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CHINAS GROWTH STORYToo Good to last forever?

Mithila Yaul 2014161

Nachiket Bhagdikar 2014165

Nilesh Thakur 2014180

Nishant Agrawal 2014181

Neha Nahata 2014172

Prerna Gaba 2014204

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REASONS

Infrastructure development

Open Economic Policy

Foreign relations

Technology

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Current Macroeconomic Indicators

GDP- 7.3%

Inflation rate- 1.6%

Interest rate- 5.6%

Savings rate- 0.35%

Unemployment rate- 4.1%

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Date: December 18-22, 1978

Third Plenum of the CCP Eleventh Party Congress

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REFORMS

Opening-up

Policy

Establishment of

Four

SEZs(Shenzhen,

Zhuhai, Xiamen &

Shantou)

Reforms in ForeignTrade regime

Trade Liberalisation

SEZ

ImportHigh

Technology

IncreaseExports

AttractForeign

Investment

EarnForeign

Exchange

CreateJobs

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Agricultural Reformchange the collective farming institutions with a

household responsibility system (HRS)

Decentralization of the Government

delegating fiscal and administrative powers

from the central government to the provincial

and lower level governments

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State-Owned Enterprise Reform

enlarge enterprise autonomy and to expand the

role of financial incentives

two-track system

Moving towards a Market Economy

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Financial Reforms

Peoples Bank of China

Industrial and CommercialBank of China

China Construction Bank

Agricultural Bank of China

Bank of China

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Approaches

A Pragmatic and Incremental Approach

A Micro-first and Self-propelling Approach

Dual-track and Growing-out-of-plan Approach

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A Pragmatic and Incremental Approach

Pragmatism success are determined by experiment rather than by

ideology Incrementalism

idea is implemented locally or in a particular economicsector

reduce the transitional costs increase the reform benefits

minimize the uncertainty of economic reforms

maximize the possibility of success.

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A Micro-first and Self-propelling Approach

the government took measures to improve the micro

incentives

granting partial managerial autonomy

profit-sharing to the micro units

introduced a dual-track price and allocation system

the resources to be allocated increasingly by the micro units

liberalized the price

gradually introduced and strengthened the necessary market

institutions

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Dual-track and Growing-out-of-plan

Approach

economic agents are assigned rights to andobligations for fixed quantities of goods at fixed plan

prices as specified in the preexisting plan the commune -sell a fixed quantity of output to the

state procurement agency & pay a fixed tax to the

government

it can liberalize markets without creating losers andthus is politically appealing

can also achieve efficiency

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CONSEQUENCES OF CHINESE ECONOMIC

REFORMS Diminishing State Sector

o Share of GIOV produced by SOEs decreased from 77.6% to 13%.

o SOEs have been consolidating through mergers, bankruptciesand regrouping.

o Chinas SOEs have nearly completed separating themselves

from the social functions of providing housing, day care,

hospitals, and schools for their employees.

o The government has also relaxed the restriction that the state in

a state-holding enterprise must hold more than 50 percent of

the shares.

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Integrating China into the Global Economy

China as a world factory

Top producer for more than 100 products

Increase in global exports

FDIs Contribution to Chinas

Economic Development Investments

Industrial output and value-added

Exports

Foreign exchange

Tax revenues

Employment

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Causes for Slowdown

Fall in exports Recession in Europe and a patchy

economic recovery in the U.S, increasing cost of

labour. Fall in Domestic Demand

Middle income trap Chinas per capita income

projected to reach $10,000 by 2015 . combined withhigh old age dependency ratio, high investment rate

with low rate of return, undervalued exchange rate.

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Wage inflation

The Invisible debt The debt of households and

corporations amounts to 130% of GDP

Over heated Investment It has an investment

rate of nearly 50% of GDP.

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Poor governance A weak and relatively

decentralized government.

Ageing population

Housing and Banking are a mess Following a

real estate bubble, in addition the countrys

shady banking sector which is overloaded with

bad loans.

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CAN THIS GROWTH STORY LAST

FOREVER?

Increase of GDP to debt ratio from 147 per cent at the end of

2008 to 251 per cent by the end of June this year.

When China started economic reform in 1978,it was very

backward and had very less productivity.

Chinas banking Sector is still dominated by State Controlled

banks.

No Synchronization between economic reform and political

reform.

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BIBLIOGRAPHYhttps://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_story

http://www.businessinsider.in/8-Charts-That-Clearly-

Confirm-China-Is-Slowing-Down/articleshow/33834171.cms

http://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.html#axzz3L8TQiNgS

Journal of Economic PerspectivesVolume 26

https://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_storyhttps://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_storyhttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.ft.com/cms/s/0/ccb72910-60f1-11e4-894b-00144feabdc0.htmlhttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttp://www.businessinsider.in/8-Charts-That-Clearly-Confirm-China-Is-Slowing-Down/articleshow/33834171.cmshttps://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_storyhttps://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_storyhttps://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_storyhttps://www.academia.edu/8629850/Why_rapid_economic_growth_in_China_The_success_story

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THANK YOU