1. 1 I. The Political and Economic Structure of the PRC economy 1. one-party rule by the CCP 2. transition to a market economy (Socialism with ______________characteristics) 3. economic profile of the country I. The Political and Economic Structure of the PRC economy 1. one-party rule by the CCP 2. transition to a market economy (Socialism with ______________characteristics) 3. economic profile of the country Lecture 1: An Overview of the Chinese Economy in the Era of Reform Sept 2003

2. 2 II. China's 1979 reform 1. Objectives (a) to liberate the hidden productivity of all productive inputs or work units (b) to increase the welfare of people through the increase in _____________________ (c) to put the country on to the right path to (market) socialism (with the ____________________characteristics). II. China's 1979 reform 1. Objectives (a) to liberate the hidden productivity of all productive inputs or work units (b) to increase the welfare of people through the increase in _____________________ (c) to put the country on to the right path to (market) socialism (with the ____________________characteristics).

3. 3 2. Means (a) decentralisation of control and planning (greater market forces) – greater initiative, autonomy and power to %________________________________ in respects of p__________, ______________, investment, _________________ ______and __________________________________. 2. Means (a) decentralisation of control and planning (greater market forces) – greater initiative, autonomy and power to %________________________________ in respects of p__________, ______________, investment, _________________ ______and __________________________________.

4. 4 3. Theoretical justification (a) The Socialist Planned Market Commodity Economy - the _________ stage of socialism in PRC (The _________session of the CCP) 3. Theoretical justification (a) The Socialist Planned Market Commodity Economy - the _________ stage of socialism in PRC (The _________session of the CCP) (b) open-door policy to facilitate the absorption of capital, knowledge and technology through the establishment of SEZs, open coastal cities, technology development zones.

5. 5 4. Benefits and costs of the reform for PRC? (a) benefits U higher agricultural and industrial growth rates U technology upgraded U_____________consumption choice U active member of the international economic community with strong _________________. 4. Benefits and costs of the reform for PRC? (a) benefits U higher agricultural and industrial growth rates U technology upgraded U_____________consumption choice U active member of the international economic community with strong _________________.

6. 6 (b) costs x income inequalities among different classes of people and in different provinces => ________________________ x regional protectionism x inflation x pollution x _____________________________crimes (b) costs x income inequalities among different classes of people and in different provinces => ________________________ x regional protectionism x inflation x pollution x _____________________________crimes

7. 7 5. Why the reform has been successful (or unique)? (a) strong government (b) role of Hong Kong and Taiwan (c) role of overseas Chinese - _________Chinese in Asia and other parts of the world. (d) appropriate strategy - gradualist approach (________________________________________ ________________________________________) (e) financial stability and liberalisation (f) no internal and external debt to begin with 5. Why the reform has been successful (or unique)? (a) strong government (b) role of Hong Kong and Taiwan (c) role of overseas Chinese - _________Chinese in Asia and other parts of the world. (d) appropriate strategy - gradualist approach (________________________________________ ________________________________________) (e) financial stability and liberalisation (f) no internal and external debt to begin with

8. 8 III. China Business 1. Meaning Direct - Trade, Investment between Hong Kong and China. Indirect - Teachers of Mandarin, China Business Centre, C__________________ III. China Business 1. Meaning Direct - Trade, Investment between Hong Kong and China. Indirect - Teachers of Mandarin, China Business Centre, C__________________

9. 9 2. A multi-disciplinary approach a. economics b. political science c. history d. law All these have impacts on the production costs (especially for direct investment) and transaction costs of engaging in business in another country. 2. A multi-disciplinary approach a. economics b. political science c. history d. law All these have impacts on the production costs (especially for direct investment) and transaction costs of engaging in business in another country.

10. 10 3. Functional approach/areas a. management b. marketing c. accounting d. finance 3. Functional approach/areas a. management b. marketing c. accounting d. finance

11. 11 IV. HK/Mainland Business 1. Types (a) trade In 2002, the share of HK’s total imports from China in HK’s total imports from the world was 44.3% and that of HK’s domestic exports to China in HK’s total domestic exports to the world was 31.6%. (The figures were 43.8% and 29.8% in 1999 respectively.) (b) direct investment HK is the largest direct investor in China. Its investment in the Mainland amounted to US$17.9 bn in 2001. The amount was only US$1.5 bn in 1986. IV. HK/Mainland Business 1. Types (a) trade In 2002, the share of HK’s total imports from China in HK’s total imports from the world was 44.3% and that of HK’s domestic exports to China in HK’s total domestic exports to the world was 31.6%. (The figures were 43.8% and 29.8% in 1999 respectively.) (b) direct investment HK is the largest direct investor in China. Its investment in the Mainland amounted to US$17.9 bn in 2001. The amount was only US$1.5 bn in 1986.

12. 12 2. Reasons for the links (a) background Geographical, ethnic, and cultural links have facilitated the business links between Hong Kong and Mainland of the PRC. (b) transport HK has the ____________________________ ______________________________________. 2. Reasons for the links (a) background Geographical, ethnic, and cultural links have facilitated the business links between Hong Kong and Mainland of the PRC. (b) transport HK has the ____________________________ ______________________________________. (c) banking and finance HK's money and capital markets are being increasingly utilised by PRC's financial institutions (c) banking and finance HK's money and capital markets are being increasingly utilised by PRC's financial institutions

13. 13 (c) investment opportunities in HK i. almost every province, region and municipality in China now has a resident representative office in HK ii. most major PRC Foreign Trade Corporations have subsidiaries, joint ventures, representative offices, agents or distributors in HK (d) political considerations i. Pledges to maintain the stability and prosperity of Hong Kong before and after 1997. (e) vast market potential in the PRC (c) investment opportunities in HK i. almost every province, region and municipality in China now has a resident representative office in HK ii. most major PRC Foreign Trade Corporations have subsidiaries, joint ventures, representative offices, agents or distributors in HK (d) political considerations i. Pledges to maintain the stability and prosperity of Hong Kong before and after 1997. (e) vast market potential in the PRC

14. 14 3. Importance of China business to HK (a) Hong Kong is a small open economy lacking natural resources. (b) HK economy is an international trading, commercial and financial centre. (c) Since China's reform in 1979, the revival of HK as an entrepot centre and the role of an international financial centre are reinforced 3. Importance of China business to HK (a) Hong Kong is a small open economy lacking natural resources. (b) HK economy is an international trading, commercial and financial centre. (c) Since China's reform in 1979, the revival of HK as an entrepot centre and the role of an international financial centre are reinforced