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Macroeconomic Trends and Cycles. Junhui Qian 2013 October. Content. Overview Key Macroeconomic Variables GDP Inflation Employment Industrial Output Investment Consumption Deposits and Loans Interest Rate. Overview. Major Cycles (Year of overheat) 1978-1983 (1980) 1984-1986 (1985)
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Macroeconomic Trends and Cycles Junhui Qian 2013 October
Content • Overview • Key Macroeconomic Variables • GDP • Inflation • Employment • Industrial Output • Investment • Consumption • Deposits and Loans • Interest Rate
Overview • Major Cycles (Year of overheat) • 1978-1983 (1980) • 1984-1986 (1985) • 1987-1990 (1988) • 1991-1997 (1994) • 1998-2005 (2004) • 2006-2008 (2008) • 2009- (2011) • Before 1998, each cycle was accompanied by pushes for reform and ideological backlashes. • After 1998, macroeconomic cycles were driven by the business cycle itself and policy (fiscal and monetary).
The Crackdown in 1981-1982 • Before 1981, private business were tolerated and even encouraged. In Jan 1981, however, the state council issued directives on cracking down “speculation” (toujidaoba). • “Eight-King Incident” in Wenzhou • Hu jinlin, who was trading metal hardware, suddenly became a wanted criminal, along with seven other business men in Wenzhou. Hu’s crime was “speculation” and “disruption of economic order” • “Han Qingsheng Incident” in Wuhan • Han, who was an engineer in an SOE, designed two water purification systems for a TVE along with three other engineers. The TVE became profitable and Han received 600 yuanfor his contribution. Han was arrested for the crime of “technology speculation”. Han’s case received national attention. Beijing finally intervened and Han was released. • In 1982 a year, about 30,000 people were prosecuted for economic crime, RMB 320 million “illegal income” were confiscated.
The “Macro-Regulation” of 2004 • In 2003, investment in the steel industry totaled RMB 132.9 billion, 92.9% growth. There were similar booms in aluminum and cement industries. • From Dec 2003, the state council issued directives on investigating “blind investments” in these three industries. • The Case of Tieben • Tieben was a medium-size steel company in Changzhou. With help from the local government, Tieben invested in a gigantic new factory on the coast of Yangtze River. To avoid the lengthy approval process, the investment was divided into 8 smaller projects that could be approved locally. • The “illegal” usage of land was detected and reported by the Xinhua Agency. A team from Beijing investigated the project in detail and uncovered many other tricks the local government used to help push through the project. • Dai Guofang, the owner of Tieben, was arrested for five “major crimes” but was sentenced for a miner crime of tax avoidance through receipt manipulation.
Industrial Output IVA=profit+depreciation+payments to labor+tax
