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Chinese Macroeconomic Survey and Globalization. Relations between politics and economy The great ideological cycle Integration into global economy Challenge from global economy Adapting to new circumstances in domestic market. Politic s and Economy.
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Chinese Macroeconomic Survey and Globalization • Relations between politics and economy • The great ideological cycle • Integration into global economy • Challenge from global economy • Adapting to new circumstances in domestic market
Politicsand Economy • Adapting economic development to political needs • Competing groups in the leadership cause changes in economic policy • Political influence on economy results in economic cycles • The trend of ideologization drifts economy away from realistic frames
The Great Ideological Cycle • Postwar development starts on a very solid economic ground • Under the pressure of ideology the development follows political cycles • Economic system moves into ever more unrealistic spheres • Ideological cycle comes to culmination in Pi Lin pi Kong campaign in 1974 • Reforms cause the decline of ideological cycle
The End of Ideological Cycle • With reforms political cycles started to follow the dynamics of economy • After ideological pressure reached the limit of tolerance both started to decline • The ideological influence disappeared in mid 90-ties when Chinese economy became normal • Ideological cycle ended with economy back in realistic frames
Integration into global economy • Member of World Bank • Member of International Monetary Fond • Member of WTO since 2001 • World biggest exporting country • China’s purchases of crude oil and raw materials influence world prices • Growing importance of China as investor in Africa and Latin America
Results of Reform Policy • Three decades growth rate more than 9% per year • Growing regional differences between coastal regions and inland China • Growing social differences: GINI index: 48 • Growing pressure on ecosystems, energy, and raw material resources • Big migrant workers’ population: 211 million
China’s Position in World Economy • World’s second largest economy • For the last 3 decades world fastest growing economy • World’s largest market with biggest potential for expansion over next 20 years • World’s largest exporter: 9% of world export • World’s biggest foreign currency reserves: $3.236 trillion on 31stDecember 2011
Advantages of large system • Relies on enormous domestic market • More self-sufficient then small system • Less dependent on foreign trade and less vulnerable to foreign influences • Greater inertia of the system • More opportunities for investment • More possibilities for protection • Can concentrate more resources to achieve strategic purposes
Challenge from global economy • From mid 90ties on Chinese development is increasingly determined by global situation • Affected by Asian financial crisis in 1997 • Adapting to the world monetary system • Growing dependence on the conditions of world markets • Adapting to the global financial system
The Challenge of the World Financial Crisis • The concept of neo-liberalism in global economy proved to be insufficient • Lack of global economic coordination and financial control • China was less affected by the crisis then most other countries • China maintained more than 8% GDP growth • Because of financial protection China was not affected by financial crisis • China was affected mainly by shrinking foreign markets
China in Times of the World Financial Crisis • China increased domestic spending mainly by new investment in infrastructure • Many foreign owned export oriented production lines closed down • Some 25 million migrant workers lost jobs and returned to their homes in villages • When economic situation improved many of migrant workers didn’t want to return, because of new opportunities near home • For the first time China is experiencing lack of cheap labour
Problems of domestic market • Problems of overheated economy • Problems of poluted environment • Extremely high proportion of investment: over 40% since 2003, 46,2% in 2010, and 54.2% in 2011 • Growing problem of inflation • Problems of uncontrolled local borrowings • High tensions in house construction • The pending real estate bubble
Requirements for future growth • Greater importance to the growth of domestic demand • Continuing the process of urbanisation • Adjusting of investment policy and consolidation of real estate market • Introduction of social security system for all social groups • Smaller social differences by increasing the income of workers • Creating wider middle class
Adjustments to the changing global markets • China should play a stronger role in world monetary system • Growing importance of Asian,African, and Latin American markets. • Labor intensive production will become less competitive • China will have to change the structure of its export industries • Chinabecoming stronger foreign investor
The Concept of Greater China • China economically integrated with Taiwan, Hong Kong, Macao, and partly Singapore • P.R. China and Taiwan signed Economic Cooperation Framework Agreement ECFA in June 2010 • The Greater China totals16% of world export and $3.757 trillion of foreign currency reserves on 31st December 2010
Faster Economic Integration in East Asia • Creation of Common market in Southeast Asia basing on ASEAN • Further integration of Mainland China, Taiwan, and Hong Kong economies • Free trade agreements – Taiwan entering via China • Faster integration into broader regional economic zone: ASEAN+3