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

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

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

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted China is a major economic power Jouko Rautava Source: IMF WEO

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

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

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Slower growth and changes in GDP structure Jouko Rautava Source: Macrobond

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Yuan spearheads reform policy Jouko Rautava Share of international payments, %Reforms in 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

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

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Structural change proceeds: demand Jouko Rautava Sources: CEIC, Macrobond

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Structural change proceeds: supply Jouko Rautava Source: Macrobond

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted No reason to understate risks… Jouko Rautava Source: Bank of Finland Bulletin

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Stock market turbulence with Chinese characteristics Jouko Rautava Source: Macrobond

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

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Urbanization supports growth Jouko Rautava Source: UN

Suomen Pankki – Finlands Bank – Bank of FinlandUnrestricted Patent applications show increasing technological power of China Jouko Rautava Source: WIPO

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