Embed Size (px)
DESCRIPTION
China's New Model session at 12th International Conference
Citation preview
Tanweer Akram (Voya Investment Management)
12th International Post Keynesian Conference (Sep 25-Sep 27, 2014)University of Missouri Kansas City (UMKC)Kansas City, Missouri, USA
Bertrand Russell and the Challenges of Contemporary China
2
Important Disclaimer
This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors. Past performance is no guarantee of future results.
Voya Compliance ID # 10534
5
Motivation
More than 90 years ago Bertrand Russell wrote The Problem of China (1922).
This presentation will discuss some of the key challenges of contemporary China in light of Russell’s dated but insightful and prescient analysis.
Many of the issues that Russell identified still apply to contemporary China but there are other important issues crucial today that were not topical 90 years ago!
6
Russell in China
7
Bertrand Russell and China
Among the first major Western philosophers who visited China
Taught at Peking Government University
Published The Problem of China (1922)
Retained an interest in China throughout his life
Corresponded with Chinese leaders, particularly during and after the Sino-Indian war (1962)
8
Russell appreciated the importance of China
“Chinese problems, even if they affected no one outside China would be of vast importance, … the entire world will be vitally affected by the development of Chinese affairs … during the next two centuries. This makes it important … that there should be intelligent understanding of the question raised by China, even if, as yet, definitive answers are difficult to give.” (The Problem of China, 1922, p. 3).
9
China today is a lot different than during Russell’s visit!
The world’s second largest economy (measured in purchasing-power parity terms)
Important driver of global growth
Vital role in international trade and global manufacturing and supply chain
Strong per capita real income growth and impressive reduction of income poverty since 1980
10
China is the world’s second largest economy
Share of Global GDP (PPP-adjusted), %
JPN EURO ZONE BRICs ex CHINA PR CHINA USA and CAN
Sources: IMF World Economic Outlook, Reuters EcoWin
94 96 98 00 02 04 06 08 10 12 14
%
0
10
20
30
40
50
60
70
12
Per capita real income in China has increased rapidly
US$, 2005 Prices
China, Real GDP per capita
Source: Reuters EcoWin
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
US$
0
500
1000
1500
2000
2500
3000
3500
4000
15
China’s challenges today
Still a lower medium income country
The standard of living remains low for the vast majority of its people
Problems of rebalancing aggregate demand, environmental degradation, and widening social disparities
One party system
16
The main problems that Russell identified in 1922
1. The establishment of a stable, orderly and sovereign government
2. The industrialization and modernization of the country’s economy with Chinese control
3. The spread of education
18
Industrialization and economic transformation in China
Russell understood that industrialization would be important for China. He believed that Chinese industrialization would occur only under socialism. Even though he thought industrialization is essential, he believed that China would remain a predominantly agrarian country in the foreseeable future.
Indeed, substantial industrialization and modernization did occur after the establishment of the People’s Republic of China. But renewed impetus to strong growth came after the post-Maoist reforms in both agriculture and industry.
China is a now a “mixed economy”, with substantial state ownership and control of the means of production but also with private ownership of capital.
20
China has undergone rapid urbanization in recent years
China, Urban population (% of total)
Source: Reuters EcoWin
60 65 70 75 80 85 90 95 00 05 10
%, To
tal Po
pulat
ion
15
20
25
30
35
40
45
50
55
21
Challenges for contemporary China that are relevant today but were not topics of the day during Russell’s times
Structural composition of aggregate demand Aging population, low fertility rate, biased sex ratio and
demographic transition Environmental degradation Social disparities Health standards and food safety Banking and finance Elevated real estate prices Energy security
22
Both consumption and investment underlie domestic demand growth
China, Sources of Growth
Final Consumption Investment Net Exports Growth
Source: Reuters EcoWin
80 85 90 95 00 05 10
-10
-5
0
5
10
15
20
25
24
Consumerism and consumption in China
Consumption in China has risen in conjunction with growth and the rise of real income, even though household consumption as a share of national income remains low and has declined since the early 1990s.
25
High investment, fixed asset and infrastructure Spending
Investment has been important driver of growth. Construction of industrial, commercial and residential real estate has boomed. Chinese cities have changed dramatically since Russell’s times!
By 2025, in China Urban population will grow to about 250 million More than 200 Chinese cities shall have more than one million
residents, compared to 35 such cities in Europe 50,000 skyscrapers is expected to be constructed (= 10
Manhattans!) Beijing’s subway (underground metro) system will exceed
1,000 km and the country will be building more subway lines that what the total of Europe’s currently installed subway systems
Impressive skyscrapers!
29
China’s population is expected to decline by mid-2030s.
China, Total midyear population
Source: Reuters EcoWin
50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50
Pers
on (b
illion
s)
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
30
China is benefiting from demographic dividend
China, Age dependency ratio (% of working-age population)
Source: Reuters EcoWin
60 65 70 75 80 85 90 95 00 05 10
%
35
40
45
50
55
60
65
70
75
80
85
34
Some indicators of human development in China
Indicator of Human Capital Development People’s Republic of China(CHN)
South Korea(KOR)
Japan(JPN)
Life expectancy at birth, years, 201273.7 80.7 83.6
Mean years of schooling, years, 2010 7.5 11.6 11.6
Expected years of schooling, years, 201111.7 17.2 15.3
Maternal mortality rate, death per 100,000 birth, 2010 37 16 5
Physicians, per 1,000 people, 2005-2010 1.4 2.0 2.1
Source: UNDP, Human Development Report 2013
35
Progress in health and life expectancy has not been impressive since the beginning of economic reforms
While China continues to make impressive progress in education, scientific and technological capabilities, since the beginning of economic reforms China’s life expectancy gains and health gains have been less impressive.
China will need to investment in public health infrastructure, public health security and insurance, and improve food and water safety standards to improve the health outcomes of its people going forward.
37
China’s total CO2 emissions exceeds that of the U.S.
USA and China, Emissions, Carbon Dioxide
China USA
Source: Reuters EcoWin
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Ton
(met
ric) (
billio
ns)
1
2
3
4
5
6
7
8
38
But China’s per capita CO2 emissions are still far below that of advanced capitalist economies
2012
Emissions, Carbon Dioxide, Per Capita
Value at 2012
Source: Reuters EcoWin
USA CHN
Tonn
es
0
5
10
15
20
39
China’s oil consumption to GDP ratio is high
Oil Consumption to GDP ratio, 2007
Source: Reuters EcoWin
GBR DEU FRA ITA JPN USA CAN BRA MEX ARG RUS CHN IND
Barr
ells p
er b
illion
$ of
GDP
, 200
7 (m
illion
ths)
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
42
The peaceful rise of China
43
China’s dispute with Japan
45
Disputes in South China Seas with its neighbors
46
Border disputes with India
47
Cooperation with Russia: Tactical or strategic?
48
How to “recover” Taiwan?
China 3.0
Major long term challenges for contemporary China
Governance, regime stability, and human rights. Or how to avoid an “Orange Revolution”!
Industrialization and modernization of the economy Job growth and poverty reduction Inequality and social disparities Human capital development, education and health care Managing the demographic transition Improving the quality of the environment Ensuring energy security and access to resources Regulating of the financial sector, including shadow banking Ensuring the “peaceful rise” of its global power without
incurring the wrath of the Western countries!
52
Conclusions
China’s challenges are still formidable but the country has made impressive gains, particularly in real per capita income growth, in recent decades. Russell realized the vital importance of industrialization for China’s development and modernization, but also the role of governance, regime stability, and human capital development and scientific and technological capability.
There are similarities between the problems that Russell identified years ago and contemporary China’s challenges, as well as differences and, of course, new problems.
Russell hoped that China, unlike Western nations, could and would develop without resorting to ultra nationalism, militarism, and crass materialism. He was optimistic that China would be a progressive force in the community of nations.
