m China is an ancient civilization extending over a large

area in East Asia, a nation and/or a multinational entity.

m With nearly 4,000 years of continuous history, China is
one of the world's oldest civilizations.
m Prior to the 19th century, it possessed one of the most
advanced societies and economies in the world
m But through successive dynasties it then missed the
industrial revolution and began to decline.
m In the 19th and 20th century, imperialism, internal
weakness and civil wars damaged the country and its
economy, and led to the overthrow of imperial rule.
m =he People's Republic of China (PRC), commonly known as
China, has control over mainland China and the largely self-
governing territories of Hong Kong (since 1997) and Macau
(since 1999).
m =he Republic of China (ROC) established in 1912 in
mainland China, now commonly known as =
 , has
control over the islands of =aiwan, Penghu, Kinmen, Matsu,
the Pratas island group, and a few other outlying islands.
m East Asia is the fastest-growing region in the world over the
past two decades
m China is the fastest growing country in East Asia²10% p.a.
since economic reform (1979)
m China is one of the very few socialist countries that have made
a successful economic transition from a centrally planned to a
market economy
m China and Hong Kong are the only two economies the
currencies of which have not been devalued amidst the East
Asian currency crisis
m China and =aiwan are the only two economies with significant
positive rates of growth in 1998
m 1979, a period in which China became a hallmark in the
global economy.
m China¶s impressive economic growth propelled it from
being one of the poorest countries in the world to becoming
- second largest economy
m China did this through an informal transition from a
centrally planned to a more market-oriented economy.
m In Chinese economic growth important was the role of
institutional reform in its transformation.
ΠMany of the institutional changes were rather informal, the
Chinese were able to incentivize agricultural output
without privatizing land.
ΠIt wasn't the kind of institutional transformation that we
saw in other economies in transition, where privatization
and liberalization were the norm.
ΠInstead, in China the change was gradual.
ΠMore formal institutional changes will be
needed.
ΠMake reforms in interest rates, create a social
welfare system and allow capital account
outflows. And these measures are more formal.
ΠA perception that policy and great management are required
for the kind of success that China has had, and these factors
are definitely part of that success.
ΠChina demonstrates is that if a government sets a permissive
regime, a lot of market-driven entrepreneurial activity
actually starts from the grassroots.
ΠChina allowed the market segment to develop, and that was
enough to inspire entrepreneurs to begin to develop new
industries and create new markets.
ΠHere informal institutional arrangement gave way to
increasingly formal institutional reforms.
m £ooking at U.S. economy's internal strengths and weaknesses
with its ' external opportunities and threats we see that the
majority of external entries (opportunities and threats) are
either directly or indirectly related to emerging economies of
China and India.
m Growth opportunities for U.S. somewhat associated with growth
in China and India. =hese opportunities include a) continued
outsourcing, b) potential increase in U.S. exports to China and
India, and c) money inflow to U.S. equities from emerging
middle class of India and China.
m America is selling its birthright not for a mess of pottage, but
for a mess of Chinese junk, and the resulting "unsustainable"
trade deficit is leading "to the collapse of the dollar, depression
and conversion of the United States to a second-rate power,"
m "Japan and China and other Pacific Rim nations have stolen
industry after industry from the United States.
m Net investment in American manufacturing actually has gone
into negative territory. U.S. manufacturing workforce has
declined steadily.
m In 2007, the United States was in a much weaker position to
compete in world markets and the dollar had nowhere to go but
down.
m Although the United States has long consumed the lion¶s share
of the world¶s resources, this situation is changing fast as the
Chinese economy surges ahead, overtaking the United States in
the consumption of one resource after another.
m Among the five basic food, energy, and industrial
commodities²grain and meat, oil and coal, and steel²
consumption in China has already eclipsed that of the United
States in all but oil.
m China is now importing in vast quantities for its world-
dominating textile industry. =hese massive imports have put
China at the center of the world raw materials economy.
m China¶s eclipse of the United States as a consumer nation should
be seen as another milestone along the path of its evolution as a
world economic leader.
m =he United States, the world¶s leading debtor nation, is now
heavily dependent on Chinese capital to underwrite its fast-
growing debt.
m In 2040, the Chinese economy will reach $123 trillion, or
nearly three times the economic output of the entire globe in
2000.
m China's percapita income will hit $85,000, more than double
the forecast for the European Union, and also much higher
than that of India and Japan.
m Although China will not have overtaken the United States
in per capitawealth,
m China's share of global GDP -- 40 percent ± will draw that of
the United States (14 percent) and the European Union (5
percent)30 years from now.
m =here are a number of significant downside risks.
m So much of Chinese growth has occurred within this very
complicated context of state ownership with quite a lot of
restrictions on the free market ² restrictions on everything
from its banking system to managing the business cycles to
the ability to meet the expectations of foreign investors.
m All these factors are some cause for concern.
m China's underlying fundamental growth potential to see the
number of challenges that it faces as it tries to lift average
incomes significantly above $3,000 per capita, which is what
it is at the moment.
m China is no longer just a developing country. It is an
emerging economic superpower, one that is writing economic
history. If the last century was American century, this one
looks to be the Chinese century. the