China: Concepts

Question 1

When did the Chinese Government start introducing reforms?

Answer 1

Began its ‘open-door policy’ to trade and investment as part of the Deng Reforms from 1978, following the death of Chairman Mao

Question 2

Why is the Chinese Government currently undergoing structural change?

Answer 2

After a period of significant export and investment fuelled growth, the Chinese economy needs to find new sources of further growth.

It is shifting to growth from domestic consumption and high-value manufacturing sectors

Question 3

State 2 statistics showing the success of SEZs for China’s growth and development.

Answer 3

SEZs contribute 22% of China’s GDP & 60% of exports

Question 4

Why has China’s GDP growth slowed in recent years?

Answer 4

• The biggest reason is slowing levels of investment demand (as cities and factories have finished being built)
• Slower export growth due to the US trade war
• Factory closures and city-wide lockdowns due to its zero-covid policy

Question 5

To what extent have each of China’s trade and investment policies succeeded?

Answer 5

The most significant reform was joining the WTO - that led to a sharp acceleration in export growth

Deregulation of FDI was essential for gaining funds and skills for improving manufacturing and export capacity

Protection and forced technology transfer policies have helped infant industries, but have created trade disputes

The Belt and Road Initiative is unlikely to be an effective economic policy, but will have strategic / military benefits

Question 6

What are the Chinese Government’s environmental policies?

Answer 6

• Signed the Paris Agreement
• Emissions target of net zero by 2060 (but emissions likely to keep rising until 2030)
• Launched emissions cap-and-trade scheme in 2013

Question 7

What is forced technology transfer and how is it done?

Answer 7

• Requirement that foreign firms setting up in China must partner as a ‘joint venture’ with a local firm – who then get access to their intellectual property
• Hacking and copyright infringement against foreign firms is also rarely enforced

Question 8

How does the Chinese Government subsidise strategic domestic industries?

Answer 8

• Provides direct subsidies for R&D (under the Made in China 2025 policy)
• State-owned electricity firms and banks are directed to provide cheap rates to strategic industries

Question 9

How big was the Chinese Government’s fiscal stimulus during the pandemic?

Answer 9

• $550 billion in tax refunds for firms

- $800 billion in funding for local governments to spend on infrastructure

Question 10

What is the Belt and Road Initiative?

Answer 10

Around $1 trillion in infrastructure spending by the Chinese Government and banks on ports, rail and pipelines, mainly in other countries

Question 11

Why is the Belt and Road Initiative expected to increase economic growth and development?

Answer 11

Increasing infrastructure in other countries will increase their ability to purchase Chinese exports, and also their ability to sell natural resources to China

Question 12

What is the main criticism of the Belt and Road Initiative?

Answer 12

Many of the investments are unlikely to be economically worthwhile and may not be repaid.

But the policy is probably more focused on securing overseas ports and infrastructure for defence purposes, rather than improving exports

Question 13

How has the international business cycle affected the Chinese economy?

Answer 13

• Manufacturing export demand fell during the GFC and the covid-19
• Need for fiscal response to stabilise the business cycle
• But China also has significant agriculture and service sectors for the domestic market that are unaffected by the international business cycle