Pre-1978 China

• 1949 - 1 October - Mao Zedong, founds the People's Republic of China.

• 1950 – China gets involved in the Korean war.• 1950 – Tibet becomes part of the peoples

republic of China.

• People = Power

• 1958 - Mao’s “Great Leap Forward”

• 1959 - Chinese forces suppress large-scale revolt in Tibet.

• 1962 - Brief conflict with India over disputed Himalayan border

• 1966-1976 - Cultural Revolution

“Destroy the old world; forge the new world”

A Red Guard crushes the crucifix, Buddha, and classical Chinese texts with his hammer

• 1976 – Mao Dies• The Gang of Four. • The members consisted of Mao Zedong's last

wife Jiang Qing, the leading figure of the group, and her close associates Zhang Chunqiao, Yao Wenyuan, and Wang Hongwen.

• 1979 - Diplomatic relations established with the US.

Economic Reform in China

•By Ashley Jones

The Transition of Power The 'open door' policy was introduced by the Chinese Premier Deng

Xiaopeng at the Communist Party Conference in December 1978.Until this point, the People's Republic of China had been centrally planned

economy. This means that all economic activity is managed by the Government. A

protectionist, self-sustaining ideology is common in all Communist and Marxist countries, where the state has a economic monopoly.

Mao Zedong won power in 1949 after a civil war with the centrist-right nationalist party Kuomnitang, who retreated to Taiwan. The war claimed some 8 million lives between the years 1927-1937 and 1946-1950.

The Start of Reform Deng Xiaopeng had returned from political exile when Mao

Zedong died in September 1976. Previously, the party had been abhorrently against reformist policies.

Throughout 1977 however, the reformist ideology and plans gained many plaudits, and sent the reputation of Deng spiralling through the roof.

In December 1978, the reforms were announced at the Third Plenary session of the 11th CPC central committee. This was the point where Xiaopeng pretty much became the leader of China, though he didn't officially Hua Guofeng until 1981.

The First Steps Xiaopeng's first approach in the late 1970's was to reform the agricultural

sector. This primary industry had been collectivised, where private landlords were eliminated and farming families were organised into communes.

At this point, domestically-produced food supplies were reaching low levels not seen since the famine brought by the Great Leap Forward in the late 1950's.

The household-responsibility system was introduced nationwide across the industry in 1981.

Household Responsibility System In 1981, communes were divided into plots; people were given land by the

government, and these people could now grow crops on fields that they privately owned.

Government quotas on what needed to be grown were significantly reduced, and now going beyond this quota could produce a very sizeable reward.

This was because whatever food that was grown as a surplus to the quota could now be sold on an unregulated market; Chinese agricultural workers could now make a profit on their livelihoods.

98% of farmers were on this system by the end of the 1980’s.

Since 1988, China has concentrated on making these Special Economic Zones larger.

More coastal areas were opened up to investment at this time, creating a platform for free trade all over the Yangtze and Pearl river deltas. The South East coast of China is nearly entirely open with favourable business policies.

Border cities and all provincial Capitals in Inland areas were opened up in 1992 after another massive wave of reform.

Where are the SEZs?

Government Decentralisation Throughout the 1980's, there was a massive emphasis on the

decentralisation of government, and the devolvement of authority to local councils.

Township and Village Enterprises were one way of doing this. The term was first used in 1984.

This describes companies actually located in townships and villages rather than it's ownership or structure.

These were flexible in ownership; some were independent whereas some were entirely managed by the council it was located in.

This left local provincial leaders to experiment with ways to increase economic growth and privatize the state sector.

From 1978 to 1985, these increased 8 fold to 12 million, and nearly 135 million people were employed in them by 1996.

Currency Reform The Yuan Renminbi had been pegged with the US Dollar since it's existence

in 1949; it was not a freely floating currency. During Deng Xiaopeng's time in office, this peg was still in place to manage

the value of the Renminbi. Though, to increase the lucrativeness of Chinese exports, the currency was continuously devalued, from 2 yuan per dollar, to over 8.5 in 1994.

In order to strengthen the currency and reduce inflation, this peg was removed in 2005. Now, the Yuan freely floats in Forex market, in that it's value is dictated by supply and demand. Government intervention is still in place though.

Opening up Private Markets The Shanghai Stock Exchange was re-opened in December 1990, forty years

after it had been shut down by Mao Zedong's egalitarian regime. Having a stock market meant that Chinese based companies could now sell

equity on a public market in return for capital. It was a way for firms to obtain money, and for speculators to make money.

Privatisation Privatisation is the process of a governmental organisation or department

being sold on/acquired and become part of the private sector. In the 1980's, this happens to many government departments which

became unviable to run. More large-scale privatisation occurred through the 1990’s, especially during

1997 and 1998. Nearly all state enterprises were liquidated and passed on to private investors.

The Impacts of this Reform

Economic Growth

Domestic Yield Growth

Though there have been Growing Pains...

Explaining Inflation

Built-In Inflation Cost-Push Inflation

Demand-Pull Inflation

The Effect of the Devalued Yuan

• There is great concensus in the IMF and amongst economists that the Yuan is devalued by between 5 and 27%. Whilst it has been the catalyst of economic growth in China and throughout the world, there has been a lot of criticism of the ‘Weak Yuan’.

• Keeping the currency’s value low was a key factor to the creation of inflation. This was because the government has to buy foreign currencies via investment and trade surpluses… and this involved printing money…

• Undermines domestic consumer’s purchasing power as an undervalued Yuan makes foreign goods more expensive.

• Exacerbates capital misallocation problems in Chinese banks, creates more bad loans.

• Completely against rules mandated by GATT and the WTO, currency manipulation through direct intervention is PROHIBITED.

China’s Energy Industry…Investment in renewables is now part of

China’s economic stimulus strategy.

Renewable Energy - Hydropower

• China's installed hydropower capacity has surpassed 200 GW in late August 2010.

• Hydropower projects such as the Gansu Dang River Hydropower Project (2007) are registered as Clean Development Mechanisms (CDMs) under the Kyoto Protocol.

Renewable Energy – Wind Power

• China has identified wind power as a key growth component of the country's economy…

• Researchers from Harvard University and Tsinghua University have found that the People's Republic could meet all of its electricity demands from wind power by 2030.

• As of 2010, China has become the world's largest maker of wind turbines – among the leading companies are Leading wind power companies were Goldwind, Dongfang, and Sinovel.

Renewable Energy – Solar Power

• China produces 30% of the world’s solar photovoltaics (PV)…

• According to some studies, the demand in China for new solar modules could be as high as 232 MW each year from now on until 2012.

• The government has announced plans to expand the installed capacity to 20 GW by 2020.

• Golmud Solar Park, Qinghai Province, is China’s largest solar park, with over 200 megawatts.

Renewable Energy – Biomass,

Biofuel and Geothermal

• China plans to develop 6 megatons a year of fuel ethanol capacity, which is expected to grow to 15 megatons/year by 2020.

• Work has begun on the ¥250 million (US$ 40,046,500) Kaiyou Green Energy Biomass (Rice Husks) Power Generating project which will generate 144 GWh/year and use 200 kilotons/year of crop waste as inputs.

• There are over 2,700 hot springs occurring at the surface, with the temperature exceeding 25°C.

• China the second direct user of geothermal energy in the world.

Nuclear Power

• As of 2012, the People's Republic of China has 16 nuclear power reactors and 26 under construction.

• Intention to raise the percentage of China's electricity produced by nuclear power from the current 1% to 6% by 2020 (20% in the USA).

• Due to increasing concerns about air quality, climate change and fossil fuel shortages, nuclear power has been looked into as an alternative to coal power in China.

• More long-term plans for future capacity are 200 GW by 2030 and 400 GW by 2050. Fast neutron reactors are planned to contribute 1400 GW by 2100

Efforts to reduce CO2 emissions

• The Chinese government is implementing multiple policies to promote renewable energy. From 2008 to January 2012, China held the top spot in clean energy investment.

• In 2011, coal consumption decreased by 10 percent.• Non-fossil energy currently accounts for more than 8 percent of the total primary

energy consumption.• Chinese energy experts are estimating that by 2050 the percentage of China's energy

requirements that are satisfied by coal-fired plants will have declined to 30-50% of total energy consumption and that the remaining 50-70% will be provided by a combination of oil, natural gas, hydropower, nuclear power, biomass and other renewable energy sources.

• At the UN climate summit in 2009 in New York, pledged that China will adopt plans targeting to use 15% of its energy from renewable sources within a decade.

• The government’s Golden Sun program providing financial subsidies, technology support and market incentives to facilitate the development of solar power industry.

Consumption

• 2nd in the world for energy consumption

• 9.8% of world energy consumption. • By 2025 - 14.2% of world energy consumption.

• China’s industrial sector accounts for 70% of total energy consumption.

• 2 new coal plants built per week

Non-renewable energy Consumption

• 1981 – 2011: energy consumption increased by 5.28 % ANNUALLY

• Energy intensity 2005 figures:

In China - 35,766 British thermal units per $.

UK and Japan figures < 7,000.

Problems with countries growth

• Improvements in efficiency are often overwhelmed

• Experts estimate that the country builds, on average, 2 new coal plants per WEEK.

• One barrier for energy efficiency is a lack of money. As the country is chasing after Steel companies who have not repaid loans and other unpaid debts.

Effects of Non-renewable energy

• In 1998, of the ten most polluted cities in the world, seven can be found in China.

• As of 2001, China accounted for 13% of CO2 emissions worldwide.

• Air pollution – caused from the use of oil and gasoline in the transportation sector.

• Water pollution –from groundwater polluted by factories and mining operations.

• China is the leading global CO2 emitter• Major effects on health problems across the country

Non Renewable Production• China has always been the largest

producer of coal• In 2011, output of primary energy

equalled 3.18 billion tons of standard coal.

• In the UK coal supplies 33.4% of electricity.

• Whereas China relies on coal for 55% of its electricity.

• China's energy problems are a direct outgrowth of being an industrializing "producer,"

Coal-fired Electricity - different countries

• OECD - Organisation for economic development and co-operation

Terrawatt –hour per year

China’s manufacturing industry

Introduction to the industry• The manufacturing industry forms the backbone of the Chinese economy. Following

China's entry into World Trade Organization in 2001, China’s economy has grown exponentially.

• The Chinese manufacturing industry is first among the manufacturing industries of the world, ahead of the USA, Japan and Germany. It is a highly important industrial sector in China, producing 44.1% of GDP in 2004 and accounting for 11.3% of total employment in 2006.

• China was the seventh largest manufacturing economy in 1990, third in 2000, and number one in 2010.

• China's leap to the top came through a combination of price increases, exchange rate appreciation, and an extremely fast growth rate in the physical volume of manufacturing value.

Chinas trade with the worldChina’s economy is structured around exports which account for about 30% of its GDP. Most of those exports go to the US and Europe.

Purchasing Managers IndexThe PMI= An indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no changeThe Purchasing Managers Index (PMI) for China’s manufacturing sector: fell to 50.4 percent in January from 50.6 percent in December.

Chinas success• China's manufacturing sector has been one of the biggest

drivers of its growth over the past few decades.• A key role in the sector's success has been played by the

availability of a large pool of low-cost labour, which has seen China become the destination of choice for many global firms looking to make goods cheaply.

• However, researchers at the International Monetary Fund (IMF) have said that China's pool of low cost labour is likely to decline in the next few years.

• After the reforms of 1978, economic growth was given most attention. The policy of reform has allowed economic sectors to develop.

• For example, such an impressive growth in car output has been achieved largely through establishing of a number of joint ventures with outside companies such as Volkswagen, General Motors, and others.

Car industry• In the 1990s, China’s auto industry grew. China’s automobile production exceeded

1 million vehicles for the first time in 1992.• China’s automotive production grew from 2 million cars in 2000 to over 13 million

cars in 2009. Some growth has been due in part to China’s entry into the World Trade Organization in 2001. China’s automobile production increased an average of 21% annually between 2002 and 2007. China surpassed the US in 2008 to become the world’s second largest automobile producer behind Japan.

Such an impressive growth in output has been achieved largely through establishing of a number of joint ventures with Volkswagen, General Motors, and others. While the initial approach was to bring in key subsystems such as engines, transmissions and other from foreign companies, the present emphasis is on building up the supply chains in China.

Chinas five-year plan In the summer of 2012 China released The Five-Year Plan with a focus on emerging Industriesto accelerate the evolution of the country’s current foreign trade structure and economic development model. The Plan aims at an annual growth rate of 10 percent in imports and exports of electromechanical and high-tech products during 2011-2015, reaching a total of US$2.5 trillion by 2015.

The plan’s six major tasks include:New & Alternative Fuels for the Automotive Industry: Concerns over the boom in car ownership, with fuel and pollution worries growing, China is looking to clean-burning carsInformation Technology: China’s tech industry is accelerating and the number of professionals skilled enough to take on demanding IT jobs is low. To keep up with its neighbours Japan and South Korea, China will attempt to pump resources into multiple facets of its IT sector.Biotechnology: An obvious choice given the agricultural and medical needs of a massive populace, the biotech sector will see considerable funding over the next five years.High-End Manufacturing: Following the general resolution that aims to “green up” the production of consumer goods, Chinese companies and foreign entities with manufacturing centers in China will be increasingly pressured to improve their manufacturing standards.New Materials: A vague-sounding pronouncement, which covers the fabrication of advanced composites and next-generation building materials designed to reduce the environmental impact of growing China’s basic infrastructure.New Energy: Development of nuclear, wind, solar and biomass energy production.Environmental Protection: China aims to change its reputation as one of the globes least environmentally conscious nations by pouring resources into national recycling programs, emission reduction and a more robust environmental protection apparatus.

Chinas development goals for 2015

China’s Renewable Manufacturing Sector• China’s policy is to undercut the market for solar cells and wind turbines in developed

countries with inexpensive labor. A Chinese wind, turbine, for example, is one third the cost of one manufactured in Germany or Spain.

• China is now the world’s largest manufacturer of wind turbines and solar panels.• China is the world’s largest exporter of rare earth minerals, which are needed in the

manufacture of these renewable technologies as well as in hybrid vehicles, cell phones, and energy efficient light bulbs.

• China supplies about 95 percent of the global market for rare earth minerals• High-technology manufacturers are finding it difficult to operate anywhere but in China due

to China’s tightening of rare earth supplies and creating higher prices through heavy taxes and other export controls.

China’s Services

What is the Tertiary Sector?

Tertiary sector.

Tourism

$85 million per year!

60 million overseas tourists a year.

Police services

Medical

Education

Internet

Mobile phone industry.

China’s future impact on the world

Global Power Shifts:

Power as we know it is changing in two fundamental ways:

1. Power transition: change in power amongst states, power moving from west to east

2. Power diffusion: power moving from all states to non state actors; NGO’s, TNC’s etc.

When looking at China’s future as a global power, we have to consider power by both of these definitions, not just in a raw economic sense.

3. PT: “Rise of Asia” very much a hot topic, but it should be called the recovery of Asiaa. In the 1800’s more than ½ the world population lived in Asia, and Asia owned more than ½ of the world’s product

b. In the 1900’s, the population distribution remained the same, however Asia now owned jus 1/5 of the worlds product

c. What happened? Western Industrial evolution, but this raises the question, what will happen as Asia’s economic prowess reaches a par with its population monopoly once again?

2. PD: Computing and communications costs have fallen 1000 fold between 1970 – C21d. If the price of automobiles had fallen by the same degree, you could buy a car today for only $5 US

e. This kind of decline reduces barriers to entry; what few could do in 1970, now anyone can do with ease

f. Non governmental powers can be both good and bad: Oxfam vs. Al Qaeda, leading to new phenomenon’s such as the privatisation of war, e.g. Pearl Harbour

Sticks, Carrots and Soft Power

Power can be defined as the ability to affect other to achieve the outcome that you want; this can be harnessed in three ways:

Threats aka Sticks Payments aka carrots Making others want what you want aka soft power

1. PT: Rise of China and the fall of the US are considered synonymous amongst economic circles; however we keep getting it wrong, economists predicted that the 2008 financial crisis would be the beginning of the end for the USA, but they were wrong. The future is unpredictable, they could be wrong again.

a. Goldman Sachs predicted that China’s economy would surpass the USA’s by 2027, but this could be very wrong:i. It is a linear projection, but history is not linear, little bumps along the way can produce big change

ii. If 2027 does happen, it will be a measure of total economic size, but not per capita income

iii. This projection is one dimensional; it doesn’t talk about the influences of military or soft power, it thinks purely in terms of economics which are liable to change by the influence of such power

b. Some predict that C21 will repeat the history of C209 – WW2 was caused by the rise of German power creating fear in its rival nation states; how will Europe respond to China’s growing dominance? How will USA respond if China can not quash North Koreas growing threat – what if china becomes a bigger threat than North Korea?

2. PD: can be perceived as a 3D chess game:

a. Top board = military power amongst states – USA still dominant

b. Middle Board = economic power – China becoming a front runner, USA an UK still highly influential

c. Bottom Bard = transnational relations: climate change, drugs, pandemics – no one is in control

Martin Jacques: Understanding the rise of China:

The projections made by Goldman Sachs

What is all the more astonishing, is that these projections were drawn up before the economic crisis of 2008; post crisis projections suggest the same result for as early as 2020. This is unprecedented on two levels

China’s population is growing at 10% per year; with a growing population, never before has the worlds largest economy been that of a developing country

For the first time, the world’s leading economy will not have western roots. The cultural heritage of china makes it a civilisation state; china is shaped by its culture, not as a nation state. Unlike the West, China is diverse, pluralistic and decentralised

1. Key political values in china = unity, maintenance of Chinese civilisation and ancient culturea. Hong Kong is a key example of this. When China proposed the ides of 1 civilisation: 2 systems,

the west were highly sceptical, but China has kept there word reflecting this civilisation state mentality

b. Looking into the future and the way in which China will handle the “Taiwan Issue”, it is likely a similar system will be imposed

2. The Chinese don’t view themselves as multiracial: over 90% of the population consider themselves Han descendants, and have a powerful sense of cultural identity

a. This concept, reinforced by the government, creates a very positive relationship between the state and its people. IN the west, we see such authoritarian power as intrusive, too influential and something to b challenged and resented, in the East. The state is the patriarch of your average Chinese family

b. There are some negatives however – there is almost as sense of Han supremacy, which is reflected in Chinese attitudes to the Tibetans to name but one example

c. This all ;links back to the civilisation state idea; the Chinese do not challenge the state, as it preserves the culture they people wish to maintain – the west has almost lost its sense of culture and heritage; we can’t relate t this sense of self

d. The state in China is ubiquitous i. The Chinese Grand Canal, 1114 miles from Beijing to Shanghai, 3 gorges dam; it is an

expression of state competence:

The implications of this…

1. Civilisation State2. Notion of Race3. Relationship between state and society

We try to understand China in western terms, but we simply can’t. Paul Coen said: “The west thinks of itself as the most cosmopolitan of all cultures, but it is not. In many ways it is the most parochial” The west has been so dominant for the past 200 years that it has never needed to accept and understand other cultures. Other cultures have been forced to understand the west as we have forced ourselves into other cultures. These are the cosmopolitan countries: the countries of the East.

What will be the consequences of this in terms of China’s growing position as a world power:

4. The West will loose its influence: Just look at Copenhagen, for the first time again in 200 years, Europe was not at the final negotiating table of a major global affair

5. World will become “strange”, our time of cultural dominance is over, and we, the arrogant west, will be taken by surprise

Three building blocks for trying to understand the difference between China and the West:

The groundwater of 90% of Chinese cities is polluted

A prolonged bout of heavy pollution over the last month, which returned with a

vengeance for a day last week – called the "airpocalypse" or "airmageddon" by internet

users – has fundamentally changed the way that Chinese people think about their

country's toxic air. The event was worthy of its namesake. On one day, pollution levels were 30 times higher than levels deemed

safe by the World Health Organisation (WHO). Flights were cancelled. Roads

were closed. One hospital in east Beijing reported treating more than 900 children for respiratory issues. Bloomberg found

that for most of January, Beijing's air was worse than that of an airport smoking

lounge.

• In 2012 China eclipsed America as the world's biggest trader. New figures show that America's imports and exports of goods amounted to $3.82 trillion in 2012, compared with China's $3.87 trillion

• These figures count only trade in objects. If services are added, America retains its lead for the moment.

• China's trade networks are spreading. The Associated Press says 124 countries count China as their leading trade partner.

• Cheap Chinese labour supplies developed markets with cheap goods which, to some extent, make up for stagnating wages.

• This labour keeps the Chinese economic model humming by providing the foundation for growth. But how long can it last?

• IMF economists Mitali Das and Papa N’Diaye, in a new working paper, reckon only about another decade.

• The glut of labour peaked in 2010 and, as the population ages, it’s all down-hill from here. They estimated that if things stay as they are, China will reach the Lewis Turning Point between 2020 and 2025.

• If China relaxed its one child policy and everyone there suddenly had lots of babies the Lewis Turning point might be delayed by a few years

• Alternatively if there’s financial sector reform, interest rates will rise. In that case Chinese worker/savers will feel richer and may not want to work as much; this would speed up the turning point.

• If using countries such as Hong Kong, Singapore, Taiwan and South Korea as a model, eventually you run out of cheap labour, reach a point of diminishing returns to adding more capital, and growth slows. Though living standards are much higher than they were before, these countries no longer grow as fast.

• If China follows a similar path, consumer goods will cost more, though some low-skill jobs may come back to the west. China can't sustain its current rate of growth; the question is whether growth will slow before incomes have attained rich-world levels or while many have yet to benefit from the current development.

China voices: the professor of gender studiesAs part of our series offering a portrait of modern China, we ask ordinary Chinese people how they see their country. Lu Ying, 64, lives in Shanghai and is a lawyer and professor of women and gender studies

What has been the biggest change in China in your lifetime? And to your own life?In China, the biggest change would be the great economy development brought by reform and opening as well as social changes. Things like the life quality of citizens have been greatly improved, while people are estranged from each other. In the past 30 years, women in China have become more and more confident about themselves, especially the younger generation. Society as a whole has become more tolerant of women. The amendment to the marriage law in 1980 ensured women's property rights in marriage, while in 2005, bills banning domestic violence and establishing civil compensation for spouse's cheating were added.The biggest change for me was the death of my mother last May, aged 96. Suddenly I realised I spend too much time on my work, which is typical among my generation. My mother, who was hard-working and kind-hearted, inspired me in many ways as part of the first generation of working women in China.

What is your greatest hope or aspiration for yourself? And for China?I hope China can set up a more adequate legal system and I wish that it will not only develop itself economically, but also in terms of politics and culture.Personally, I am a typical Shanghai woman with some petit bourgeoisie sentiments. I hope one day I can run a cafe or live in the countryside, escape from my work, which has brought so much pressure, and enjoy the peace with books.

What is your greatest fear?My greatest concern for the country is corruption. If the corruption problem can't be solved completely, the future of the country won't be bright. Even though the economy has been developing all these years, corruption will corrupt them all. Personally, I have no fears, currently.

China voices: the farmerAs part of our series offering a portrait of modern China, we ask ordinary Chinese people how they see their country. Song Huiran, 71, lives in Xiloudian village, Henan province

What is the biggest change you have seen in China? And in your own life?Our country has solved the problem of starvation. Everyone has enough to eat. Our economy is strong and big. The financial crisis has not affected us much. I haven't noticed any difference in village life, though some migrants have come back home. As individuals, we don't feel that we have got much richer. We don't have much money. The biggest change since I was young is the loss of water. I used to swim in the ponds around our village, but they have all dried up.

What's your greatest hope for China and for yourself?I would like the government to provide more support to improve the environment in rural areas. They always say that they treat the city and the countryside equally, but that is not the case when it comes to sanitation. We need more help from above. But I believe our country is generally following the right direction set by our party. We could see the power of China last year during the Olympics and in the way we helped each other after the earthquake. Our country can be the greatest in the world.

What is your greatest fear?My biggest concern is my wife's health. She has Alzheimer's. She always supported me by looking after the farmland while I was out. But now, I must stay home and look after her. She has been sick for two years now. We have to pay all our medical bills ourselves. That is tough. Our income is very low. We earn 1,000 to 2,000 yuan (£100-£200) per year from our farmland. They say there will be a new medical insurance system later this year that will help us, but I haven't seen anything about it yet.

http://www.guardian.co.uk/news/datablog/2012/mar/23/china-gdp-since-1980