1. Unrestricted Bank of Finland Chinese Economy Reforms, structural change and slower growth Jouko Rautava 112.5.2016 Aalto University Helsinki

2. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Contents  Introduction  Current situation and economic policy  Long-run view 12.5.2016Jouko Rautava2

3. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted China’s GDP growth since 1950s 12.5.2016Jouko Rautava3 Source: IMF WEO

4. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted China is a major economic power Jouko Rautava412.5.2016 Source: IMF WEO

5. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted … but its income level is still relatively low Jouko Rautava512.5.2016 Source: IMF WEO

6. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted A map of disparities 12.5.2016Jouko Rautava6

7. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Slower growth and changes in GDP structure Jouko Rautava712.5.2016 Source: Macrobond

8. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Yuan spearheads reform policy Jouko Rautava812.5.2016 Share of international payments, %Reforms in 2015-2016 Source: Swift -Deposit insurance -Liberalization of interest rates -Capital account liberalization measures -Change of exchange rate mechanism -SDR -Access to domestic bond markets -Two-child policy -SEO reform (though still only plans) -Pricing reforms (e.g. gas) -Military reform -Growth target of 6.5% vs. reforms -Economic liberalization vs. political tightening

9. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted More flexibility to forex policy Jouko Rautava912.5.2016 Juan against dollarNEER and REER Sources: Reuters, BIS

10. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Structural change proceeds: demand Jouko Rautava1012.5.2016 Sources: CEIC, Macrobond

11. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Structural change proceeds: supply Jouko Rautava1112.5.2016 Source: Macrobond

12. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted No reason to understate risks… Jouko Rautava1212.5.2016 Source: Bank of Finland Bulletin

13. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Stock market turbulence with Chinese characteristics Jouko Rautava1312.5.2016 Source: Macrobond

14. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted A lot of catching up potential - GDP per capita Jouko Rautava1412.5.2016 Source: IMF WEO

15. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Urbanization supports growth Jouko Rautava1512.5.2016 Source: UN

16. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Patent applications show increasing technological power of China Jouko Rautava1612.5.2016 Source: WIPO

17. Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Asia on the rise - share of global output Jouko Rautava1712.5.2016 Sources: Maddison, WEO