China and Its Neighbor COPICO

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China and Its Neighbor In 2005COPICO Syndicate


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Economic Growth in Developing

and Transitional Economieswww.copiconews.com COPICO NEWSPAPER - Since 2011 All economic analysis deals with the

problem of making choices underconditions of scarcity, and the problem of

satisfying peoples wants and needs is asreal for Somalia and Haiti as it is for theUnited States, Germany, and Japan. Theuniversality of scarcity is what makeseconomic analysis relevant to all nations,regardless of their level of material well-being or ruling political ideology.

Even though economic problems and thepolicy instruments available to tackle themvary across nations, economic thinkingabout these problems can be transferredeasily from one setting to another. 15


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and Transitional Economieswww.copiconews.com COPICO NEWSPAPER - Since 2011LIFE IN THE DEVELOPING NATIONS: POPULATION AND POVERTY

TABLE 21.1 Indicators of Economic Development

Country

Group

Population,

2006

Gross

NationalIncome per

Capita,2006

(dollars)

Literacy Rate

(percent over15 yearsof age)

Infant

Mortality,2006 (deathsbefore age 5

per 1,000births)

Internet

Users per1,000 people,

2005

Low-income 2.3 billion 510 29 122.0 30

Lower middle-income

2.4 billion 1,580 75 42.0 47

Upper middle-income

575.9 million 4,770 243 29.7 72

High-income 1.0 billion 32,040 2,977 7.0 76

Source: World Bank, www.worldbank.org


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and Transitional Economieswww.copiconews.com COPICO NEWSPAPER - Since 2011

While the developed nations account for only aboutone quarter of the worlds population, they are

estimated to consume three-quarters of the worldsoutput.

This leaves the developing countries with aboutthree-fourths of the worlds people but only one-fourth of the worlds income.

The simple result is that most of our planetspopulation is poor.


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COPICONEWS

Strategies for Economic Development

25/10/11

Agriculture or Industry?

TABLE 21.2 The Structure of Production in Selected Developed and DevelopingEconomies, 2003

Country Per-CapitaGross National Income

(GNI)Percentage of Gross Domestic Product

Agriculture Industry Services

Tanzania $ 375 45 17 37

Bangladesh 480 20 28 52

China 2,010 12 47 41

Colombia 2,740 12 34 54

Thailand 2,990 10 46 44

Brazil 4,730 5 31 64

Korea (Rep.) 17,690 2 23 75

Japan 38,410 2 30 68

United States 44,970 2 23 75

Source: World Bank, World Development Indicators, 2008; Sectoral numbers for U.S. and

Japan are for 2003.


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Exports or Import Substitution?

import substitution An industrial trade strategy that favors developinglocal industries that can manufacture goods to replace imports.

export promotion A trade policy designed to encourage exports.

structural adjustment A series of programs in developing nationsdesigned to: (1) reduce the size of their public sectors through

privatization and/or expenditure reductions, (2) decrease their budgetdeficits, (3) control inflation, and (4) encourage private saving andinvestment through tax reform.

Strategies for Economic Development

COPICONEWS25/10/11


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Six Basic

Requirements for

Successful

Transition

Macroeconomic Stabilization

To achieve a properly functioning marketsystem, prices must be stabilized.

Deregulation of Prices andLiberalization of Trade

An unregulated price mechanism ensuresan efficient allocation of resources acrossindustries.

Privatization

Private ownership provides a strong

incentive for efficient operation,innovation, and hard work that is lackingwhen ownership is centralized and profitsare distributed to the people.


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COPICONEWS25/10/11

Six Basic

Requirements for

Successful

Transition

Market-Supporting Institutions

The capital market, which channelsprivate saving into productive capitalinvestment in developed capitalisteconomies, is made up of hundreds ofdifferent institutions.

Social Safety Net

This social safety net might includeunemployment insurance, aid for thepoor, and food and housing assistance.

External Assistance

Very few believe that the transition to amarket system can be achieved withoutoutside support and some outsidefinancing.


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COPICONEWS25/10/11

Shock Therapy or Gradualism?

Shock Therapy . The approach totransition from socialism to marketcapitalism that advocates rapidderegulation of prices, liberalizationof trade, and privatization.


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China And Its Neighbor In2005Copiconews WORLD EXCLUSIVES

China was the one of the mostimportant features of the worldeconomy in the last quarter of the20th century.

China would be equally importantin 21st century.


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Business Economics - Since 2011

Chinas Economic Development

The third largest country in theworld in term of size.

Chinas 22 provinces, 5autonomous regions and fourlisted cities, along with some5000 islands, were governedfrom Beijing, the countryscapital

The majority of chinas 1.3billion strong populations stilllived in rural settings

Chinas economy had remained

isolated in 1949 until the late1970s, when Deng Xiaoping


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Real GDP growth in the PRCaverage approximately 9.5 % perannum from 1978-2004 and peak

growth happened in 1992 at 14.2%, fell to 7.1% in 1999. but thencontinue to improve through2004.

In 1980 per capita income inchina was $192

In 2003 chinas GDP of $1.4trillion made it the worldsseventh largest economy inconventional comparisonsexchange rates.

Some analysts predicted thatchina would be the worlds


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1978-2003 china trade grew nearly five times faster thanworld trade

China had run a trade deficit in 1980, but it turn tosurpluses in 1990 cuts in Chinese import barrier.

2003, leading as 4th exporter and 3rd importer in theworld.

Mainstay of china export : textile, clothing and footwear.

Chinas imported : machinery, electrical and electronicproduct (42%), minerals, metal, and chemical (26%).

Chinas top trading partner (2004) : U.S, Japan. HongKong, South Korea, Taiwan, Germany, Singapore, Malaysia,Netherlands and Russia.


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WORLDLEADING

IMPORTER 2003

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WORLDLEADING

EXPORTER 2003


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china and international investment

China FDI flows grew from under $1 billion in 1985 to over $53billion in 2003

China had been the second largest recipient of FDI worldwideThe leading source of investment include Hong Kong, Japan, US,

Taiwan, Singapore and South Korea.China had been the largest single destination for FDI in Asia


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Chinas International Competitiveness

By 2005, China had become anextremely important production basefor a wide range of goods.

It was the worlds leading exporter ofgarments, footwear, consumerelectronics products, and many otherproducts.

China became the location of choicefor assembly and final production.

Fuelled by low labor cost, flexiblelabor practices and FDI, china becamethe worlds largest producer andexporter of apparel and textile

product.


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Chinas International Competitiveness

In 1990s, china production hadtransitioned from relatively low-priced,low quality products to compete in

virtually all segments and price point China instituted export taxes to

reduce the disruption to worldmarkets and avoid potential tradefrictions Many companies shiftingproduction to China

Largest producer and exporter in:

textile products-, electronics-,furniture

China was not competitive in:

-natural resource-based industry

- aerospace industry

- pharmaceuticals

-advance services (financial,

consultin accountin


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Business Economics - Since 2011Chinas market

Chinas development was having aprofound impact on input and

commodity markets.

China was self-sufficient in coal; it hadto import most metals, as well as oil

By early 2000s, China was consuming

a large portion of the worlds rawmaterial and commodities

Concurrently, Chinas consumer andindustrial markets were growingrapidly


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Chinas EconomicInteraction with the

Region

China is an important trading partnerfor most of the economies in theregion, but also as a major investment

location.

By 2005, Chinas growth wasconsidered a major contributor to thegrowth of several East Asianeconomies.

Many in the region were concernedabout Chinas emergence ascompetitor in export markets andforeign investment.


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Chinas Economic Interaction with the Region

H

ongk

ong

Hong Kong had emerge as a major metropolitan servicecare serving the Asian region as well as China.

Many analysts believed that Hong Kong was ideallysituated to provide many of the services that had beenclosed to outside firms in the past.

After the enactment of the Closer Economic PartnershipArrangement (CEPA) whereby most Hong Kongmanufactured goods gained duty free access to theMainland

Hong Kong firms had preferential access to the Mainlandmarkets in a wide range of service sectors.


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T

aiwan

Taiwanese firms, especially those involved in footwearapparel and electronics assembly, had movedsubstantial portions of their production activities to theChinese Mainland, while retaining design, developmentand other activities in Taiwan.

Decentralization of manufacturing activities to the

Mainland had become a source of concern to theTaiwanese leadership for two reasons: fear ofemployment and the fear that such investment would beused as a political level by the PRC.


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J

apan

China had become the dominant production location formany Japanese companies.

In 2004, many analysts credited Chinas growth withputting Japans economy on the road toward recovery.

China was also the largest destination for Japanese FDIin Asia, with investment concentrated in electronics,textiles, transportation equipment and metals andmaterials.


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S

outh

Korea

In the early 1990s, China was only minor economicpartner for South Korea.

In 2003, China surpassed the United States as adestination for Korean exports and FDI.

By 2003, over one third of Koreas FDI was going toChina.

Korean companies had been decentralizing productionand moving base to China for manufacture of low valueadded goods.

Many analysts indicated that Chinese companies wouldincreasingly try to do to Korean firms ha done to

Japanese firms, ie, offer a reasonable quality alternativeat significantly lower price.


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ASEAN ECONOMICS Chinas emergence had significant impact, with potential ripple effect, on ASEAN

economies.

November 2002, China and ASEAN negotiated a framework agreement designed to laythe groundwork for a subsequent free trade agreement.

November 2004, China and ASEAN committed to establish a free trade agreement by2010 with the six core members of ASEAN.

The commitment began with a process of tariff reductions and removals of restrictions insome service sectors


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OTHER ECONOMICS Although Chinas longest border was with Russia, the economic interaction between the

two countries was relatively limited.


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REGIONAL GROUPINGSwww.copiconews.com COPICO NEWSPAPER - Since 2011 By 2005, China had begun to participate in

several regional organizations in additionto its traditional participation in APEC, theAsia Pacific Economic Co-operation forum.

The Mekong Basin Development Project,include Thailand, Laos, Cambodia, Vietnam,the UN and the Asian Development Bank(ADB) and China and Myanmar asdialogue partners.

The shanghai Five (Russia, China,Kazakhstan, Kyrgyzstan and Tajikistan)


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The Impact of China on its Neighbors

www.copiconews.com COPICO NEWSPAPER - Since 2011 By 2005, the rise of Chinas economy was

having a strong impact on its neighbors. Theimpact had been largely beneficial.

Chinas emergence was seen as potentiallyeven more important than Japans economicrise a few decades earlier.

China, in contrast, was still a developing, onethat could match up with other developingeconomies in the region. Chinas growinginvestments in education and technology

industries in the foreseeable future.

Companies from Japan, Korea and Taiwan hadtaken advantage of Chinas markets.

Southeast Asian nations had seen somefacilities benefit from Chinas emergence as amarket for resources and intermediate goods,

while other facilities were shut down or shiftedto China.


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problemsWould chinas neighbors be able to continue their pre-existing

development path, or would the rise of china force them to seekother avenues for development?

What economic roles would China play in the region?

What would be the impact on the different economies andindustries on the region?

What should the governments and firms in neighboring economiesdo in response to the emergence of Chinas economy?


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Mereka tetap dapatmenjalankan pembangunanmereka, justru karenaperkembangan China yangsangat pesat akan membukaarea perdagangan yang lebihluas. Selain itu mereka dapatmenjadikan China sebagaisekutu untuk bersama2memajukan daerahnya agarlebih berkembang.


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Chinas strategies

Dengan politik yang diajalankan oleh pemerintahannya, banyaknmembantu pertumbuhan perekonomiannya. Misalnya tidak bergabungdalam World Trade Organization (WTO) dan General Agreement on Tariff

and Trade (GATT). Cina bisa memproteksi terhadp produk dalam negerinyadan leluasa dalam melakukan pembajakan produk negara lain.

Selain itu cina mempunyai sikap keras untuk tidak mau tunduk terhadapperaturan perdaganagn bebas dunia dan ekonomi cina disusunberdasarkan strategi yang matang.

Untuk menjadi pusat perhatian dunia Cina mengambil kebijakan denganmenekan biaya penggunaan listrik. Agar dapat menjadi daya tarikinvestor.

Melakukan strategi peningkatan produk industri untuk ekspor.


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Thank You :)

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China and Its Neighbor COPICO