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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, 1997-8 (%) Annual growth rate of per-capita GDP (%) 1980-90 1990-99 Life expectancy at birth, 1999 (years) Infant mortality rate, 1999 (per 1,000 live births) 44.2 3.7 4.1 63 71 18.5 8.6 9.6 70 30 n/a 2.3 5.1 74 14 Source: J. Dreze and A. Sen, India Development and Participation, p.115. India, China and Kerala: Selected Comparisons

5 1981-2 Female Male 1990-1 Female Male Adults (age 15+) India China Kerala Adolescents (age 15-19) India China Kerala 26 55 51 79 71 86 43 66 85 96 92 95 34 62 68 87 84 93 55 75 92 97 98 98 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 (%) 199018553.8298.662.118.21.815 199121629.2382.771.815.72.013 1992266414.2467.684.918.22.311 1993346313.5528.591.78.02.511 1994467612.61042.2121.031.92.911 1995584810.51245.2148.823.03.011 199667889.61257.6151.01.52.911 199774468.81516.1182.821.03.310 199878357.81522.4183.70.53.49 199982077.11616.0194.96.13.69 200089478.02063.4249.227.84.07 200197317.52202.4266.16.84.36 2002105178.32694.8325.622.45.15 20031173910.23628.8438.234.65.94 2004136879.94910.3593.335.46.5 Chinas GDP and Export Growth Rates, 1990-2004

9 Chinas GDP and Export Growth Rates, 1990 - 2005 %

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 1988-2005 % Year

12 Share of General Trade and Processing Trade in Chinas Total Exports 1989-2005

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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