The Chinese Economy: Whats the real Problem? Andong Zhu Tsinghua University IDEAs Conference on A Decade After: Recovery and Adjustment Since the East Asian Crisis July 2007

Outline Introduction The Impacts of the Crisis on the Chinese Economy Whats the Real Problem? Conclusion

Outline Similar Story with Other Asian Countries The Chinese Story Whats the Real Problem Conclusion

Similar Story with Other Asian Countries High GDP Growth Savings Investment Gap CA Surplus High Foreign Reserves Pressure for Appreciation of the Currence Jobless Growth High Inequality Foreign Capital Penetration in the Economy ……

Decreasing Employment Elasticity Total Primary Industry Secondary Industry Tertiary Industry

Income Inequality in China:1979~2004

Share in Industry Output by Ownership (%)

The Chinese Story with the Crisis One Good Impact: Capital Account Liberalization Stopped Other Impacts:

The Over-dependency on Foreign Trade

The Over-dependency on Investment

The Excessive Savings in China:

Decreasing Consumption Rate

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

The Increasing Inequality According to a recent study, In urban area, the top 10% familys income is 31 times of the bottom 10% familys income, rather than 9 times, as some statistics show. If we consider both the urban and rural area, the ratio is 55, rather than 21 times.

Informalizing Labor Market

The Laid-off/privatization Movement

Urban employment State-owned Units Collective -owned Units Mining and Quarrying Manufacturi ng highest level 27331(2005) 11261(1995) 3628(1991) 932(1995)9803(1995) lowest level19040(1995) 6488(2005)810(2005) 558(2005)8043(2000) change

Ownership Changes in the Chinese Economy Shrinking SOE Sector Increasing Private Enterprises Share Increasing Foreign Control

Share in Industry Output by Ownership (%)

Foreign Capitals Share in Different Industries in China:2005

Share of Different Ownership in Different Industries in China:2005

Take away Profits, Leave GDP and… Pollution

Pollution in the World:1999

Searching a Job Or a War

Whats the Real Problem? Too much foreign Reserves Too much foreign capital High CA surplus (most of them owned by foreign capital) Pressure for appreciation of the currence Easy solution or not?

Why We are always the Victim? Should we just solve the urgent problem or should we rethinking the world political and economic system?

Thanks!