1. Political Economy
China

2. How does China deal with economic planning?
intro
How does China deal with economic planning?

3. Political Economy
China

4. All property was state owned and the economy was centrally planned.
China
Communism
Communism
From China used a Soviet style communist political economic model
Mao promised an “iron rice bowl” of lifetime health care, work, and retirement security)
All property was state owned and the economy was centrally planned.
This system favored industrial production at the expense of consumer goods.
Industries were nationalized from & land redistributed to 300 million peasants before the Great Leap Forward

5. China Communism Industrialization
Mao used a “Reds vs Experts” policy putting party cadres against those with economic training.
Small scale labor intensive industries developed
Economic energy was shifted from agriculture to inefficient industry
After the Great Leap Forward, industries began to emphasize expertise over political goals

6. China Communism Cultural Revolution
Mao attacked the “experts” as capitalists
Cultural Revolution
Persecutions affected those with the most expertise in economics
The impact on the economy was devastating
After the Cultural Revolution, China was a poorly functioning and isolated economy

7. China Reform & Opening Deng Reform & Opening began in 1978
Leadership shifted its focus from communist goals to creating rapid economic growth
Agricultural communes of the GLF were replaced with by the household responsibility system
This system meant land was contracted out to families who still had to give some amount of their produce to the state, but could sell the surplus
Food production improved and famines no longer occurred

8. China Reform & Opening Deng Industries were decentralized.
Town and village enterprises were given more economic freedom & encouraged to generate profits.
Private industry was permitted by the middle of the 1980s
The govt created special economic zones that offered incentives for foreign investment in coastal cities.
During the 1990s even more economic decision making was given to local officials and private entrepreneurs.

9. China Reform & Opening Growth Growth was unprecedented
The economy grew annually at 10% for three decades after reform & opening
Hundreds of millions of people were lifted out of poverty
This became the new source of legitimacy for the govt. Economic growth made people trust the govt.

10. State Capitalism
China

11. 21st Century China is definitely capitalist
State Capitalism
Capitalism
21st Century China is definitely capitalist
Party state reformers have sold or closed tens of thousands of state owned enterprises
The remaining SOEs are very large, important, and given favor by the party

12. China State Capitalism State Owned Enterprises
China has tightened its control of a few strategic industries
85 Chinese companies are in the Fortune 500 and all but 7 of them are SOEs.
These control industries like oil, coal, transportation, & telecommunications.
They receive preferential lending from the state & favored market access
These policies have enhanced their growth and made employment in them desirable for Chinese elites

13. China has tightened its control of a few strategic industries
State Capitalism
State Capitalism
China has tightened its control of a few strategic industries
85 Chinese companies are in the Fortune 500 and all but 7 of them are SOEs.
These control industries like oil, coal, transportation, & telecommunications.
They receive preferential lending from the state & favored market access
These policies have enhanced their growth and made employment in them desirable for Chinese elites

14. The Chinese model is more neomercantilism
China
State Capitalism
Beijing Consensus
China’s state led model of capitalism is known as the Beijing consensus
As opposed to the neoliberal free market model known as “Washington consensus”
The Chinese model is more neomercantilism
The state nurtures infant industries and gives preferential treatment to domestic firms
There has been significant liberalization in China, but the economic system is substantially closed

15. Challenges of Economic Growth
China

16. China Challenges Challenges
Reform & opening have caused problems as well as great successes
The iron rice bowl of Mao has been replaced by labor mobility, job insecurity, and high unemployment
After emphasis on equality, reform has made China much less equal.
Inequality has grown between rich and poor, as well as between urban & rural.
Gini coefficient was 0.16 in 1978; 0.39 in 1988; and peaked at 0.49 in 2008
US is 0.45

17. Regional inequality is a major problem
China
Challenges
Inequality
Inequality has grown between rich and poor, as well as between urban & rural.
Gini coefficient was 0.16 in 1978; 0.39 in 1988; and peaked at 0.49 in 2008
US is 0.45
Regional inequality is a major problem
Foreign investment is concentrated on the east coast. Much of China’s inland territory has gotten little investment.
Urbanization is increasing rapidly, but more than half the population is rural

18. Reforms have focused on China’s cities
Challenges
Migrants
Reforms have focused on China’s cities
Migrant workers who come to cities lack a residency permit and are therefore excluded from the urban welfare system
They don’t have health care, pensions, unemployment insurance, or education
Even with these challenges facing migrants, their numbers continue to grow
Recent leaders have promised to deal with the imbalance between urban and rural benefits

19. China Challenges Slowing Growth Since 2012, GDP is only growing at 7%
This growth is still more than any other advanced industrialized nation
The govt’s legitimacy is based on their ability to continue to deliver
prosperity to their people

20. China Challenges Factions in the Party
Populists want to address China’s growing inequality problems
Hu Jintao & Li Keqiang are both populists – they worked their way up through the CCP from humble beginnings in rural areas – they see the need for change
Elitists favor economic freedom and efficiency over equality
Jiang Zemin & Xi Jinping are both elitists – they are children of former high ranking officials and they want to emphasize China’s role in the global economy.

21. Foreign Relations
China

22. Creation of PRC and it’s break with USSR made China isolated globally
Foreign Relations
Isolation
Creation of PRC and it’s break with USSR made China isolated globally
The height of its global isolation was during Cultural Revolution when Mao attacked foreign cultural & economic influences
Deng finally helped China emerge from isolation with his “opening” policies
By the end of the 1970s most countries had normalized relations with PRC

23. It’s economically interdependent with the world’s largest economies
China
Foreign Relations
Improvement
There are increasing outbursts of nationalists rhetoric from PRC leaders
China has continued to improve its relations with the rest of the world
It’s economically interdependent with the world’s largest economies
The 2008 Olympics were very important to show China can participate as a peaceful leader of the international community

24. China Foreign Relations Taiwan
Chiang Kai-shek established the Republic of China on Taiwan in 1949
Chiang claimed it as the temporary home to the legitimate govt of all of China
It prospered as a capitalist authoritarian state under KMT rule
It was forced to surrender its UN seat to PRC in 1971.
The US ended formal diplomatic relations with it in 1979 when it normalized relations with PRC

25. CCP leadership has always regarded Taiwan as a province of China.
Foreign Relations
Taiwan
CCP leadership has always regarded Taiwan as a province of China.
China would view any Taiwanese declaration of independence as an act of war & expects its full integration
Taiwan democratized in the 1980s, which made tensions with the PRC worse.
The USA continues to promise military protection & sells weapons to Taiwan
Taiwan & China signed a free trade pact in 2010 & now China is Taiwan’s biggest trading partner

26. China Foreign Relations Hong Kong
The United Kingdom returned Hong Kong to China in 1997
China used a policy called “one country, two systems” in dealing with HK
Hong Kong has virtual autonomy for a transition period of 50 years.
Hong Kong has its own economic & administrative systems
China expects to have Hong Kong fully integrated into China in 2047 although it is unclear what that will mean.

27. China Foreign Relations Japan
Tension exists between China & Japan dating back to occupation in WW2
The two have competing claims over islands equidistant between them
Japan currently maintains control over the islands, but both claim & exercise fishing and drilling rights.
Despite tensions, Japan & China have strong economic ties.

28. China Foreign Relations South China Sea
China has been increasing its sovereignty in the South China Sea by building
islands on coral reefs
These allow China to claim exclusive economic rights to the water around them
China has disputed claims to these waters which are also claimed by Philippines, Vietnam, Malaysia, & Brunei

29. Xi knows these answers…
China

30. State owned enterprises
Main Ideas
China
Reform and Opening
Economic inequality
State owned enterprises
Mao’s Main Ideas
Foreign relations