondhighest number of billionaires. China's domestic retail market was worth over 20
trillion yuan (US$3.2 trillion) in 2012 and is growing at over 12% annually as of
2013, while the country's luxury goods market has expanded immensely, with
27.5% of the global share. However, in recent years, China's rapid economic
growth has contributed to severe consumer inflation, leading to increased
government regulation. China has a high level of economic inequality, which has
increased in the past few decades. In 2012, China's Gini coefficient was 0.474.

CHINA GDP
The Gross Domestic Product (GDP) in China was worth 10866.44 billion US
dollars in 2015. The GDP value of China represents 17.53 percent of the world
economy. GDP in China averaged 1605.36 USD Billion from 1960 until 2015,
reaching an all time high of 10866.44 USD Billion in 2015 and a record low of
46.69 USD Billion in 1962. GDP in China is reported by the World Bank Group.

The Employment in China

The total population of China has reached 1.35 million. Of this, the economically
active population was 785.79 million at the end of 2011. At that time, Chinas
workforce hit 764.2 million people, with 359.14 million employed in urban and
405 million in rural China. The number of migrant workers stood at 252.78
million, with an increase of 10.55 million from 2010. Among the migrant laborers,
about 158.63 million worked outside of their home province. Regarding
the sectors, primary industry accounted for 34.8 percent of total employment,
while secondary industry represented 29.5 percent, and tertiary industry had a
share of 35.7 percent. The unemployment rate in urban China stood at 4.1 percent,
and the number of unemployed persons reached 9.2 million.

TYPE OF UNEMPLOYMENT IN CHINA:

FRICTIONAL UNEMPLOYMENT:

-Happens among fresh graduates.

-Limited qualified faculty, outmoded infrastructure obsolete curriculum.
-Absence of career planning instructions results in graduates inefficiency of job
hunting and unrealistic self-position.
-Lack of position mobility inside some enterprises.
-There are 3 million unemployment youth in urban China, constituting 23% of a 13
million urban unemployment population.

STRUCTURAL UNEMPLOYMENT:
-In China, the workers losses their job because of inadequate supply of
raw materials and isolated location.
-Demand of domestic competent professionals is very urgent in some
brand-new industries.

-Job openings are usually occupied by imported qualified talents from

abroad.

Population
The demographics of the People's Republic of China are identified by a large
population with a relatively small youth division, which was partially a result of
China's one-child policy. China's population reached the billion mark in 1982.
China's population is over 1.381 billion, the largest of any country in the world.
According to the 2010 census, 91.51% of the population was Han Chinese, and
8.49% were minorities. China's population growth rate is only 0.47%,
ranking 159th in the world.

Population Ratio
Population ratios are used to describe the degree of balance between two elements
of the population, e.g., Males vs. females, children versus women of reproductive
age. The ratio is normalized to refer to a standard unit of people, usually 100
persons.
The population age distribution of China at the beginning of the year 2016 was:-

Under the Age group of 15 years the population was 241859243 which consisted of
130280559 males and 111578684 females.
Between the Age group of 15 and 64 years the population was 1011537642 which
consisted of 519857108 males and 491694285 females.
Above the Age group of 64 years the population was 121740953 which consisted
of 58457109 males and 63283843 females.

Working Class
Chinas working age population saw its biggest decline in 2015. The number of
workers aged 16 to 59 dropped by a record 4.87 million to 911 million last year,
compared to decline of 3.71 million in 2014. The share of the elderly, or those who
are more than 65 years old, was 9.7% in 2013, up from 9.4% in 2012, official data
showed. The Future expectations for the working age group is estimated to
decrease because China does not have young labor force and the same is shown in
the table given below.

Non-working class
According to current UN projections, the population of the world age 60 or older
will be 2 billion by 2050. With populations aging in nearly all countries, there has
been widespread concern about the possible effects on economic growth and on the
ability of countries to provide support for their elderly populations.

The unemployment rate in urban China stood at 4.1 percent, and the number of
unemployed persons reached 9.2 million. In terms of salary, an employee in
China's towns and cities earned an average of 41,799 yuan annually for full-time
work as of 2011.

Retirement Population
8.3% of population belongs to Retirement class of China. Only 4% of population
have pensions after retirement whereas 41% of the rural elderly rely on their
families for support. Over 20 percent of the population is over 55, and the number of
younger people is plummeting. By 2050, the number of senior Chinese will equal
Europes entire population and outstrip Americans of all ages.

Economic Problems
A weakening Chinese yuan and a shrinking money supply are the key factors
causing China's economic challenges in 2016. But there are also some other
problems which affect the economic state of the Coutry.

Poverty
In China today, poverty refers mainly to the rural poor as decades of economic
growth has largely eradicated urban poverty. The dramatic progress in reducing
poverty over the past three decades in China is well known. According to
the World Bank, more than 500 million people were lifted out of poverty as
Chinas poverty rate fell from 88 percent in 1981 to 6.5 percent in 2012, as
measured by the percentage of people living on the equivalent of US$1.90 or less
per day in 2011 purchasing price parity terms.
Between 2000 and 2010, per capita income also rose by the same rate, from
$1,000 to $5,000, moving China into the ranks of middle-income countries.
Between 1990 and 2005, Chinas progress accounted for more than three-quarters
of global poverty reduction and the reason why the world reached the UN
millennium development goal of halving extreme poverty. This incredible success
was delivered by a combination of a rapidly expanding labour market, driven by a
protracted period of economic growth, and a series of government transfers such as
an urban subsidy, and the introduction of a rural pension.

Terrorism
The occurrence of violence as a form of political resistance in China has been
attributed to government policies restricting the practice of religion and
political expression, particularly in the Xinjiang region. Because expression of
grievances against government policies are not permitted, "acts of violence have
replaced peaceful demonstrations as the expression of the Uyghur malaise,"

according to Rmi Castets. The government of the People's Republic of China

identifies terrorism as one of "Three Evils" which also include separatism and
religious fundamentalism. These forces are seen by Beijing as inter-connected
threats to social stability and national security. In particular, terrorism is viewed as
a violent manifestation of ethnic separatism, and separatism is understood as a
corollary of religious zealotry. The government has embarked on strike-hard
campaigns to suppress these tendencies, particularly in Xinjiang and Tibetan
regions.

Printing of money
BEIJING: China's economic growth relies heavily on investment, which means
that it requires major injections of capital. One of the ways China achieves that is
by increasing the money supply - literally, printing more currency
"In the past 30 years," explained a government economist, Wu Xiaoling, in 2011,
"we have used excessive money supply to rapidly advance our economy." At the
end of 2013, the excess of money supply totaled 110.65 trillion yuan ($17.77
trillion), four times more than 10 years earlier - a clear sign that the government is
printing money faster than the economy is expanding.
Since a floating exchange rate was introduced in 2005, the yuan has consistently
risen in value against the United States dollar as China's economy has grown. But
while the yuan has appreciated in relation to other currencies, it has steadily lost
value at home. Many ordinary Chinese people are convinced that their money is
worth less, and they attribute this to the excess printing of currency by the central
bank.

Unemployment

Unemployment rate in China fell slightly to 4.04 percent in the third quarter of
2016 from 4.05 percent in the June quarter, Ministry of Human Resources and
Social Security said in a briefing. During the first nine months of 2016, the country
has created 10.67 million new jobs, Premier Li Keqiang said in a recent speech. In
September alone, the surveyed urban unemployment rate in 31 big cities fell below
5 percent, the first time in recent years. Unemployment Rate in China averaged
4.12 percent from 2002 until 2016, reaching an all time high of 4.30 percent in the
fourth quarter of 2003 and a record low of 3.90 percent in the third quarter of 2002.
Unemployment Rate in China is reported by the Ministry of Human Resources and
Social Security of the PRC.

INTERACTION OF TRADE FROM OTHER COUNTRIES

The largest Chinese partners in billions of US Dollars for 2011 are as follows:
Region

Exports

Imports[2]

Total trade

Trade balance

European Union

356.0

211.2

567.2

+144.8

United States

324.5

122.2

446.7

+202.3

Hong Kong

268.0

15.5

283.5

+252.5

ASEAN

170.1

192.8

362.9

-22.7

Japan

148.3

194.6

342.9

-46.3

South Korea

82.9

162.7

245.6

-79.8

Brazil

31.8

52.4

84.2

-20.6

India

50.5

23.4

73.9

+27.1

Russia

38.9

40.3

79.2

-1.4

Taiwan

35.1

124.9

160.0

-89.8

Economic reason for the situation china is facing

CHINA has cut its growth target for 2015 to 7%, which would be the slowest
expansion0 in more than two decades. Data this week show it will be a stretch to
hit even that. This might not seem much to fret about. Even at its subdued current
rate, China's growth is still the envy of most countries. But the slowdown is cause
for concern. China is faring worse than many had expected (as recently as 2012,
the International Monetary Fund, among others, forecast that annual growth above
8% would continue until 2017). Its deceleration is one of the main reasons for the
sell-off of global commodities from iron ore to coal over the past two years. And
there are fears it could yet turn uglier. What explains Chinas slowdown?
More recent trends explain Chinas sharper-than-expected slowdown. The single
most important development has been its credit binge. Total debt (including
government, household and corporate) has climbed to about 250% of GDP, up 100
percentage points since 2008. This debt allowed China to power its economy
through the global financial crisis but also saddled it with a heavy repayment
burden. Most worrying, much of the credit flowed to property developers. Chinas
inventory of unsold homes sits at a record high. The real-estate sector, which
previously accounted for some 15% of economic growth, could face outright
contraction. New property starts fell by nearly a fifth in the first two months of
2015, compared with the same period a year earlier. From this vantage point, the
abruptness of Chinas current slowdown looks more cyclical than structural. A
period of overheated economic growth tends to be followed by a correction. Not all
cycles are created equal, however. Working off a credit overhang can take years.
Given that Chinas financial system is mostly closed, it has little risk of an acute
crisis, but the other side of the coin is that it might need even longer to clean up its
bad debts.