China and Its Neighbor In 2005

COPICO Syndicate

Economic Growth in Developing and Transitional Economies

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All economic analysis deals with the problem of making choices under conditions of scarcity, and the problem of satisfying peoples wants and needs is as real for Somalia and Haiti as it is for the United States, Germany, and Japan. The universality of scarcity is what makes economic analysis relevant to all nations, regardless of their level of material wellbeing or ruling political ideology. Even though economic problems and the policy instruments available to tackle them vary across nations, economic thinking about these problems can be transferred easily from one setting to another. 15

Economic Growth in Developing and Transitional Economies

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COPICO NEWSPAPER

- Since 2011

LIFE IN THE DEVELOPING NATIONS: POPULATION AND POVERTY

TABLE 21.1 Indicators of Economic Development Country Group Population, 2006 Gross National Income per Capita, 2006 (dollars) 510 1,580 Literacy Rate Infant Internet (percent over Mortality, Users per 15 years 2006 (deaths 1,000 people, of age) before age 5 2005 per 1,000 births) 29 75 122.0 42.0 30 47

Low-income Lower middleincome Upper middleincome High-income

2.3 billion 2.4 billion

575.9 million

4,770

243

29.7

72

1.0 billion

32,040

2,977

7.0

76

Source: World Bank, www.worldbank.org

Economic Growth in Developing and Transitional Economies

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While the developed nations account for only about one quarter of the worlds population, they are estimated to consume three-quarters of the worlds output. This leaves the developing countries with about three-fourths of the worlds people but only onefourth of the worlds income. The simple result is that most of our planets population is poor.

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COPICONEWS

Strategies for Economic Development

Agriculture or Industry?
TABLE 21.2 The Structure of Production in Selected Developed and Developing Economies, 2003 Country Per-Capita Gross National Income (GNI)

Percentage of Gross Domestic Product Agriculture Industry 45 20 12 12 10 5 2 2 2 17 28 47 34 46 31 23 30 23 Services 37 52 41 54 44 64 75 68 75

Tanzania Bangladesh China Colombia Thailand Brazil Korea (Rep.) Japan United States

375 480 2,010 2,740 2,990 4,730 17,690 38,410 44,970

Source: World Bank, World Development Indicators, 2008; Sectoral numbers for U.S. and Japan are for 2003.

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COPICONEWS

Strategies for Economic Development

Exports or Import Substitution?
import substitution An industrial trade strategy that favors developing local industries that can manufacture goods to replace imports.

export promotion A trade policy designed to encourage exports. structural adjustment A series of programs in developing nations designed to: (1) reduce the size of their public sectors through privatization and/or expenditure reductions, (2) decrease their budget deficits, (3) control inflation, and (4) encourage private saving and investment through tax reform.

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COPICONEWS

Strategies for Economic Development

Central Planning or the Market? International Monetary Fund (IMF) An international agency whose primary goals are to stabilize international exchange rates and to lend money to countries that have problems financing their international transactions. World Bank An international agency that lends money to individual countries for projects that promote economic development.

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COPICONEWS
Macroeconomic Stabilization To achieve a properly functioning market system, prices must be stabilized. Deregulation of Prices and Liberalization of Trade An unregulated price mechanism ensures an efficient allocation of resources across industries. Privatization Private ownership provides a strong incentive for efficient operation, innovation, and hard work that is lacking when ownership is centralized and profits are distributed to the people.

Six Basic Requirements for Successful Transition

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COPICONEWS
Market-Supporting Institutions The capital market, which channels private saving into productive capital investment in developed capitalist economies, is made up of hundreds of different institutions. Social Safety Net This social safety net might include unemployment insurance, aid for the poor, and food and housing assistance. External Assistance Very few believe that the transition to a market system can be achieved without outside support and some outside financing.

Six Basic Requirements for Successful Transition

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COPICONEWS

Shock Therapy or Gradualism?

Shock Therapy . The approach to transition from socialism to market capitalism that advocates rapid deregulation of prices, liberalization of trade, and privatization.

Copiconews

WORLD EXCLUSIVES

China And Its Neighbor In 2005 China was the one of the most

important features of the world economy in the last quarter of the 20th century. China would be equally important in 21st century.

Chinas Economic Development

Business Economics
- Since 2011

The third largest country in the world in term of size. Chinas 22 provinces, 5 autonomous regions and four listed cities, along with some 5000 islands, were governed from Beijing, the countrys capital The majority of chinas 1.3 billion strong populations still lived in rural settings Chinas economy had remained isolated in 1949 until the late 1970s, when Deng Xiaoping

Chinas Economic Development

Business Economics
- Since 2011

Real GDP growth in the PRC average approximately 9.5 % per annum from 1978-2004 and peak growth happened in 1992 at 14.2 %, fell to 7.1% in 1999. but then continue to improve through 2004. In 1980 per capita income in china was $192 In 2003 chinas GDP of $1.4 trillion made it the worlds seventh largest economy in conventional comparisons exchange rates. Some china analysts predicted that would be the worlds

Chinas Economic Development

Business Economics
- Since 2011

1978-2003 china trade grew nearly five times faster than world trade China had run a trade deficit in 1980, but it turn to surpluses in 1990 cuts in Chinese import barrier. 2003, leading as 4th exporter and 3rd importer in the world. Mainstay of china export : textile, clothing and footwear. Chinas imported : machinery, electrical and electronic product (42%), minerals, metal, and chemical (26%). Chinas top trading partner (2004) : U.S, Japan. Hong Kong, South Korea, Taiwan, Germany, Singapore, Malaysia, Netherlands and Russia.

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WORLD LEADING EXPORTER 2003

WORLD LEADING IMPORTER 2003

china and international investment

China FDI flows grew from under $1 billion in 1985 to over $53 billion in 2003 China had been the second largest recipient of FDI worldwide The leading source of investment include Hong Kong, Japan, US, Taiwan, Singapore and South Korea. China had been the largest single destination for FDI in Asia

Chinas International Competitiveness

Business Economics
By 2005, China had become an extremely important production base for a wide range of goods. It was the worlds leading exporter of garments, footwear, consumer electronics products, and many other products. China became the location of choice for assembly and final production. Fuelled by low labor cost, flexible labor practices and FDI, china became the worlds largest producer and exporter of apparel and textile product.
- Since 2011

Chinas International Competitiveness

Business Economics
In 1990s, china production had transitioned from relatively low-priced, low quality products to compete in virtually all segments and price point China instituted export taxes to reduce the disruption to world markets and avoid potential trade frictions Many companies shifting production to China Largest producer and exporter in: textile products-, electronics-, furniture China was not competitive in: -natural resource-based industry - aerospace industry - pharmaceuticals -advance services (financial, consulting, accounting)
- Since 2011

Chinas market
Business Economics
Chinas development was having a profound impact on input and commodity markets. China was self-sufficient in coal; it had to import most metals, as well as oil By early 2000s, China was consuming a large portion of the worlds raw material and commodities Concurrently, Chinas consumer and industrial markets were growing rapidly
- Since 2011

Chinas Economic Interaction with the Region

China is an important trading partner for most of the economies in the region, but also as a major investment location. By 2005, Chinas growth was considered a major contributor to the growth of several East Asian economies. Many in the region were concerned about Chinas emergence as competitor in export markets and foreign investment.

Chinas Economic Interaction with the Region

Hong Kong had emerge as a major metropolitan service care serving the Asian region as well as China. Many analysts believed that Hong Kong was ideally situated to provide many of the services that had been closed to outside firms in the past. After the enactment of the Closer Economic Partnership Arrangement (CEPA) whereby most Hong Kong manufactured goods gained duty free access to the Mainland Hong Kong firms had preferential access to the Mainland markets in a wide range of service sectors.

Hongkong

Chinas Economic Interaction with the Region

Taiwanese firms, especially those involved in footwear apparel and electronics assembly, had moved substantial portions of their production activities to the Chinese Mainland, while retaining design, development and other activities in Taiwan. Decentralization of manufacturing activities to the Mainland had become a source of concern to the Taiwanese leadership for two reasons: fear of employment and the fear that such investment would be used as a political level by the PRC.

Taiwan

Chinas Economic Interaction with the Region

China had become the dominant production location for many Japanese companies. In 2004, many analysts credited Chinas growth with putting Japans economy on the road toward recovery. China was also the largest destination for Japanese FDI in Asia, with investment concentrated in electronics, textiles, transportation equipment and metals and materials.

Japan

Chinas Economic Interaction with the Region

In the early 1990s, China was only minor economic partner for South Korea. In 2003, China surpassed the United States as a destination for Korean exports and FDI. By 2003, over one third of Koreas FDI was going to China. Korean companies had been decentralizing production and moving base to China for manufacture of low value added goods. Many analysts indicated that Chinese companies would increasingly try to do to Korean firms ha done to Japanese firms, ie, offer a reasonable quality alternative at significantly lower price.

South Korea

ASEAN ECONOMICS
Chinas emergence had significant impact, with potential ripple effect, on ASEAN economies. November 2002, China and ASEAN negotiated a framework agreement designed to lay the groundwork for a subsequent free trade agreement. November 2004, China and ASEAN committed to establish a free trade agreement by 2010 with the six core members of ASEAN. The commitment began with a process of tariff reductions and removals of restrictions in some service sectors

OTHER ECONOMICS
Although Chinas longest border was with Russia, the economic interaction between the two countries was relatively limited.

REGIONAL GROUPINGS
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By 2005, China had begun to participate in several regional organizations in addition to its traditional participation in APEC, the Asia Pacific Economic Co-operation forum. The Mekong Basin Development Project, include Thailand, Laos, Cambodia, Vietnam, the UN and the Asian Development Bank (ADB) and China and Myanmar as dialogue partners. The shanghai Five (Russia, China, Kazakhstan, Kyrgyzstan and Tajikistan)

The Impact of China on its Neighbors

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COPICO NEWSPAPER

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By 2005, the rise of Chinas economy was having a strong impact on its neighbors. The impact had been largely beneficial. Chinas emergence was seen as potentially even more important than Japans economic rise a few decades earlier. China, in contrast, was still a developing, one that could match up with other developing economies in the region. Chinas growing investments in education and technology industries in the foreseeable future. Companies from Japan, Korea and Taiwan had taken advantage of Chinas markets. Southeast Asian nations had seen some facilities benefit from Chinas emergence as a market for resources and intermediate goods, while other facilities were shut down or shifted to China.

problems
Would chinas neighbors be able to continue their pre-existing development path, or would the rise of china force them to seek other avenues for development? What economic roles would China play in the region? What would be the impact on the different economies and industries on the region? What should the governments and firms in neighboring economies do in response to the emergence of Chinas economy?

Business Economics

- Since 2011

Mereka tetap dapat menjalankan pembangunan mereka, justru karena perkembangan China yang sangat pesat akan membuka area perdagangan yang lebih luas. Selain itu mereka dapat menjadikan China sebagai sekutu untuk bersama2 memajukan daerahnya agar lebih berkembang.

Chinas strategies
Business Economics
- Since 2011

Dengan politik yang diajalankan oleh pemerintahannya, banyakn membantu pertumbuhan perekonomiannya. Misalnya tidak bergabung dalam World Trade Organization (WTO) dan General Agreement on Tariff and Trade (GATT). Cina bisa memproteksi terhadp produk dalam negerinya dan leluasa dalam melakukan pembajakan produk negara lain. Selain itu cina mempunyai sikap keras untuk tidak mau tunduk terhadap peraturan perdaganagn bebas dunia dan ekonomi cina disusun berdasarkan strategi yang matang. Untuk menjadi pusat perhatian dunia Cina mengambil kebijakan dengan menekan biaya penggunaan listrik. Agar dapat menjadi daya tarik investor. Melakukan strategi peningkatan produk industri untuk ekspor.

Thank You :)