1. Understanding a Development Miracle ——China
Social Economic Development
Understanding a Development Miracle
——China

2. Agenda China’s Economic Growth: A Review
The Key Elements for China’s Growth

3. China’s Economic Growth: A Review
Economy
The largest
Exporter
second largest
Importer
1st~25th
26th~50th
Per capita GDP (PPP)
51st~75th
76th~100th

4. China’s Economic Growth: A Review
General description
The People's Republic of China is the world's second largest economy after the United States. It is the world's fastest-growing major economy with average growth rates of 10% for the past 30 years. China is also the largest exporter and second largest importer of goods in the world. China became the world's top manufacturer in 2011, surpassing the United States. The country's per capita GDP (PPP) is $7,518 (IMF 93rd in the world) in 2010.

5. China’s Economy prior to the start of economy reform
China’s economy experienced modest, but significant, growth in the decades prior to the outbreak of full-scale war with Japan in The pattern of pre-World War economic advance reflected China’s openness to international trade and investment. Prewar expansion clustered around two growth poles: the Yangzi Delta area centered on Shanghai and the northeastern provinces. Ⅱ

6. Northeastern provinces
Yangzi Delta Area
Shanghai was the largest and most prosperous city in the Far East during the 1930s

7. Modest but significant economic growth in 1930s, that were not regained for over sixty years
The economy was heavily disrupted by the war against Japan and the Chinese Civil War from 1937 to 1949.

8.
The new China moved to create an economic system largely modeled after Soviet experience. Soviet advisers and Soviet-trained specialists worked to establish new institutions organized around annual and five-year plans, extensive state ownership, central control over prices, and material balance plans that issued specific directives governing the allocation of major inputs, products, and financial flows.

9. Failures of planed system
Food scarcity: Chinese villager and city dwellers
Inefficient industry associated with Soviet-style central planning
Underdevelopment of services
Isolation from the international economy
Substantial difference between the rural and urban sectors

10.
Reform in the countryside: Beginning with the poor mountain areas of Anhui and then spreading across the country. Farmers were able to keep the land's output after paying a share to the state. This move increased agricultural production, increased the living standards of hundreds of millions of farmers and stimulated rural industry.
Reforms were also implemented in urban industry to increase productivity. A dual price system was introduced. Private businesses were allowed to operate and they began to make up a greater percentage of industrial output.

11. Special economic zones were set up to absorb foreign direct investment: All of these places provide favored tax treatment and other advantages for foreign investment. Laws on contracts, patents, and other matters of concern to foreign businesses were also passed in an effort to attract international capital to spur China‘s development

12. Shen Zhen: from fisherman village to a modern city
SHANGHAI: Pudong new district

13.
In the 1990s, the Chinese economy continued to grow at a rapid pace, at about 9.5%, accompanied by low inflation. The Asian financial crisis affected China at the margin, mainly through decreased foreign direct investment and a sharp drop in the growth of its exports. However, China had huge reserves, a currency that was not freely convertible, and capital inflows that consisted overwhelmingly of long-term investment.
Financial system burdened by huge amounts of bad loans.
-----Massive layoffs stemming from aggressive efforts to reform SOEs
-----Over half of the China’s SOEs were inefficient and reporting losses.
Uncertainty Avoidance(Geert Hofstede)

14.
The large-scale privatization continued and the number of SOEs decreased.
Entry into the WTO in 2001
Reform in the banking system
The 11th Five-Year Economic Plan aimed at building a “ harmonious society”
China launched its Economic Stimulus Plan to specifically deal with the Global financial crisis of 2008–2009 .

15. Map of countries by GNI per capita compared to China
Date: 26 September 2010
Source:

16. China’s GDP growth since 1978 Source: China statistical yearbook 2010
36.4
China’s GDP growth since 1978
Source: China statistical yearbook 2010

17. China’s GDP growth per head since 1978
GDP per head (RMB)
23708
7858
1644
381
China’s GDP growth per head since 1978
Source: China statistical yearbook

18. Economic performance since reform
Rapid growth has elevated hundreds of millions from absolute poverty.
year
1980
1990
2001
2009
Poverty ratio in county
40.65%
10.55%
4.75%
3.8%
China’s economy has abandoned its former isolation in favor of deep engagement with world markets
year
Before 1978
1985
1995
2009
(Export+Import)/GDP
<10%
22.9%
38.7%
44%

19. Economic performance since reform
The slow retreat of planning has cumulated into a dominant role for market outcomes.
Markets for products, labor, and materials are well developed and increasingly competitive.
Private entrepreneurs continue to push into sectors formerly reserved for public enterprise.

20. Socialist transformation in 1958 Reform and opening up in 1978
Social economy
Founded in 1949
Socialist transformation in 1958
Reform and opening up in 1978
State-owned economy
Sino-foreign economy
Private owned economy
Purchased
Left
Foreign economy
Bureaucrat capitalism economy
Confiscated
State-owned economy
State-owned economy
Purchased
Private owned economy (weak)
Protected
Private owned economy
Foreign economy
Feudalism economy
Individual economy
Confiscated
Protected
Farmers and handicraftsman
Individual economy
Collective economy
Collective economy
Internal-oriented
public-owned economy
Planed economy
Outward-oriented economy with coexistence of various economic composition
Market economy

21. The Key Elements for China’s Growth
1. Stable political environment and successive economic policy
Deng was a pragmatic leader, known less of his ideological commitment than his slogan: "Who cares if a cat is black or white, as long as it catches the mice." Once he consolidated his power, he began to put his pragmatic policies to work.
Despite Deng's death in 1997, reforms continued under his handpicked successors, Jiang Zemin and Zhu Rongji , who were ardent reformers.
The conservative Hu and Wen Administration adopted more egalitarian and populist policies

22. 2. Market incentives mechanism
Particularistic contracting: These contracts grandfathered in each firm’s existing situation, giving that firm incentives to improve profitability from the current achieved level. Particularistic contracting spread to millions of family farms, hundreds of thousands of state enterprises.
Dual track: Firms operated on both a plan and a market track under dual track policy. Each firm had to first fulfill its preexisting plan contracts. Above this base, firms were allowed to produce for the market at market price. This enabled price liberalization.
Privatization: For example, for the first decades of reform at the local level, township and village enterprises were encouraged. They accounted for a very large share of industrial output growth in China.

23. 3. Decentralized experimentation
Special economic zones
Reform from county to urban areas
Reform from costal areas to central or west
Let some people get rich first

24. 4. Capital stock
-----High savings. High savings accelerates the rapid capital formation, which has played a major role in China’s economic growth.
------Massive capital inflow. Foreign investment has become an important driving force for China’ s economic growth, which brings the capital ,technology and job opportunities.

25. 5. labor and human capital
-----Cheap labor cost. A huge amount of rural population in China provides the cheap labor for the foreign and domestic companies.
------Human capital. The education system and the investment in human capital improve the quality of human resources in China. The improved human capital becomes the driving force for innovation.

26. 6. Urbanization
As one of the most important result of market oriented reform, urbanization was accelerated during the reform period. Millions of rural residents have transferred to urban areas, which has sustained increasing labor supply to the rapid growing industrial and service sectors.

27. 9. Political competition
7. Infrastructure
In the past decades, many rural places’ economic growth is benefit from better infrastructure. Meanwhile, infrastructure investment forms part of total capital stock.
8. Huge domestic market
China has a huge population, and the domestic market is very important for foreign companies and domestic competitors.
9. Political competition
Officials at all levels are striving to outdo its neighbors and rivals in expanding the infrastructure and absorbing the investments.