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China & The Global Economy > Week 2: China & The World Economy > Flashcards

Week 2: China & The World Economy Flashcards

1
Q

How large was China’s current account surplus in 2022?

A

$417 bn

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2
Q

What structural/economic policy changes occurred in post-reform China?

A
  1. Decentralised foreign trade institutions
  2. Promotion of foreign economic relations
  3. FDI
  4. Expanded Trade
  5. Joining of international organisations
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3
Q

What was China’s development strategy?

A

Export-driven

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4
Q

What did China offer to the WTO?

A

Greater access to agriculture, manufacturing and services

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5
Q

What share of the global goods trade did China have in 2017?

A

11.4%

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6
Q

What have China’s trade surplus caused?

A

China to be the world’s largest holder in foreign reserves

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7
Q

How much foreign reserves did China hold in 2024?

A

$3.2 trillion

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8
Q

How does China’s currency work?

A

-Currency is not allowed to float
-Large scale purchases of USD to keep exchange rate within targets
-Many argue that the currency remains undervalued

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9
Q

How does an undervalued currency affect an economy?

A

-Exports are less expensive and imports more expensive
-Governments who purchase foreign currency find it harder to use monetary policy to fight inflation

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10
Q

Why can China produce goods cheaper than America?

A
  1. Lower standard of living so lower wages
  2. An exchange rate set to always be lower than the USD.
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11
Q

How does the trade deficit affect the US economy?

A

-China is the largest lender to the US govt as it buys US treasury notes.
-China gains political leverage over US fiscal policy

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12
Q

How much debt does the US owe to China?

A

$1.25 trillion

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13
Q

What is the Donald Trump quote about a 45% tariff?

A

“The 45% tariff is a threat. It will be a tax if they don’t behave”

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14
Q

What has China accused the US of doing?

A

Launching the “largest trade war in economic history”

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15
Q

What is the value of tariffs placed exclusively on Chinese goods by the USA?

A

$550 billion

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16
Q

What is the value of tariffs placed exclusively on American goods by China?

A

$185 billion

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17
Q

Why is the US taking action against China?

A

-To stop unfair transfers of American tech, intellectual property and jobs
-Tariffs will make US goods relatively cheaper- boosting the local economy

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18
Q

How did the tariffs affect Americans in America?

A

-Prices weren’t lowered
-Jobs did not return
-Tariffs reduced US exports as they had Chinese inputs

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19
Q

How much could global growth be reduced through full scale dispute according to Morgan Stanley?

A

0.81%

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20
Q

What literature can we use to assess the economic analysis of the trade war?

A

Fajgelbaum and Khandelwal (2021)

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21
Q

What are some challenges to China’s trade-led growth?

A

-50% of GDP
-Heavy dependence on manufacturing exports
-Low skilled and labour intensive industries
-Resource over-extraction

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22
Q

How did China adapt post financial crisis?

A

-Reforms making labour more flexible with better social safety nets
-$4 trillion RMB stimulus package
-Expansion of trade network through FTAs

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23
Q

According to Fajgelbaum & Khandelwal (2021), how were US consumers affected?

A

Higher prices for imported goods, bore the brunt of tariffs, reducing aggregate real income.

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24
Q

According to Fajgelbaum & Khandelwal (2021), what are the effects on US manufacturing employment?

A

Job losses of 2.3% in affected industries.

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25
What is the aim of OBOR initiative?
Strengthen Beijing's economic leadership through a vast program of infrastructure building through China's neighbouring regions
26
What can China gain from OBOR?
Political leverage (soft power)
27
What does the World Bank define the OBOR as?
“China-led effort to improve connectivity and regional co-operation on a trans-continental scale through large-scale investments”
28
What 2 opportunities does the OBOR give China?
1. Export its technological and engineering standards. 2. Upgrade the country's industry, skills and knowledge
29
What did Xi Jinping say about the OBOR?
"We must build the Silk Road Economic Belt and 21st Century Maritime Silk Road, creating a new regional economic order.”
30
What was the OBOR trying to counterbalance?
TPP (Obama's Asia pivot)
31
What 3 opportunities did the OBOR have?
1. Scale 2. Unexploited potential 3. Improving connectivitity
32
How much of the global economy do OBOR nations account for?
1/3
33
How are OBOR nations not using their potential?
They trade below potential due to lack of infrastructure or weak policies/governance
34
How can OBOR improve connectivity?
Improve transport infrastructure- build railway (reduces transport time by 50%)
35
What are some OBOR risks?
-Policy barriers create thick borders -Large infrastructure projects have risk (corruption) -Macro risks- unsustainable debt
36
How much did the Lao section of the Kunming-Singapore railway cost?
$6 billion- 40% of Lao GDP
37
What are economic challenges of the OBOR?
1. Encouraging regional development through integration of neighbouring nations 2. Upgrading China's industry while exporting Chinese standards 3. Addressing over capacity issues
38
What was the OBOR supposed to do for internal regional development?
Reduce inequality between western and eastern regions
39
How has the OBOR aided Xingjiang?
-Links with port of Gwadar in Pakistan reduces transport costs. -Economic growth will reduce political tension
40
What is the "Made in China 2025 strategy"
A goal to make the country's manufacturing industry more innovation-driven, focused on quality and restructure China's low cost manufacturing base
41
How does excess capacity negatively impact an economy?
-Squeeze corporate profits -Increase debt levels -Lead to financial market vulnerability
42
What can China do about excess capacity?
- Shut down steel mills -Export spare capacity via OBOR
43
When was the OBOR launched
2013
44
What are some challenges for the OBOR?
-Lack of trust -Poor sovereign credit ratings -Over-leveraged Chinese financiers
45
What are the risks associated with overseas loans?
Political instability Economic viability
46
What does the World Bank analysis of OBOR measure?
-Assessment on the benefits and risks of joining OBOR -Evidence on how OBOR can benefit from greater connectivity -Assesses sequencing for policy reforms -Identifies main risks
47
What did the WB find about infrastructure for OBOR?
Infrastructure and policy gaps hinder trade and FDI. New infrastructure helps close gaps but are costly and could increase public debt
48
What did the WB find about the OBOR transport projects?
They can expand trade, increase FDI and reduce poverty by lowering trade costs. Infrastructure costs could outweigh gains
49
What did the WB find about large infrastructure projects for OBOR?
Risks are exacerbated by limited transparency and weak governance in certain nations
50
What is the literature for OBOR?
Reed and Trubetskoy (2019)
51
How many projects does Reed and Trubetskoy (2019) assess the value of?
68 BRI projects
52
What do the most valuable projects do according to Reed and Trubetskoy (2019)
Connect highly populated cities to the network
53
What are 3 examples of highly value projects according to Reed and Trubetskoy (2019)
1. Kunming-Kolkata High Speed Rail 2. Tehran-Mashhad rail electrification in Iran 3. Expansion of ML-1 Karachi-Hyderabad-Lahore railway in Pakistan
54
According to Flyvbjerg (2014) how much do projects overrun on cost?
96% on dams 45% railways
55
How many projects are delivered on time according to Flyvbjerg 92014)
1-2/10
56
How does transparency prove a risk for OBOR nations?
Lack of transparency regarding terms and size of financing provides risks of debt
57
What should debt transparency ensure?
Efficient use of financing to protect debt sustainability
58
In an ideal world, what should China do ensure transparency?
Create a comprehensive database of OBOR projects inclusive of financing terms, expected new lending and ensuring the amount lent reflects the value of the project
59
What 3 things should a project procurement be?
Open Transparent Competitive
60
What % of BRI projects do Chinese firms win (according to Centre for Strategic and International Studies)
60%
61
What is the main governance risk?
Corruption
62
What are three types of corruption for BRI?
Infrastructure corruption Administrative corruption State capture
63
What is state capture?
Policies that benefit particular firms
64
What 3 ways can BRI reduce corruption?
1. Audits 2. Construction Sector Transparency Initiative 3. Integrity Pacts
65
What are some direct environmental costs of BRI?
Pollution Interruptions to water courses Soil erosion
66
What does Maliszewska and Van Der Mensbrugghe (2019) demonstrate?
Overall impact on emissions is low but could be high in certain countries- such as Cambodia
67
What are 4 social risks of OBOR?
1. Threats to human security 2. Negative social/economic impacts from involuntary taking land 3. Risks with influx of labour 4. Risks of cultural heritage
68
What 3 reforms help OBOR effectiveness?
1. Transparency 2. Country-Specific Reforms 3. Multilateral Cooperation

China & The Global Economy (10 decks)

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