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Making Sense of Chinas Economic Reform: Initial Success and Current Danger Zhiyuan Cui School of Public Policy and Management Tsinghua University Beijing,

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Presentation on theme: "Making Sense of Chinas Economic Reform: Initial Success and Current Danger Zhiyuan Cui School of Public Policy and Management Tsinghua University Beijing,"— Presentation transcript:

1 Making Sense of Chinas Economic Reform: Initial Success and Current Danger Zhiyuan Cui School of Public Policy and Management Tsinghua University Beijing, China

2 China: A New Workshop of the World Shunde in the Pearl River Delta, microwave-oven capital of the world, with 40% of global production in a single giant factory Shenzhen makes 70% of the worlds photocopiers Dongguan has 80,000 people working in a single factory making running shoes Zhongshan is the home of the worlds electric lighting industry

3 Hourly wages (US$) China0.68 India0.38 Pakistan0.41 Indonesia0.27 Malaysia1.41 Thailand0.91 Dominican Republic1.65 South Africa1.38 Hourly Wages in the Garment Industry, 2002

4 IndiaChinaKerala Estimated proportion of the population living below the international poverty line, (%) Annual growth rate of per-capita GDP (%) Life expectancy at birth, 1999 (years) Infant mortality rate, 1999 (per 1,000 live births) n/a Source: J. Dreze and A. Sen, India Development and Participation, p.115. India, China and Kerala: Selected Comparisons

5 Female Male Female Male Adults (age 15+) India China Kerala Adolescents (age 15-19) India China Kerala Literacy Rates in India, China and Kerala Source: J. Dreze and A. Sen, India Development and Participation, p. 117.

6 Sen on Chinas Pre-reform and Post-reform Connection It may have been very far from Maos own intentions to develop literacy and basic health care in ways that would help to promote market-based, internationally- oriented enterprises (though that dialectical contrariness must have some interest for a Marxist theorist). But these structural achievements in the pre-reform period have certainly served as direct and valuable inputs in fostering economic performance in post-reform China. In drawing lessons from China, these apparently contrary interconnections can be particularly important.

7 Sweden 25, India 32.5, United States 40.8, China 44.7, Brazil 59.1 Gini Coefficient for Chinas Income Distribution

8 YearGDPExportsChina Share in World Exports (%) Chinas Ranking in World Exports RMB billion Yuan Growth Rate (%) RMB Billion Yuan USD Billion Dollar Growth Rate (%) Chinas GDP and Export Growth Rates,

9 Chinas GDP and Export Growth Rates, %

10 Export Structure of Chinas Top Five Exporting Provinces Guangdong JiangsuShanghaiZhejiangShandong Exports in 2003 (million $) As % of China s Total Exports 152,848 (34.88) 59,140 (13.50) 48,482 (11.06) 41,603 (9.49) 26,573 (6.06) Primary Goods As % of total exports 4,001 (2.62) 1,136 (1.92) 1,232 (2.54) 2,450 (5.89) 5,367 (20.2) Manufactured Goods As % of total exports 148,847 (97.28) 58,004 (98.08) 47,250 (97.46) 39,153 (94.11) 21,206 (79.8) General Trade Exports As % of total exports 29,192 (19.1) 22,480 (38.01) 19,417 (40.05) 34,195 (82.19) 14,007 (52.71) Imported-Materials-Processing Exports As % of total exports 84,172 (55.07) 30,426 (51.45) 27,631 (56.99) 6,093 (14.65) 8,452 (31.81) Supplied-Materials-Processing Exports As % of total exports 33,973 (22.23) 6,162 (10.42) 1,190 (2.86) 3,929 (14.78) State-owned Enterprises Exports As % of total exports 40,553 (26.53) 12,186 (20.6) 15,188 (31.33) 13,303 (31.98) Collective-owned Enterprises Exports As % of total exports 5,601 (3.66) 3,413 (5.77) NA7,262 (17.46) Private Enterprises Exports As % of total exports 11,299 (7.39) NA 7,938 (19.08) Foreign-funded Enterprises Exports As % of total exports 95,373 (62.4) 41,135 (69.56) 30,813 (63.56) 13,050 (31.37)

11 The Share of Primary Goods and Manufactured Goods in Chinas Exports % Year

12 Share of General Trade and Processing Trade in Chinas Total Exports

13 General Trade Exports State-owned 41.7% Solely foreign- invested 10.7% Sino- foreign Cooperation 15.2% Private 22.9% Collective 9.4% Solely foreign-invested 55.7% Sino-foreign cooperation 25.5% State- Owned 13.5% Processing Trade Exports The Share of Chinas General Trade and Processing Trade Exports by the Ownership of Enterprises, 2004 Note: Processing Trade includes both pure-assembly and import-and-assembly processing. Under pure-assembly regime a foreign buyer supplies a plant in China with inputs and hire the plant to process them into finished goods; while under import- and-assembly regime the plant in China imports inputs, processes them, and sells the processed goods to a foreign buyer. P 2.9 C 2.5

14 Export Structure of Chinas Top Five Exporting Provinces Guangdong JiangsuShanghaiZhejiangShandong Exports in 2003 (million $) As % of China s Total Exports 152,848 (34.88) 59,140 (13.50) 48,482 (11.06) 41,603 (9.49) 26,573 (6.06) Primary Goods As % of total exports 4,001 (2.62) 1,136 (1.92) 1,232 (2.54) 2,450 (5.89) 5,367 (20.2) Manufactured Goods As % of total exports 148,847 (97.28) 58,004 (98.08) 47,250 (97.46) 39,153 (94.11) 21,206 (79.8) General Trade Exports As % of total exports 29,192 (19.1) 22,480 (38.01) 19,417 (40.05) 34,195 (82.19) 14,007 (52.71) Imported-Materials-Processing Exports As % of total exports 84,172 (55.07) 30,426 (51.45) 27,631 (56.99) 6,093 (14.65) 8,452 (31.81) Supplied-Materials-Processing Exports As % of total exports 33,973 (22.23) 6,162 (10.42) 1,190 (2.86) 3,929 (14.78) State-owned Enterprises Exports As % of total exports 40,553 (26.53) 12,186 (20.6) 15,188 (31.33) 13,303 (31.98) Collective-owned Enterprises Exports As % of total exports 5,601 (3.66) 3,413 (5.77) NA7,262 (17.46) Private Enterprises Exports As % of total exports 11,299 (7.39) NA 7,938 (19.08) Foreign-funded Enterprises Exports As % of total exports 95,373 (62.4) 41,135 (69.56) 30,813 (63.56) 13,050 (31.37)

15 Intermediate goods Final goods Exports Domestic intermediate goods Capital and labor Domestic sales Country 1 Country 2 Country 3 A BCC D E Vertical Specialization Country 1 produces an intermediate good and exports it to Country 2. Country 2 combine the imported intermediates with capital and labor (value added), and domestically produced intermediate inputs to produce a final good (gross output). Finally, Country 2 exports some of the final good to Country 3.

16 Two Example Areas of Foreign-Invested Processing Exports Guangdong:In 2003, solely foreign-invested processing exports accounts for 72.3% of its total processing exports, being 85.4 billion US$; barter terms of trade deteriorated from 1 in 1998 to 0.65 in 2003; value- added in processing exports has been kept at 18% Suzhou:In 2004, foreign-invested processing exports accounts for 97% of its total processing exports, being 40.3 billion US$; in high-tech industry and machinery and electronic industry it accounts for 98% and 96%, respectively; value-added in processing exports has dropped from 63.5 in 1998 to 14% in 2004

17 The Problematic Future of Suzhous Industrial Development under Foreign-Invested Processing Exports Crowding-out domestic firms Low local content No new land available for future development

18 Washington Consensus v.s Beijing Consensus WC:(1) Liberalization (2) Privatization and (3) Stabilization BC: (1) Innovation/Experiment (2) Equity (3) Asymmetric Defense Strategy


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