Affective Issues on China Economy

Description:

China's economic growth story seems never-ending. It is driven by three things: more capital, more labour and more productivity. Above all, Productivity is everything that allows more output to be produced with the same inputs. China's economy has relied heavily on capital accumulation over the last 20 years, but in the future productivity growth will become more important.

Enablers:

- Technology imports
- Lots of 'learning by doing'
- Better education
- More efficient financial institutions
- More rule of law
- Better infrastructure

Inhibitors:

• Yuan Revaluation
  The trading band of the Chinese Yuan, whose exchange rate is pegged to the US dollar, is expected to widen by around 3 percentage points, rising from the current daily range of 0.3% to slightly over 3 percentage points. As a result, China’s currency is expected to appreciate slightly from 8.28 to about 8.0 Yuan against the US dollar by the end of 2005. The Yuan’s trading band is expected to widen further after 2006, moving closer to a form of a floating exchange rate system. But a fully floating system seems possible only after the 2008 Beijing Olympics.
  

• Worsening Inequity
  In the shadow of economic success and high growth, China suffers from a widening disparity in income and regional development. Thanks to robust exports and high consumption, development of China’s coastal region has vastly surpassed that of the inland region. Per capita income of people in Shenzhen is 15 times higher than that of people in Guizhou Province. In short, disparities in China’s society are becoming structural and deep-rooted, making it difficult to resolve these problems within the foreseeable future.
  

Paradigms:

China is rapidly emerging as the world’s second most powerful economy next only to the United States, expanding its global influence along with its economic size. That prompts the rest of the world to demand on China a role in the international community that commensurates with its economic power: a more appropriate value of its currency, greater respect for human rights, quicker progress on democratization, and increase in aid for developing countries. China is expected to gradually expand its global influence through cooperation with other countries and by minimizing frictions with its partners. The successful hosting of upcoming international events like the 2008 Beijing Olympics and 2010 World Expo in Shanghai will help expand China’s influence. As that happens, East Asia will serve as a strong footing for China’s expansion of global influence. China will try countering the spread of US influence through cooperation with the emerging economies of Brazil, Russia and India.

Experts:

WEFA, National Bureau of Statistics of China

Timing:

• China's open-door policy was initiated in late 1978.
  
• China and the U.S set the diplomatic relationship in 1979.
  
• China set up Shenzhen special economic zone in 1980.
  
• China joint into the WTO on Dec.11th,2001.
  
• China will cancel the tariff for telecommunication equipments before 2005.
  
• The 2008 Olympic Games will be held in Beijing.
  
• The 2010 World Exposition will be held in Shanghai.
  

Web Resources:

http://www.xinhau.com/contents/complete40.php
World Bank Report