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Topic 5 – China, the Awakening Giant

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1 Topic 5 – China, the Awakening Giant
A – The Chinese World B – The Path to Chinese Development C – Selected Problems and Issues

2 For personal and classroom use only
Conditions of Usage For personal and classroom use only Excludes any other form of communication such as conference presentations, published reports and papers. No modification and redistribution permitted Cannot be published, in whole or in part, in any form (printed or electronic) and on any media without consent. Citation Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University.

3 A. The Chinese World 1. Unity and Diversity 2. Chinese Demography
What characterizes Chinese geography and in which way it has been a factor of unity and diversity? 2. Chinese Demography How does China cope with its huge demography? 3. Communist China How communism has changed the Chinese society?

4 1. Unity and Diversity A change in emphasis Conventional perspective:
China was presented mainly from a political and historical perspective. Imperial history. Communism (Maoism); a centrally planned economy. Political movements that impacted the society (e.g. Great Leap Forward, Cultural Revolution, Open Door Policy). A rural society isolated from the outside world. In today’s China, this perspective has almost become irrelevant. Emerging perspective: Economic forces at play. A China that has become the industrial motor of the global economy. Unique social issues linked with industrialization and urbanization. Growing player in regional geopolitics.

5 1. Unity and Diversity China: 3.7 million square miles Gobi Desert
65% mountainous USA: 3.6 million square miles

6 1. Unity and Diversity Arable land: 12% Arable land: 25%

7 Main Rivers of China Heilong Jiang (Amur) China's border with Russia
Huang He (Yellow River) Can carry up to 40% sediment weight (highest in the world). Subject to flooding, especially in its delta. Changed course many times. Chang Jiang (Yangtze) Longest river, China’s main street (6,300 km). Pearl River delta system Most productive and sustainable ecosystem in the world. Rice paddies and fish ponds.

8 1. Unity and Diversity The Grand Canal
Achievement of Imperial hydrological engineering. First segments completed around 602 AD (Sui Dynasty). At its peak during the Ming dynasty ( AD). Totaled about 2,500 kilometers, 1,700 still in use today. Grain distribution through the empire, notably its capitals. Beijing Tonghui Canal (Yuan) Yongji Canal (Sui and Yuan) Yellow Sea Old course of the Yellow River (Song) Jiao-Lai Canal (Yuan) Jizhou Canal (Yuan) Yongji Canal (Sui) Jizhou East China Sea Tongji Canal (Sui) Luoyang Kaifeng Huaiyin Bian Canal (Song) Chuzhou Yangzhou Canal (Song and Yuan) Yangzhou Jiangnan Canal (Sui, Song and Yuan) Suzhou 400 km Hangzhou

9 The Chinese Realm Turkic Mongols Han Tibetan Miao-Yao Tai Takla Makan
53% of the population speaks Mandarin. Han China: 92% of the population Minorities dominantly live in mountainous or arid regions. Turkic Mongols Takla Makan Gobi Koreas Highland China Han Tibetan Miao-Yao Tai Taiwan

10 The South China Sea – A Contested Area of the Chinese Realm
Paracel Islands Spartly Islands Important shipping lanes. Oil and natural gas reserves. Fishing areas. High biodiversity (coral reefs)

11 1. Unity and Diversity: Main Agricultural Regions
China feeds approximately 25% of the world’s population with about 7% of the world’s arable land. North: continental climate growing wheat, sorghum and corn. Wheat Dominant Pasture and oasis Rice Dominant Double-crop rice South: subtropical climate growing rice.

12 1. Unity and Diversity Chinese Cuisine
Food and tastes are a cultural expression. Reflects the complexity of the country. Diversity of the climate, products and customs: Each cuisine has its own set of base elements (grains, meats, vegetables, oils and spices). Strive for harmony of sight, smell, taste and texture. 8 regional / provincial cuisines: Shandong, Sichuan, Guangdong, Fujian, Jiangsu, Zhejiang, Hunan and Anhui. Two main local cuisines (Beijing and Shanghai). Many minorities cuisines. Long history of famines and food shortages: Anything edible will be used. Parts of animals which are often discarded will be used (feet, head, tendons, tripes). The wok: a fuel efficient form of fast cooking.

13 1. Unity and Diversity: The Three Chinas
Western China Sparsely populated. Region of minorities. Most mineral resources The Interior Agricultural and demographic hearth. Poor and rural China. Coastal China Forefront of modernization. Political and economic center. Rich, urbanized and open to the world.

14 1. Unity and Diversity: China’s Main Contrasts
Inward-Looking History / Outward-Looking Future Hans / Minorities. Authoritarian Government / Opening of the Economy. Command economy versus market forces. Isolation versus openness. Rural Interior / Urbanizing Coast. Wheat Growing North / Rice Growing South. Geography Economy Society Politics Some are the outcome of endogenous processes. Some are imposed or exacerbated by external forces. Authoritarian Government / Opening of the Economy. Inward-Looking History / Outward-Looking Future. Rural Interior / Urbanizing Coast. Wheat Growing North / Rice Growing South. Hans / Minorities. Mandarin Hans / Non-Mandarin Hans (Cantonese, Wu, Hakka, etc.).

15 2. Chinese Demographics Demographics...
More people than the combined population of Europe, the Americas and Japan. Any change has global ramifications. The demography of China is a powerful trend (1.32 billion): About million people are added each year in the 1980s. Average of 13 million people per year in the 1990s. 10 million people per year in the 2000s. Expected to peak at about 1.45 billion by 2030. Projection figures are revised downward ( : 100 million less in 2050). 400 million Chinese live in towns and cities (30-35%). 64% of the population lives in rural areas (950 millions). 343 million females are in their reproductive age.

16 The Population of China, 0-2050
The population exploded after 1949. Population control was secondary. Mao Zedong saw numbers as a workforce and a way to fight the Soviet Union and the United States. Calls for women to “breed for the motherland”. Source: adapted from Zhao, FAO Database.

17 Chinese Population, 1949-2008 (in millions) (projections to 2050)
Source: China Population Information and Research Center, FAO Database.


19 Population Density of China and Most Populous Provinces
Excessive concentration: 50% of the population lives on 8.2% of the land. Bulk of the population along the coast. East China accounts for 90% of the population. 56%, about 728 million, are living in mountainous areas. High density rural areas.

20 2. Chinese Demographics Current issues
Population growth undermines Chinese development (education, health, energy, food, transportation). About 10 million persons reach the job market each year. Increasing ethnic diversity: The government had not enforced the One Child Policy among the country’s 55 recognized minority groups. They had increased their share of still predominantly Han population to 9.4% in 2005 from 6.7% in 1982. Missing female population. Sustaining agriculture. Coping with huge urban growth. Nutrition transition: growth of “western diseases” (obesity, diabetes).

21 Population Pyramid of China, 2005
Source: US Census Bureau, International Database

22 Population Pyramid of China, 2050
Source: US Census Bureau, International Database

23 2. Chinese Demographics Education
Traditionally perceived as a path to self improvement (Confucianism). College attendance: 20% in 2005 from 1.4% in 1978 Produces 440,000 engineers per year (10 times more than the US). Low quality of many college degrees (rote learning). High unemployment among recent graduates (26% found employment in 2008). Tremendous incurred costs.

24 Surplus labor in rural areas
2. Chinese Demographics Surplus labor in rural areas Development of the rural economy and the higher rate of birth. Large numbers of surplus rural labor: Many rural provinces have an excess population they cannot sustain. Difficult situation in the country side as China is running out of land. Need to transfer from the agricultural to a non-agricultural sector. Increased urbanization. About 20 million people per year migrated from the interior to the coastal areas.

25 2. Chinese Demographics Aging of the population
China is in its peak active population years, to last until about 2015. Then, a rapid shift is expected. 65 years old or older: 87 million in 2000. 112 million in 2010. 340 million in 2050. Providing social security and services to a huge elderly population. High savings rate a positive factor. Source: U.S. Bureau of the Census, International Database.

26 3. Communist China: the Path to the PRC
Event Implications Geography Large country; development of a canal system Large internal market; central government; self sufficiency Political and social system Unified since 221 BC; Civil bureaucracy and meritocracy; Cultural superiority complex (sinocentrism) National identity; Self-improvement; Unwilling to trade Technological innovation Leader up the to 15th century; Lagging behind until the late 20th century Possibility of an industrial revolution; Economic opportunities missed Foreign relationships Core civilization of the region; Never colonized; Forced to open port cities after 1842 Foreign nations as vassals; Hostile relationships with foreign powers Key events 1433 – Ming Emperor ends international trade; – First Opium War; – Civil Wars; 1949 – PRC founded Isolation of China; Forced to open markets; Adoption of Marxism.

27 3. Communist China Chinese flag Communism and China
Red: the color of revolution. One large star: communist party. Four stars: four classes : the workers, the peasants, the petty bourgeois, and the “patriotic capitalists”. Communism and China The Marxist ideology is of western origin. Leninism (Soviet Union after 1917): Compatible with the Chinese ideology. Absolute central power. Bureaucracy. Social division of the society. Economic and social control.

28 3. Communist China Maoism
Mao ( ) had evolved a Chinese Communist alternative that reflected China’s different demography. Core goals: Economic self-reliance. Power derived from numbers. Labor-intensive rather than technologically advanced development. Local community effort. Concept of “mass-line” leadership: Integrated intellectuals with peasant guerrilla leaders as a fundamental economic and social strategy. Launched programs of industrialization and collectivism.

29 3. Communist China: Maoist Movements
Nature Impact The “Hundred Flowers” (1956) Intellectuals invited for constructive criticism. Some party leaders criticized for corruption and incompetence. Followed by repression, with many intellectual labeled as “rightists”. No tolerance of dissent or criticism. The “Great Leap Forward” ( ) Supposed to industrialize the countryside. Over-inflated industrial and agricultural quotas. Forgery and exaggerations of agricultural production figures. Resulted in the largest famine in human history. About 30 million died of starvation. Sino-Soviet Break (1960) Ideological differences. Removed Soviet aid and technical personnel. Increasing border clashes. No global “unified” communist bloc. The “Great Proletarian Cultural Revolution” ( ) Ideological demagogy by Mao to maintain power. Millions of youths (the Red Guards) were mobilized. Plunged the country in a turmoil. Factions fought to control the government. Party-state machinery was crippled and many Party veterans were purged.

30 Development strategies
3. Communist China Development strategies Based on the Soviet model. Collectivization: Land was expropriated. Farming was collectivized. Industries were reorganized as state-owned communal enterprises. Immobility of the population. Emphasis on “heavy industry” and as source of employment: Redistribution of economic activities in the interior. Fear of war and vulnerability of the coast. Dramatic social changes: Education: formal state education (politically-oriented). Religion: abolition but some level of tolerance. Population growth: favorable policies.

31 Reforming China (Deng Xiaoping, 1904-1997)
3. Communist China Reforming China (Deng Xiaoping, ) Initiated important agricultural and industrial reforms (1978). Opened China to the outside world for trade and technology: Different from Mao’s view of self-determination. Characterized by pragmatism: “It is not important if the cat is black or white, as long as it catches mice”. Establishment of “socialist market economy” to help China’s development. Decollectivization (1978-) Many farms reverted to families. Land leased. Growth in Coastal zones: Major cities. Special economic zones. Most important migratory movement from the countryside to the cities in history.

32 Administrative Divisions of China
5 Autonomous Regions Recognition of minorities. Buddhist Tibetans (Xizang). Muslim Uygurs (Xinjiang). Mongols (Inner Mongolia). 4 Municipalities Beijing, Tianjin, Shanghai and Chongqing; China’s most prominent cities. 22 Provinces 7-100 million people. Similar to US states. 2 Special Administrative Regions Hong Kong and Macao. “One country, two systems”. Taiwan “Rebellious Province”

33 B. Chinese Development 1. Rural Development 2. Urbanization
What is the structure and challenges of Chinese agriculture? 2. Urbanization What is the nature and extent of urbanization in China? 3. Industrialization How China was able to industrialize? 4. China and the Global Economy How China is becoming a leading element of the global economy?

34 Challenges for Chinese Agriculture
Issues Agricultural productivity Consolidation of agricultural plots (economies of scale); Better irrigation; Appropriate storage and transport Agricultural output Coping with population growth (10 million per year); Coping with changes in the Chinese diet (more meat) Urbanization, industrialization and transport Decreased agricultural land in the most productive areas; Development (land use changes) around cities. Environmental degradation Contamination of soils and water supply. Dependency China is now a net importer of grain; By 2030, China would need to import the current global grain production; Finding reliable suppliers. China has not much applied techniques learned during the “green revolution”. 65% of all the water used for irrigation is lost. Putting this ratio only to 50% could increase water resources by 40% without taping on new sources. Approximately 25% of the grain is lost due to improper warehousing and transport infrastructure (eaten by rodents). Farm size is too small (less than 1 hectare per household in coastal areas).

35 Production and Yield of Paddy Rice in China, 1961-2009
Source: FAO Database.

36 Production and Yield of Wheat in China, 1961-2009
Source: FAO Database.

37 Meat Production, United States and China 1961-2009 (in tons)
Source: FAO Database.

38 Rural-Urban Migrations
1. Rural Development Rural-Urban Migrations Conventional situation: China fixed its population to its place of work and residence. Food tickets were only valid at the place of residence. Residence permit necessary to obtain food (permit not transferable). Emerging situation: Possible to transfer the residence permit if a sum is paid. Surplus labor in the countryside moved to cities in order to occupy lowe wages jobs (construction, manufacturing and services). Migrants around millions (about 10% of the population). 20% of agricultural workers take at least of month off per year to work outside the farm. About million peasants may have left the countryside by 2010. Possibility of a reverse migration: Sharp drop in exports by the end of 2008. Unemployed workers returning to the countryside.

39 2. Urbanization Urbanization concern Historically underrepresented:
Most of the labor in the countryside. Urbanization accelerated only after 1978. 32% urbanization level (2000), or 400 million urban residents. 40 million new urban residents between (official). The reality is more likely to be millions. 50% urbanization level to be reached by 2030. Urbanization occurred at the expense of highly productive agricultural areas. Source: United Nations, World Population Prospects, 1999.

40 Urban and Rural Population in China, 1961 - 2050
Source: China Statistical Yearbook, Beijing, 1998 (p.105). Estimates for 2000.

41 2. Urbanization Beijing The political center.
Imperial capital transformed into a national capital. Shanghai The head of the dragon (Yangtse). The industrial center. The new financial center. Gateway to Central China. Guangzhou Old commercial city. New industrial center (Pearl River Delta). Gateway to South China.

42 Urban industrial economy (1950-1980)
3. Industrialization Urban industrial economy ( ) Creation of vast administrative units. The work unit (Danwei): In industry, services and administration. Controlling the population through geographical fixation. Stability and material security provided. Workers class is the outcome of the communist government: Regrouping of labor in industrial units. Employment was guaranteed for life: Employees have a set of social benefits. Health, retiring, housing, education, vacations, preferential prices on food. Transmission of the job to a member of the family. Promotions were done by the social position and respect of ideology. Having a job in a State enterprise was to possess an “iron rice bowl”.

43 Open Door Policy and economic development (1980-)
3. Industrialization Open Door Policy and economic development (1980-) Employment problems: Increasing since the 1960s because of demographics. The State sector was not capable to absorb all the new workers. Inefficiency of the State sector with diminishing returns (classic central planning conundrum). Collective and private enterprises: Growth occurring in the labor intensive light industrial sector. The share of the industry outside the State control has gone from 20% of industrial production in 1978 to 70% in 1993. Private enterprises account for growing share of the industrial output. : 200 million Chinese have been lifted out of absolute poverty.

44 4. China and the Global Economy
Integration to the global economy Economic growth is mainly driven by exports: China contributed to 25% of the world’s GDP growth ( ). With no welfare state, no labor unions and an enormous supply of both labor and savings, “communist” China is a capitalist's paradise. Lessons from the past: Each time China opened to the outside, a period of relative prosperity resulted. Each time China closed to the outside world (e.g. the Great Leap Forward and the Cultural Revolution) was a period of instability. The CCP is embracing this form of development: Insuring improvements in the population’s welfare. Insuring the growth of the economic power of China. Insuring technological development. Insuring their own survival / legitimacy.

45 Major Components to Price Reductions by the Chinese Manufacturing Sector, 2005
Source: Navarro, P. (2006) Report of “The China Price Project”, Merage School of Business, University of California-Irvine,

46 4. China and the Global Economy
Growing consumption of resources Economic growth has increased China’s consumption of resources: “The Dragon is hungry”. Second largest consumer of oil after the United States. Energy supply problems with increasing blackouts. Completion of a natural gas pipeline in 2004 (Tarim Basin to Shanghai). Driving up global commodity prices: Increased global competition caused by China. Fear that China may “export inflation”. China may hit a “resource wall” inhibiting future developments. The food and energy (coal) shortages of the winter of 2008 are a sign that China does not have much margin.

47 China’s Share of the World Commodity Consumption, c2009
Source: Barclays Capital (2010), Credit Suisse (2010), Goldman Sachs, United States Geological Survey (2009), BP Statistical Review of World Energy (2009), Food and Agriculture Organization of the United Nations (2008), International Monetary Fund (2010)

48 China’s Endowment in Strategic Mineral Resources, 2007
*Incl. lateriteimport and NPI production **2006 basic reserve/2006 mining output ***Import dependence –mine: Imported concentrate (metal content)/domestic refined metal production; Reserve: basic reserve issued by National statistic Bureau; proven, technologically and economically minablereserve (without considering mining/operation loss) Source: McKinsey analysis; World Metal Statistics, Metalchina; China Statistic Yearbook.

49 Crude Oil Production and Consumption, China, 1980-2009 (in 1,000 of barrels per day)
Source: BP Statistical Review of World Energy.

50 China’s Crude Oil Imports, 2004
Source: D. Zweig and B. Jianbai (2005) “China’s Global Hunt for Energy”, Foreign Affairs, Sept. / Oct. , pp

51 4. China and the Global Economy
Growth of international trade Tremendous growth of China’s involvement in international trade over the last 25 years. Exploitation of comparative advantages. Export oriented (neomercantilist) “strategy”: China is the world’s 3rd largest exporter (2005), 7.3% of the world’s trade. Exports account for 40% of the GDP while this share was 5% in 1978. However, 90% of exports are by foreign owned factories. United States: Most important trading partner. Account for 40% of China’s exports and 10% of its GDP. American corporations benefiting tremendously from low costs. The European Union the second. Japan the third.

52 Monthly Trade between China and the United States, Millions of USD (1985-2011)

53 4. China and the Global Economy
Shifts in international trade Decrease of raw materials: From 50% of exports in 1985 to 15% in 1995 to 2.5% in 2005. Increase in manufactures: 97% of the value of exports. Consumption goods (shoes, toys). Textiles and clothes. Low level electronics. 12% of exports are bought by Walmart. Energy and raw materials imports: 1/3 of its oil. Second largest oil importer after the United States.

54 4. China and the Global Economy
World dominance in manufacturing Two processes: Addition of new manufacturing activities either the outcome of FDI or internal investments (modern facilities). The closing down of many manufacturing activities, mainly the outcome of Chinese competition and/or comparative advantages. Examples: 50% of the world's TVs (80 million). 60% of the world's cell phones. 50% the world's shoes (and 95% of those sold in the United States). 80% of the toys. 90% of the sporting goods sold in the United States. 100% of Levi's blue jeans are now made in China. 70% of Wal-Mart products made in China.

55 4. China and the Global Economy
Labor issues China supplies a gigantic quantity of labor. 200 million people in the countryside are without work. Constant flow from the interior (poorer provinces). Often woman to work in factories for about 3 years. Come back to their villages/towns to marry or start businesses. Flows of capital that is used for familial capital investments (housing, agriculture).

56 4. China and the Global Economy
Wages Extremely low wages that are kept low because of rural to urban migration and population growth. Between $60 and $85 a month. The rest of the developed world cannot compete. Selling itself with diminishing returns. Many factories offer “free” room and board. Strong inflationary pressures having an impact on wages: Rising cost of living in manufacturing (coastal) regions. Rising energy and food prices. The same basket of goods can be as expensive in China than in the United States. Doubling of wages between 2005 and 2008. Relocation of some manufacturing activities in Vietnam.

57 Hourly Cost of Wages and Benefits, 2004 ($US)
Source: USDOL.

58 4. China and the Global Economy
Mechanisms for opening to the outside world Rely on extraterritoriality and Foreign Direct Investments (FDI). Gain capital and investment. Using the Chinese diaspora: Chinese living abroad with substantial business experience. About 75% of FDIs initially came from Hong Kong and Taiwan. Facing high wages, high land values and scarcity of available space for development. Geographical concentration Guangdong, Fujian and Shanghai: Account for 50% of FDIs. Coastal provinces account for 85%. 80% of FDIs are coming from Asia (Hong Kong, Taiwan). 20 to 30% of the international trade concerns the Pearl River Delta.

59 4. China and the Global Economy
FDI Phases 1st phase ( ): Labor-intensive / low technology sectors. Comparative advantages of China. China received 4.1% of the world’s FDIs in 2000 (ranked 6th). Often used to develop joint ventures / subcontracting. 2nd phase (1995-): Shift towards added value goods is observed. Basic to intermediate electronics (keyboards, mice, etc.). An expertise in many sectors has been developed. Integration in global commodity chains. World’s largest manufacturer of consumer electronics. About half of the world's DVD players are now made in China. Emergence of a knowledge industry.

60 Value of Chinese Exports and Received FDI, 1983-2009 (Billions of $US)
Source: WTO and UNCTAD.

61 Extraterritoriality: China’s Special Economic Zones
Zones in which laws are different from China’s economic laws. The goal is to increase foreign investments. Subject to a different taxation regime; little or no taxes on exports Source: adapted from World Bank (2009) World Development Report 2009: Reshaping Economic Geography.

62 4. China and the Global Economy
Purchase of foreign assets Accumulation of gigantic foreign reserves ($US 1.3 trillion in 2007). Recycling income from exports. Initially involved mainly in T-bills and debt instruments. Move to secure strategic resources: Oil, mines, lumber, food supply. New Chinese presence in Latin America, Africa and Southeast Asia. Purchase of foreign technology and brand names: Lenovo acquired IBM personal computing division (2004). Little known Chinese manufacturers seeking an international recognition.

63 Acquisitions by Chinese Oil and Gas Companies, 2008-2009
Year Company Acquisition Value ($ billion) 2008 Sinopec 60% of AED Oil Ltd, Australia 0.56 CNOOC 100% of Awilco Offshore 2.5 100% of Tanganyika Oil, Syria 1.8 2009 Sinochem 100% of Emerald Energy, Syria and Columbia 0.88 CNOOC, Sinopec 20% of Angola’s Bloc 32 from Marathon Oil 1.3 100% of Addax Petroleum, Calgary 7.2 CNPC, PetroChina 96% of Singapore Petroleum 2.0 CNPC, KazMunaiGaz 50% of MangistauMunaiGaz, Kazakhstan 3.3 60% of Athabasca Oil Sands, Mackay River, Dover Projects, Canada 1.9 Source: FACTS Global Energy

64 4. China and the Global Economy
Trade and tourism Very difficult for a Chinese to go outside China until recently. Closed under communism ( ): Only 210,000 Chinese people were allowed to go abroad. About 7,000 a year. Mainly diplomatic personnel. Open door ( ): 50,000 per year in the period. Students and trade personnel. Economic reforms ( ): 18.1 million people were approved to go outside China. Average of 1.13 million annually. Mainly for educational and business purposes.

65 4. China and the Global Economy
A maturing industry (2001-): Emerging middle class allowed to travel with a visa. In 2001, four million Chinese went overseas for tourism. 20 million in 2003. 26 million in 2004. 31 million in 2005. 57 million in 2010. Proximity effect. 30-50% go to Hong Kong or Macao. Travel mostly organized as tightly scheduled group tours, Europe being the most popular foreign destination.

66 4. China and the Global Economy
Over optimistic views on China? Analogies with Japan during the 1980s. “Resources wall” (energy and food shortages). National inequalities (civil unrest). Over dependence on foreign markets for exports: Triggers protectionist forces. Low profit margins (less than 5%). Large misallocations of capital (export based / real estate). Large debt by state enterprises: Non-performing loans. Fiscal irresponsibility. Little profits in spite are massive investments. The Yuan is a fiat currency like many others: Money printing (inflation) by the government is rampant. De-industrialization of some manufacturing clusters.

67 C. Selected Problems and Issues
1. Family Planning What was the One Child Policy and how it impacted the Chinese society? 2. Modernization What are the challenges of modernization in China?

68 1. Family Planning Early 1970s End of 1970s
Known as the “later-longer-fewer program”. Authorized age of marriage 25 for men and 23 for women. Wait later to begin their families, allow for longer spacing in between children, and have fewer children overall. Began to reduce fertility levels. Not fast enough to really slow down population growth due to the demographic momentum that had already developed. End of 1970s Government began to promote the two-child family throughout the country. Slogan “One is best, at most two, never a third”. Contributed to fertility decline but, again, not rapidly enough.

69 1. Family Planning One Child Policy
Launched in 1981 when the population reached 1 billion: Initial goal: Stabilize China’s population at 1.2 billion. Revised goal: Keep China’s population under 1.4 billion until 2010. Population expected to stabilize around 1.6 billion by 2050. Under the responsibility of the State Family Planning Commission (SFPC): Population control perceived from a strategic point of view. Employers and neighborhood committees had to enforce guidelines. Great variations in performance between the country’s urban and rural areas. Possible to enforce in China (totalitarian). Would have been impossible in most other places.

70 Regulation of the One Child Policy
Authorization for marriage 25 years for male and 23 years for female. Students and apprentices not allowed to marry. Monitoring menstrual cycles Monitored by the work unit. Contraceptive use mandatory IUD used for women with already one child. Incentives for sterilization after the birth of the first child. Couples with two or more children had to have one partner sterilized (women 80% of the time). All pregnancies must be authorized Unauthorized pregnancies had to be aborted. 7th, 8th or 9th month abortions are legal.

71 1. Family Planning Urban areas Rural areas Small sized apartments.
Improving one’s status and level of consumption. Easier control from the government. Rural areas Families want more children to work the family plots and sustain parents when they get old. Want sons who will continue the family line and provide ritual sacrifices to their ancestors after they die. Daughters are leaving their family once they marry. Girls are accounting for only 20 to 30% of a new demographic class in some areas.

72 Percentage of Women Having More Than One Child, 1998
Fertility reduction Prevented about 400 million births since 1980. When the program began (1970), Crude Birth Rate was 34 and TFR was around 6. Been brought down to 10 (CBR) and 1.7 (TFR). About 40% of Chinese women have been sterilized. About 5% of women have more than one child. Source: China Population Information and Research Center, 2000.

73 Percentage of Chinese Women with No Born Sons by 60th Birthday
“Notes: Calculations are illustrative, based upon simplifying assumptions: 1. Reported parity distributions in 1990 census are accurate; 2. SRB as in previous graphic; 3. SRB not parity-specific; 4. Childbearing completed by age 35 for the 2025 cohort of 60-year old women; 5) Posits the following distribution of childbearing for the 2025 cohort of 60-year-old women: no children, 3%; one child, 25%; two children, 65%; three or more children, 7%.” Sources: Derived from Feeney et. al. 1993, op cit; China National Bureau of Statistics 2002, op cit. From: Global Population Trends: Shaping The Strategic Future, Nicholas Eberstadt, Henry Wendt Chair in Political Economy, American Enterprise Institute.

74 Fluctuations of fertility
1. Family Planning Fluctuations of fertility Fertility has declined substantially before the OCP. Reached a low in 1984. Increased from the mid 1980s to the early 1990s: Relaxation in enforcement in rural areas. In 1986, 2 children per couple were allowed in rural areas. In 1995, the restriction was lifted for urban areas. Reductions in the authority of local officials responsible for implementing the program. Sizeable age cohort entering their reproductive years: Baby boom of the early 1960s (about 40% of the increase was due to this). A decline in the age of marriage explained the other 60%. Nearly 75% of this increase was offset by declines in the age-specific fertility rates.

75 Chinese Fertility Rate, 1949-2005
Source: China Population Information and Research Center, WHO

76 Psychological consequences
1. Family Planning Imbalanced sex ratio Male children are more valued. 120 boys for 100 girls (national average). Abandon or abortion of females: 11 million abortions a year; 1 out of 2 live births. “Missing female population” as girls are not declared. 2000: About 900,000 girls were missing (0 to 4 years group). Only 1% of females are unmarried by the age of 30. Psychological consequences Currently around 70 million single child. 4-2-1 syndrome (4 grand parents – 2 parents – 1 child): “Little emperors” or “little empresses”. Self-centrism. Pressure to succeed.

77 Males minus Females per Age Cohort, China, 2000
Source: US Census Bureau, International Database

78 Government’s response
1. Family Planning Government’s response Well aware of the situation, but limited range of options. Laws giving girls and women equal rights with males. Propaganda and consciousness-raising slogans about the equal value and contributions of females and males. Laws outlawing infanticide, prenatal sex identification, and sex-selective abortion. Policies in most provinces allowing rural couples to have two children, or a second child if the first is a girl.

79 The Population and Family Planning Law
One-child policy was “a policy for one generation”. Relaxed in the mid 1980s: 2 children permitted in rural areas. A new family planning law started in 2002. Same goal than the One-child policy, but offer more flexibility: One child, but permission may be granted for a second under specific circumstances. Late marriage and childbearing. More flexibility for provinces, autonomous regions and minorities. People in reproductive age have to use contraception. Provisions for sex-determination and sex-specific abortions. Government keeping a close eye on demographics to see if population control is required: Considering abandoning the one child policy (2008).

80 The appeal of modernization
For the last 500 years, China developed an inferiority complex: Decline of China’s status as a global power. Humiliation by foreign powers (e.g. Opium Wars, Japanese invasions). Collapse of the imperial government (1912). Strong pressure to portray China as a modernizing nation. Large investments in grandiose projects: Largest dam; Three Gorges Dam (2005). Largest shopping mall; The South China Mall. Highest railway (Tibet). First maglev train in Shanghai (2003). First Chinese in space (2003); spacewalk (2008). New international airports (Beijing, Shanghai, Guangzhou). 2008 Olympics.

81 Development of the telecom market
2. Modernization Development of the telecom market Easier and cheaper to switch to the latest technology. World’s largest mobile phone market: 376 million cell phone subscribers (2005). 25.7 mobile phones for every 100 Chinese. 4-5 million cell phones sold each month. 70% of Beijing resident have a cell phone; 60% for Shanghai (2002). 42% of the Guangdong province population; 30 million. World’s largest online user: 20% of the population uses the internet. 268 million users (2008). The “Great Firewall of China”. Half of the rural residents have a television.

82 Chinese Internet Market, 2000-2008
Source : CNNIC, JP Morgan

83 Industrial development problems
2. Modernization Industrial development problems Pulling millions of Chinese out of poverty: More than 200 million peasants live on less than $1 a day. Justifies any policy and project. Guangdong; the Manchester of the 21st century. Inequality is becoming a standard: Wages remain $50 to $70 per month. With inflation, standards of living are going down. Industrial overcapacity: Over investment. Over supply of consumption goods, driving prices down. Limited profits. Quality issues: Several companies are starting to move away from China. Rising transportation costs.

84 The “business environment”
2. Modernization The “business environment” The rule of law is not well applied. Local abuses and racketing: Local government seizing and selling land to special interests. Joint ventures must contribute to local development. Different price systems. New Property Law (2007): Protection of private property. Remove the power by many government entities, particularly local, to seize property with impunity. Good Guanxi enables to bend most of the rules.

85 2. Modernization The parasite economy
73 million members of the CCP working for the government or managing State enterprises (2007). Duplication of functions in every sector of the civil service at the national, provincial and township level. 90% of civil servants are redundant. Institutionalized racketing of economic activities by all levels of government. China ranks low on the international transparency index.

86 Environmental degradation
2. Modernization Environmental degradation Limited attention placed for the protection of the environment. Development is a priority over the environment. Serious degradation of environmental conditions. Air pollution: China is the second largest CO2 emitter in the world. 2/3 of the Energy supplied by coal. 16 of the world’s 20 worst polluted cities. 2/3 of Chinese cities have pollution level well above national criteria. 75% of the urban population suffering from health problems. Water pollution: 20% of rivers in China are severely polluted. 80% cannot sustain commercial fishing. Energy efficiency issues.

87 Counterfeiting and intellectual property
2. Modernization Counterfeiting and intellectual property One of the greatest “industrial subsidy” ever seen. Failure to protect intellectual property rights. Indirect involvement with hackers to steal information abroad. Technological expropriation: Copy a well known product without paying any royalties or R&D costs. Illegal copies: More than 90% of the movies, music and software. Legal CD has a 1.2% market share. About 40% of pharmaceutical products. Two levels: International: software and brand names (e.g. Polo, Nike). National: books and music.

88 2. Modernization Role of government: Consequences:
Weak (non-existent / arbitrary) legal environment. Counterfeiting controlled by authorities and protected by judiciary instances. High levels of profits prevent any governmental intervention, except when counterfeiting involves Chinese brands. Pirate DVD market mostly controlled by the military. Consequences: May impact on future economic growth. Firms reluctant to invest in China outside simple labor intensive processes. Other options (Southeast Asia, India) are available.

89 2. Modernization Speculation Short term perspectives of investments.
Real estate, not production, is the favored sector: “Development zones” are often created for this sole purpose. Over supply of office space in many cities. Vacancy rate of more than 25%; large non-performing assets. People cannot afford to buy most of the housing, so real estate becomes a speculation based solely on appreciation (not rent seeking). Large shopping malls projects for a customer base that does not exist. Stock markets: Market still in its infancy and low level of education of shareholders. The notion of “investment” is not well understood (perceived as a “sure-winning” lottery. The stock market has been declining due to low profits, until 2006. Bubble of ; and then a crash (70% drop in 2008).

90 Shanghai Composite Index, 2000-2011 (Monthly)

91 2. Modernization Consumption Symbol of modernity and of achievement:
Mass consumption and mass media has created needs while the employment market offered limited opportunities to many. Access to new sources of information providing a globalized culture. Mass media is new to China and there is no tradition of consumer behavior. Development of Western consuming behavior: Fashion and beauty products. Weddings. Christmas (the consumption segment of it). New housing complexes and home decoration. Emergence of a middle class: About million as of 2010. A tool of social change, but also instability.

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