IS CHINA AN EMERGING

MARKET ECONOMY?
VARIOUS MACRO ECONOMIC PARAMETERS DISCUSSED

Group 8
 On October 1949, Mao Zedong proclaims that the People’s Republic of China is established.
 Mao adopted the Soviet Five Year Plan & Collectivization (1952-1957):
 Five Year Plan: modernize technology & science to develop heavy industry
 Collectivization: Mao reversed original land reform and peasants were organized into
government owned collectives
 The great leap forward and the aftermath.
 Reform in the countryside.
 Rural industrialization and Enterprise reform. (SOE and TVE)
 Reform in the 90’s.
 Divided tax system.
 Non performing loans, Bank reforms to provide credit to TVEs.
CHALLENGES & LIMITATIONS

• Growth is unstable, imbalanced, uncoordinated and unsustainable.

• Slow growth of population of working age
• Environmental challenges
• Low ranking of government, rule of law, perceptions of corruption
• Excessive high national savings & investments
WHY CHINA IS AN EMERGING MARKET ECONOMY
(5 YEAR PLAN AGREED IN OCT 2015 TO ACHIEVE BY 2020)

• Regional development Growth drivers –

End of the one-child Alibaba, Xiaomi,
• Inclusive development policy Huawei, Tencent, Baidu,
China Mobile
• Opening up
Reforms of hukou
• Green development Made in China 2025 – scheme for upgrading system – extend urban
manufacturing capacity. welfare services and
• Innovation raise min. wages.

Targeted sectors – IT, Power generation, agriculture equipment,

Medical products and bio-pharma, robotics, Advanced aerospace ,
Rail and other transportation equipment
 GUIDES FRAMEWORK

GDP & Growth • Global demand has fallen, high corporate debt, and inflated housing prices
• 1st Quarter exceeds expectations 6.9% driving on infrastructure growth
• Significant R&D spending, large FDI inflows, highly educated workforce,
• Large coastline drives 10% of national output
• Need to invest in Innovation and entrepreneurship
Unemployment & • High unemployment, excess industrial capacity – steel dumping controversy
Utilization • Tax system and education disparity
• Need to streamline social assistance system, although poverty rate has declined
Inflation & Interest • Lower – weaker global commodity prices – deflationary force in the world economy
Rate
 GUIDES FRAMEWORK CONTD.

Debts & Deficits • Two-thirds of enterprise debt is owed by SOEs

• Debt owed by non-financial firms in China reached 170%
of GDP in 2016
• Non performing loans are rising
External balances • CAS increased from 5.7b$ to 70b$
& Exchange Rates • Fixed Exchange Rate and strict controls on current and
capital accounts

Savings & • Investment is slowing

Investments • Saving Rates is high
CHINA’S TRADE RELATIONS-
EUROPEAN UNION
• The EU and China are two of the biggest traders in the
world. China is now EU’s second biggest trading partner
behind US and EU is China’s biggest trading partner.
• When China joined the WTO in 2001 it agreed to
reform and liberalize important parts of its economy.
Though China has made progress, some problems
remain:
1) Lack of transparency
2) Industrial policies and non tariff measures are not
friendly
3) Strong government intervention
4) Poor protection and enforcement of IPR.
CHINA’S TRADE RELATIONS-
INDIA
• According to recently released data by Chinese customs, India-China trade in 2016
decreased by 0.67% YoY- India’s exports to China decreased by 12.29% YoY while India’s
imports from China saw an YoY growth of 2.01%.
• In 2016, India was the 7th largest export destination for Chinese products, and 27th
largest exporter to China.
• India-China trade in the first four months of 2017 increased by 19.92% YoY.
• India’s top exports to China included diamonds, cotton yarn, iron ore, copper and organic
chemicals.
• As per China’s Ministry of Commerce, the cumulative Chinese investment in India till
march 2017 reached US$ 705 million.
RECOMMENDATIONS

• Spread government support for innovation across more sectors

• Accelerate the bankruptcy process to reduce financial risk
• Gradually remove implicit guarantees to SOEs and other public entities
• Restrict leveraged investment in asset markets
• Channel funds to where returns are high such as education, health and social security and
avoid misallocation of capital
THANK YOU