1. CHINA: THE WORLD’S LARGEST ECONOMY
Economics 1490
THE WORLD ECONOMY:
GROWTH OR STAGNATION?
with
Professor Dale W. Jorgenson
Lecture 19.
CHINA: THE WORLD’S LARGEST ECONOMY
November 2, 2017
Harvard University Department of Economics
Fall 2017

2. THE WORLD ECONOMY:
GROWTH OR STAGNATION?
A. Comparing Economies
B. U.S. Crisis and Recovery
C. European Slowdown
D. Asian Economic Miracles
E. Sustainability of Economic Growth
F. World Economic Outlook

3. D. ASIAN ECONOMIC MIRACLES
16. Is Asia’s Miracle a Myth? 
17. Reviving Japanese Economic Growth
18. The Rise of Developing Asia
19. China: The World’s Largest Economy
20. India: The Most Rapidly Growing Economy

4. SUPPLEMENTARY READING
World Bank (2015), China Economic Update, Washington, DC, The World Bank, July 3. 
National Development and Reform Commission (2016), An Overview of the 13th Five Year Plan, Beijing, China, NDRC, December 7.

5. CAPITAL MUSEUM
Capital Museum

6. THE DECISION ON MAJOR ISSUES CONCERNING COMPREHENSIVELY DEEPENING REFORMS
1. Reform and opening-up has been a crucial choice that China has made regarding its destiny in modern times. But there can never be an end to the need for the emancipation of individual thought or for continuing reform and opening-up. China must deepen its all-round reform with a new starting point.
2. China must stick to the socialist market economy as the orientation of its reform, must promote social fairness and justice and must seek to advance the well-being of the people. The general purpose of deepening its all-round reform is to develop socialism with Chinese characteristics, to advance modernization in the State governance system and governance capability. The basic economic system should evolve on the decisive role of the market in resource allocation. Political reform must evolve around the leadership of the Communist Party of China and advance the institutionalization of socialist democracy. Cultural reform must evolve around the socialist core value system. Social reform must evolve around the protection and improvement of the people's livelihood and advance fairness and justice. The development of an eco-conscious civilization must evolve around the building of a beautiful China. The reform of Party building must evolve on the effort to raise the level of governance to be scientific, democratic and according to the law.
3. The reform of the economic system is the focus of all the efforts to deepen the all-round reform.
4. The successful experience of the past reform and opening-up must be built upon. Decisive results are to be obtained in key areas in 2020.
Adopted at the Third Plenary Session of the 18th Communist Party of China Central Committee. China Daily, November 16, 2013.

7. CHINESE ECONOMIC GROWTH BEFORE THE CRISIS
Growth Averaged Nearly Ten Percent Per Year from
Investment Has Exceeded Forty Percent of GDP
Growth Accelerated from , Powered by a Surge in Exports
Growth Was Interrupted in the Fourth Quarter of 2008 by the Collapse of Exports, but Growth for the Year was 9.6 Percent.

8. WEN JIBAO
Wen Jibao Promises to Maintain Economic Growth in the Year of the Tiger Despite Turbulence

9. ZHONGNANHAI COMPOUND
South Entrance to Zhongnanhai Compound, Site of November 5, 2008, Meeting of the State Council Convened by Premier Wen Jibao

10. CENTRAL DOCUMENT NO. 18

11. CHINA'S RESPONSE TO THE CRISIS
Provincial and Local Governments Responded to the Meeting at Zhongnanhai on November 5, 2008, by Proposing Investment Projects Amounting to 80 Percent of the GDP.
The Stimulus Package Extended Over Nine Quarters, Beginning with the Fourth Quarter of 2008, and Amounted to Thirteen Percent of the GDP.
Projects Were Mainly Financed by the Central Government through Borrowing.

12. CHINA BEFORE AND AFTER THE CRISIS
China's Response to the Global Financial and Economic Crisis Was Extremely Rapid
The Stimulus Program Was Focused on Investment. This Has Postponed Efforts to Restore the Role of Private Consumption as a Proportion of the GDP
Exports Dipped in 2009, but Rebounded Sharply in Monetary Policy Became More Restrictive to Avoid the Risk of Overheating.

13. HIGH-SPEED RAIL AND THE STIMULUS PROGRAM
As China upgrades and expands its rail system, it creates the economies of large-scale production for another big export industry. “The sheer volume of equipment that they will require, and the technology that will have to be developed, will simply catapult them into a leadership position,“ said Stephen Gardner, Amtrak’s vice president for policy and development [...]
Officials drafted a plan to move much of the nation’s passenger traffic onto high-speed routes by 2020, freeing existing tracks for more freight. Then the global financial crisis hit in late Faced with mass layoffs at export factories, China ordered that the new rail system be completed by 2012 instead of 2020, throwing more than $100 billion in stimulus at the projects.
Administrators mobilized armies of laborers ­ 110,000 just for the 820-mile route from Beijing to Shanghai, which cut travel time to five hours, from 12, when it was opened in June 30, 2011.

14. TRAVEL IN THE YEAR OF THE TIGER (2010)
The world’s largest human migration ­ the annual crush of Chinese traveling home to celebrate the Lunar New Year ­ is going a little faster this time thanks to a new high-speed rail line.
The Chinese bullet train, which has the world’s fastest average speed, connects Guangzhou, the southern coastal manufacturing center, to Wuhan, deep in the interior. In a little more than three hours, it travels 664 miles, comparable to the distance from Boston to southern Virginia. That is less time than Amtrak’s fastest train, the Acela, takes to go from Boston just to New York.
Even more impressive, the Guangzhou to Wuhan train is just one of 42 high- speed lines recently opened in China. By comparison, the United States hopes to build its first high-speed rail line by 2014, an 84-mile route linking Tampa and Orlando, Fla.

15. TUESDAY, OCTOBER 26, 2010
China on Tuesday unveiled the world's fastest bullet train, which will connect two of the country's industrial hubs travelling at an average speed of 245 miles per hour or over 350 kilometers per hour. During trials, the train set the world speed record traveling at over 420 kilometers per hour.
The home-built CRH380 bullet train represents a large step forward for the Chinese high-speed rail program as previous trains had used shared technology from Europe and Japan.
The CRH380 train, operating on the Beijing-Shanghai High Speed Railway, can reach an operational speed of 380 km/h (240 mph), but runs at 300 km/h.
The rail link Shanghai and Hangzhou, covers the 200-km distance in only 45 minutes, reducing the travelling time from 78 minutes.
On 23 July 2011, two high-speed trains collided in the Lucheng District of Wenzhou, Zhejiang Province, China. Several carriages of each were derailed. State-run Chinese media confirmed 40 deaths, and at least 192 people were hospitalized, including 12 who were severely injured.
The Chinese government formed a commission to investigate the accident with a directive to report its findings in September On August 10, 2011, the Chinese government announced that it was suspending approvals of any new high-speed rail lines pending the outcome of the investigation.

16. THE CHINESE HOME-BUILT CRH380A

17. CHINA HIGH-SPEED RAIL NETWORK, 2020

18. CHINA’S RESPONSE TO THE CRISIS: SUMMARY
First paragraph should read: The Stimulus Program Put in Place on November 5, 2008, Was Focused on Investment. The 12th Five-Year Plan, Inaugurated in 2011, Was Intended to Rebalance the Chinese Economy Away from Investment and Exports and Toward Private Consumption.
Investment in High-Speed Rail and Other Major Infrastructure Projects Will Continue. China Plans to Spend $300 Billion to Build a 25,000 Km (16,000 Mi) High-Speed Rail Network by 2020.

19. CHINA’S IMPRESSIVE ECONOMIC PERFORMANCE

20. CHINA OVERTAKES JAPAN

21. THE WORLD’S LARGEST EXPORTER

22. THE WORLD’S LARGEST MANUFACTURER

23. CHINA’S PROJECTED GROWTH PATTERN

24. HIGH SAVINGS

25. SAVINGS IN CHINA COMPARED TO OTHER ECONOMIES

26. CONSUMPTION

27. INVESTMENT

28. INEQUALITY

29. TIME LINE FOR CHINESE ECONOMY POLICY
2012: Xi Jinping and Li Keqiang Assume Office.
2013: Third Plenum of the Central Committee of the Communist Party of China.
2015: Guiding Opinions on Deepening Reform of State-Owned Enterprise.
: Thirteenth Five-Year Plan

30. ENVIRONMENTAL COSTS

31. CHINA’S ‘NEW NORMAL’ Faster Urbanization Poverty Relief
Child Policy Change
Household Registration System
Balanced, Sustainable Growth in
Wider Opening Up
Financial Reforms
‘Green’ Development

32. SUPPLY SIDE STRUCTURAL REFORM
1. Cut excess [industrial] capacity
2. Cut down excess stocks [of unsold housing]
3. Cut leverage (i.e., reduce debt)
4. Reduce costs
5. Fill in weak spots