Stats & Numbers Flashcards
What is the Average GDP rate of growth over the last 12 years?
Average GDP rate of growth over the last 12 years is about 10%
Average growth of the global economy is 2.73%
UK averaged 2% since 2000
China has been slowing down since 2008, but is still growing very rapidly
China household saving rates trend since 2000?
Rose steadily by about 27%
from approx. 28% in 2000 to approx. 45% in 2017
Twice as high as US - 26%
This suggests Low Comsumption (one of the lowest in the world)
Problematic as China is trying to switch from an investment driven economy to a consumption driven economy
Why does China save so much?
Low birth rates and one child policy, thus less ability to rely on children in retirement
China’s economy shifted from state-owned to privately owned firms, no safety net, uncertainty
Households saved so that they could invest in housing
Up until recently, there were not many investing options, thus saving and accumulaing interest rates were the only options.
Rising housing, education and health expenditures (health expenditure 1995-2005, from 2% to 14%)
1990 17% owned homes, by 2005 86% owned homes
Middle aged save less, young and old save more
Explain how, going forward, consumption may increase?
Financial market development ->
- possibility to borrow against future income
- better portfolio investment -> higher ROI -> higher C
This and improvements in provision of education and welfare net should decrease savings rate and tf increase consumption
Urbanisation rates in China?
- 92% lived in cities in 1978
- 52% in 2017
Increase by approx. 40%
From 2010 to 2025, it is estimated that 300 million Chinese will move into cities.
70% of population in cities by 2025
China literacy rate trend?
1982 - 65%
2018 - 98%
This is evidence for a more skilled labour force, allowing to switch to higher cost manufacturing
The Lewis Model
The transition of labour from the agricultural sector to the manufacturing sector due to higher wages, resulting in reinvested extra profits profits, resulting in economic growth.
Income inequality in China
The GINI coefficent as increased by 20% since 1980s
Minimum wage increases in China
Average minimum wage has increased 250% since early 2000s
Set not by central governemnt but by provincial authorities based primarily on the changing living costs in the areas.
Evironment
China Emits More Carbon Dioxide Than The U.S. and EU Combined
China has pledged to reduce its carbon emissions by 40-45% by 2020
Over the past 10 years coal production has been reduced by a 1/4
Renewable energy proportions of total energy:
2008 - 17%; 2018 - 27%
Labour in China
Abundant, cheap, used to have little working regulations - allowed for extremely low production costs in cheap manufacturing, becoming the reason for Chinas rapid growth.
Now - Literacy increased, working conditions improved/are improoving, wages rose/are rising, standarts of living improved/are improving - allows for switching to more complicated, expensive manufacturing ( e.g. tech, machines, communication devices etc.)
Collective bargaining was permitted in 2008, but otherwise, trade unions in China have been unimpactful
Key Challenges for the Chinese economy?
1) 270% of GDP total debt (2016) - Some believe its a problems, some believe its appropriate for an economy of such size
2) Investment accounts for 47% of GDP growth -overreliance on investment; diminishing returns to capital; unsustainable in LR (Solow model)
3) Reliance on real estaste (investmetn) - not a problem as low property prices
4) LR policy favouring local firms -disencentivises FDI and trade, potentially lower dynamic efficency
5) Middle Income Trap
Middle income trap
As China achieves the middle income status, its growth may slow down, as seen with many examples in the past. (Argentina,
Potential reasons include:
- smaller labour supply
- higher wages
- higher costs
- less investment in human capital (increasing)
- lower innovation
- govt. and institution quality
- High inflation
- Low diversification
How to avoid the middle income trap?
- Having a sufficently large middel class / rising incomes (increased demand and economies of scale in manufacturing and production)
- FDI
- Investment in human capital
- Improved working conditions & welfare safety nets
- Investment in hard infrastructure (ports, airports, railways) & soft infrastructure (institutions, universities, etc.)
- Opening up to trade, in order to incentivise allocative and productive efficency
- R&D
The 13th five year plan
Agreed in October 2015, due by 2020
- Innovation
- Regional development - regional disparity, urbanisation
- Green development
- Opening up - further integration with the global market
- Inclusive development - enduring that Chinas development includdes all, especially the poorest 40% of households
