Nikhil Joshi (31)

Shrikant Birajdar (55)

Vinod Prajapat (63)
 CAPITAL - BEIJING
LARGEST CITY – SHANGHAI
OFFICIAL LANGUAGE – MANDARIN
GOVERNMENT – SOCIALIST REPUBLIC,
SINGLE PARTY
COMMUNIST
STATE
PRESIDENT – Mr HU JINTAO
ESTABLISHMENT - People's Republic of
China proclaimed.
1 October 1949 
TOTAL AREA- 9,640,821 km2[d] or
9,671,018 km2[d]
( 3rd/4th)
3,70 4,427 sq mi
POPULATION - 2000 census -
st
GDP (PPP) -
2009 estimate Total $7,034
trillion[1](2nd)
 Per capita - $5,325[1] (99th)

GDP  (Nominal)
2009 estimate
Total $3,280
trillion[1](3rd)
 Per capita - $2,483[1] (105th)
 Gini (2007) 47.0[2] 

 HDI (2006)
▲0.762 (medium) (94th)

 Currency
Yuan[c](CNY)
 GDP growth rate (2008) - 9.0% (official
data)

GDP by sector (2007)

Agriculture (Primary)
(11.1%)

Industry (Secondary)
(48.5%)

Services (Tertiary)
(40.4%)
 Private consumption
36.4

Government consumption
13.7

Gross fixed investment

40.9

Exports of goods/services
Domestic demand growth (2002-06 avg) 9.3 %

Interest rates(2008)
One-year benchmark deposit rate: 4.14%
One-year lending rate: 7.47%

Inflation rate (CPI) 4.9%

(CPI: 8.7%, Feb 08- Feb 09)
4.5% (2007 avg)
1.7% (2006 avg)

Population below poverty line (2004) -- 10%

Labor force(2006) 795.3 million

Labor force by occupation (2006)

Agriculture (43%),
Industry (25%),
Services (32%)
 Unemployment rate (2006) - 4.3% (official);
17%
(unofficial)

 Industrial production growth rate

- 22.9%
 Main industries
Mining And Ore Processing, Iron, Steel,
Aluminum, And Other Metals, Coal; Machine
Building; Armaments; Textiles And Apparel;
Petroleum; Cement; Chemicals; Fertilizers;
Consumer Products, Including Footwear, Toys,
And Electronics; Food Processing;
Transportation Equipment, Including
Automobiles, Rail Cars And Locomotives, Ships,
Agricultur
al
products
Rice, Wheat, Potatoes, Corn (Maize),
Tobacco, Soybeans, Peanuts
(Groundnuts), Tea, Millet, Barley, Apples,
Cotton, Oilseed; Pork; Fish
 Natural resources
Coal, Iron Ore, Crude Oil, Mercury,
Tin, Tungsten, Antimony,
Manganese, Molybdenum,
Vanadium, Magnetite, Aluminum,
Lead, Zinc, Uranium, Hydropower
Potential (World's Largest)

 Investment (gross fixed) (2006)

40.9% of GDP
 Foreign direct investment
(FDI) inflows (2007) 3.1% of GDP
 Current account balance (2008)
$262.2 billion (9% of GDP)
(ranked 1st)
 Exports (2008) $1.22 trillion f.o.b.
 Principal exports (US $ bn) (2008)
Office machines & data processing equipment (134.5),
Telecommunications equipment (123.6), Electrical
machinery (101.7), Apparel & clothing (95.4),
Miscellaneous manufactures (55.5)
 Main destinations of exports (2008)
US 19.1%, Hong Kong 15.1%, Japan 8.4%,  South Korea
4.6%, Germany 4%
 Imports (2007)
$904.6 billion f.o.b.
 Principal imports (US $ bn) (2006)
Electrical machinery (174.8), Petroleum &
related products (84.1), Professional &
scientific instruments (48.6), Metalliferous
ores and scrap (44.0), Office machines &
data processing equipment (40.7)
 Main origins of imports (2007)
Japan 14%, South
Korea 10.9%, Taiwan10.5%, US 7.3%,Germ
 Publicdebt (2006)
22.1% of GDP

 External debt (2006)

$315 billion

 Forexreserves (2008)
$1.905 trillion

 Revenues(2006)
 China – Energy Baseline
 China has 21% of world population
 and uses 10% of world energy use.
 China is the second largest
 consumer of oil and is the source
 of 40% of world usage growth
 over the past few years.
 The Evolution of the Chinese Economy
from 1980 – 2005

 The Impact of China’s Accession to the

World Trade Organization

 China’s Growth Prospects for 2009 – 2020

 Conclusions and Key Challenges

 Over the past 25 years, annual GDP growth has
averaged over 9%

GDP (billion dollars)

2,500
GDP (billion dollars)

2,000
1,500

1,000
500

0
1980 1990 2000 2005
Year
 Capital accumulation has been the most important
source of growth
 Trade’s role in China’s economy has increased

Table 1.7 China's Exports and Imports, 1980 - 2005

Measure 1980 1990 2000 2005

Average annual export growth rate (percent) 13.2 14.8 25.1

Average annual import growth rate (percent) 10.4 15.4 24.1

Trade dependence ratio 0.13 0.30 0.40 0.64

 However processing trade represents a significant

share; value added in China is less than implied
 Growth has lifted incomes
 Percentage of population living on $1/day
has fallen from 80 percent in 1980 to
20% today

 Yet 70% of population still lives on

$2/day

(Source: World Bank)

 Urban/rural disparities remain pronounced
 2005 Rural average net income: $397
 2005 Urban average net income: $1281

 Sustained growth will require generating

higher-productivity and higher-income
employment opportunities for the 45% of
the population still engaged in low-
productivity agriculture
 Why use a model to study what has already
happened?
 Model projects impacts to 2010

 Investigate impact of textile and apparel

restraints, imposed after last modeling exercise

 Isolate causal relationships

 Explore impact of different labor market

assumptions
Results with surplus labor compared to full-
employment assumption:

 Overall gains went higher

 Gains from manufacturing liberalization are

closer to level of gains from agricultural
liberalization

 Investment growth became much stronger

 Distribution of gains Urban

from accession by
Low est
household income type Low
Medium Low
 Gains are fairly evenly
Medium
distributed between rich Medium High

and poor households High

Highest
within urban and rural
household groups (S7 Rural
and surplus labor
assumption) Low est

 % gains ranges from 2.8 Low

Medium Low
-3.2 urban, 1.5-2.1 rural Medium
Medium High
High
Highest
 However, urban households as a group gain significantly more
than rural households as a group (S7 and surplus labor),
primarily because urban households unambiguously benefit
from agricultural liberalization, while increased agricultural
imports hurt many rural agriculture-producing households
Percent change relative to baseline

25

20 Highest
High
15 Medium High
Medium
10 Medium Low
Low
5
Lowest

0
Urban Rural
 Employment Changes (surplus labor assumption)
 Agriculture
▪ Net job creation: 800,000 jobs
▪ Gains: 2.4 million jobs in livestock production
▪ Losses: 1.8 million jobs in rice
 Manufacturing
▪ Net job creation: 4 million jobs
▪ Gains: 965,000 in apparel
▪ Gains: 865,000 in textiles
▪ Losses: 217,000 jobs in automobiles
 Services
▪ Net job creation: 7.75 million jobs
▪ Gains: 670,000 in commerce (trade)
▪ Gains: 548,000 in construction
 Employment Changes (surplus labor)
 Net 13 million jobs created
 Current labor force numbers 918 million
 300 million additional jobs needed to reach full
employment

 Policy conclusion
 Trade alone cannot solve employment challenges
 Domestic demand and government policy must be main
drivers of job creation
 Areas of uncertainty
 International
▪ Rise in protectionism
▪ Dollar crash
▪ Worsening terms of trade (cost of imports v. exports)
▪ Financial liberalization leading to volatility
 Domestic
▪ Savings patterns of aging of population
▪ Persistent rural poverty
▪ Sluggish employment generation
 Model explores three scenarios
 Baseline
 Optimistic
▪ Increased trade
▪ Improved resource allocation
 Pessimistic
▪ Less trade growth
▪ Less efficient allocation of resources
 Trends in composition of output and employment

 In all scenarios the share of agriculture in employment

and output will fall
 Employment and output of secondary sector will grow
through 2010 but then decline as growth in service
industries begins to pull in larger numbers of workers
 Pace of this transformation will depend on level of
domestic investment in human capital and growth in the
technologically-advanced service industries that serve
manufacturing industries
 Baseline Scenario
 Sources of Growth: 2006-2020
 In all scenarios, capital accumulation
continues to drive growth Labor

 Growth in TFP varies according to Capital

gains in efficiency
Total Factor
 Contribution of labor does not grow Productivity
in any scenario (demographics)

Optimistic Scenario Risk Scenario

Labor Labor

Capital Capital

Total Factor Total Factor

Productivity Productivity
 Returns to labor in 2020 relative to 2002
(percent
3000
change)
Percent change

2500

2000
Profes s ionals
1500 Production workers
Agricultural labor
1000

500

0
Bas eline Optim is tic Ris k Scenario
Scenario Scenario

 Agricultural workers stand to gain the most

but also face greatest losses relative to
baseline if risk scenario materializes
 Projected changes in household income in 2020 relative to
2002 (percent change)
Percent change

3500
3000 Highest
2500 High
2000 Medium High
1500 Medium
1000 Medium Low
500 Low
Optimistic (Urban)

Optimistic (Rural)
Baseline (Urban)

Baseline (Rural)

Risk (Urban)

Risk (Rural)
0 Low est

 Rural households stand to gain the most but also face

greatest losses relative to baseline if risk scenario
materializes
 Capital accumulation will continue to be single
most important driver of economic growth

 Sustainability of growth will depend on

improvements in total factor productivity (TFP)

 Costs of adverse developments in international

environment and/or domestic policy missteps will
be borne disproportionately by the rural poor
 Despite the importance of trade to
China’s economy, results from the WTO
model suggest that trade can play only
a limited role in creating employment
opportunities
 Broad-based domestic demand will be
required to sustain growth; additional
advantage that it relieves international
pressures and risks
 Generating broad-based demand will
require adequate job creation at all skill
levels and particularly in rural areas

 Paceand quality of job creation should

be a key focus of policy makers

 Where can jobs be created?

 Laborintensive service sector
industries, such as education and
health care, represent promising
sources of new jobs

 Demographic structure of China means demand for

health care by aging population will grow

 Moving up technology ladder means China will

need more and changing mix of skill—more
education services
 Thisdemand will require adequate
supply and adequate provision of
finance. Policies required:

 Boost domestic demand for services

▪ Stronger social safety nets (health, pensions)
▪ Supply social infrastructure (schools, hospitals)
▪ Support for education (tuition, fees)

 Provide appropriate education and training

opportunities
 China is believed to be one country that has
largely been able to protect itself from effects of
US subprime crisis and credit crunch.
 But this nation is undergoing certain structural
changes as far as its economy is concerned.
 Shanghai stock exchange has lost about two-
thirds of its value. Chinese export industry is also
experiencing difficulties in growth prospects.
 But despite these challenges, Chinese economy
is believed to be independent and strong enough
to not only cope with global economic crisis, but
also establish itself as an global economic giant.
 China is one of world's largest receiver of foreign
direct investments.
 World Bank estimates reveal that around $80
billion are invested in China annually.
 China's job market is also quite impressive,
offering employment to about 15 million new
workers on a yearly basis.
 Large-scale poverty eradication and fastest rise
in income levels of individuals in China, have
lent support to a view that this South-East
Asian country, in near future, will surpass US in
terms of economic power. 
 Corruption at local level governance
has been a perennial challenge for this
nation.
 Central government's inability to
control affairs of local government has
always proved to be a hindrance to
China's economic growth.
 Economic reviews of China have
revealed that attempts made by
central government to counter this
menace has been a slow and long-
 China's economic future depends a lot
on on how it manages to build upon its
strengths and overcome its
weaknesses.
 Chinese government needs to be
proactive to prevent a possible
financial sector collapse in their
country.
 A sustained rate of growth may help
China to surpass US and become
world's largest economy.
THANK YOU