The Chinese Economy: What’s
the real Problem?
Andong Zhu
Tsinghua University
IDEAs Conference on
A Decade After: Recovery and
Adjustment Since the East Asian Crisis
12-14 July 2007
Outline
 Introduction
 The Impacts of the Crisis on the Chinese
Economy
 What’s the Real Problem?
 Conclusion
Outline
 Similar Story with Other Asian Countries
 The Chinese Story
 What’s the Real Problem
 Conclusion
Similar Story with Other Asian
Countries









High GDP Growth
Savings Investment Gap
CA Surplus
High Foreign Reserves
Pressure for Appreciation of the Currence
Jobless Growth
High Inequality
Foreign Capital Penetration in the Economy
……
GDP Growth in China: 1979-2006 (%)
16
15.2
14
14.2 13.9
13.5
13.1
11.6
12
10.9
10.9
10.0 10.1 10.2
10.0
10
8
11.3
9.0
9.3
9.2
8.9
6
9.1
7.8 7.6
7.6 7.8
10.7
8.4 8.3
5.3
4.1 3.8
4
2
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
0
Savings and Investment in China: 1978-2005
50.0
investment ratio
Saving ratio
45.0
40.0
35.0
30.0
25.0
20.0
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Net Export as % of GDP in China: 1978-2006
8
6.76
6
5.48
4.35 4.19
4
2.64 2.74
1.63
2
0.34
1.26
1.00
0.82
1.58
1.97
2.61 2.42
2.13
2.57
2.19
2.54
0.09
0.02
0
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
-0.32-0.49-0.32
-0.98-1.07
-2
-1.84
-2.43
-4
-6
-4.04
Foreign Reserves of China ($Bn): 1978-2007
1400
1202
1200
1066
1000
819
800
610
600
403
400
286
-200
2007
2006
2005
2004
1989
2003
1988
2002
1987
212
2001
1986
2000
1985
1999
1984
1998
1983
1997
1982
105
1996
6 11 22 19 21
1995
3
52 74
1994
3
1993
2
1992
3
1991
8
1990
9
1981
7
1980
1 -1 3
1979
0
0
1978
200
140 145 155 166
Exchange Rate of RMB against USD(?RMB=100USD): 1978-2007
1000
900
862
835 831 829 828 828 828 828 828 828 828 819
800
797
758
700
600
532
576
478
500
400
345
372 372 377
294
300
200
551
171
168 155
150
189 198
233
100
2007.7
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
0
Employment Elasticity in China
2.5
Total
2
Primary Industry
Secondary Industry
Tertiary Industry
1.5
1
0.5
0
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-0.5
-1
-1.5
Decreasing Employment Elasticity
Total
Primary
Industry
Secondary
Industry
Tertiary
Industry
1979-1989
0.34
0.21
0.57
0.58
1991-2000
0.11
-0.11
0.10
0.50
2001-2005
0.11
-0.16
0.19
0.37
Income Inequality in China:1979~2004
.48
.44
.40
.36
.32
.28
.24
80
82
84
86
88
90
92
94
GINI
96
98
00
02
04
Share in Industry Output by
Ownership (%)
60
Foreign Owned
SOE
Collective
Domestic Private
50
4054.61
35.63
7.48
56.17
32.99
5.55
30
51.52
35.07
6.32
34.02
9.83
2047.01
37.34
37.72
13.69
36.59
15.14
1033.97
36.32
39.39
9.15
031.62
38.11
11.7
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
28.24
38.41
9.01
The Chinese Story with the Crisis
 One Good Impact: Capital Account
Liberalization Stopped
 Other Impacts:
The Over-dependency on Foreign Trade
Foreign Trade as % of GDP: 1978-2006
80
70
Total Imports & Exports
Total Imports
Total Exports
Balance
60
50
40
30
20
10
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
0
-10
The Over-dependency on Investment
Capital Formation Rate in China:1978-2005
50
Capital Formation Rate (%)
45
42.6
40.5 40.3
40
38.2
36.1
35
38.1 37.5
34.8
32.5 31.9 32.8
34.2
36.3 37.0 36.6
34.9 34.8
36.6
41.0
38.8
36.7 36.2 36.2
35.3
36.5
43.2 42.6
37.9
30
25
20
15
10
5
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
0
The Excessive Savings in China: 1981-2004
Gross savings (% of GDP)
44
42
42
42
40
40
39
39
38
41
40
40
39
38
38
38
36
36
36
36
35
35
35
35
35
35
34
34
34
32
32
30
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Decreasing Consumption Rate
Final Consuption Rate in China:1978-2005
68
Final Consumption Rate (%)
66
64
62
60
58
56
54
52
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
50
Gini Coefficient for China’s Income Distribution
0.50
0.45
0.40
0.35
0.30
0.25
0.20
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01
Sweden 25, India 32.5, United States 40.8, China 44.7, Brazil
The Increasing Inequality
 According to a recent study,
In
urban area, the top 10% family’s income is
31 times of the bottom 10% family’s income,
rather than 9 times, as some statistics show.
If we consider both the urban and rural area,
the ratio is 55, rather than 21 times.
Informalizing Labor Market
Employment In China: 1978-2005 (0000)
30000
EMP-CITY
EMP-CITY-SOE
EMP-STF&WRK
25000
20000
15000
10000
5000
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0
The Laid-off/privatization Movement
30000
Urban employment
State-owned Units
25000
Collective- owned Units
Manufacturing
20000
15000
10000
5000
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
0
The Laid-off/privatization Movement
Urban
employment
highest level
lowest level
change
State-owned
Units
27331(2005) 11261(1995)
19040(1995)
8291
6488(2005)
-4773
Collective
-owned
Units
Mining and
Quarrying
Manufacturi
ng
3628(1991) 932(1995)
9803(1995)
558(2005)
8043(2000)
810(2005)
-2818
-374
-1760
Ownership Changes in the Chinese
Economy
 Shrinking SOE Sector
 Increasing Private Enterprises’ Share
 Increasing Foreign Control
Share in Industry Output by
Ownership (%)
60
Foreign Owned
SOE
Collective
Domestic Private
50
4054.61
35.63
7.48
56.17
32.99
5.55
30
51.52
35.07
6.32
34.02
9.83
2047.01
37.34
37.72
13.69
36.59
15.14
1033.97
36.32
39.39
9.15
031.62
38.11
11.7
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
28.24
38.41
9.01
Foreign Enterprises' Share in China's International Trade (%)
70
60
EX + IM
EX
IM
50
40
30
20
10
0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Foreign Capital’s Share in Different Industries in China:2005
“三资”企业在工业总产值中的比重(%)
30
20
0
4
0 1 2
46
50
40 43 43
39
38
36 37
32 33 34 34 35
40
27 28 29
23 25 25 25 26
15 18
13
8 8 10 11 11
10
84
90
80
53 55
60
66
61 63
70
通信设备、计算机及其他电子设备制造业
仪器仪表及文化、办公用
其他采矿业
文教体育用品制造业
家具制造业
皮革、毛皮、羽毛(绒)及其制品业
纺织服装、鞋、帽制造业
交通运输设备制造业
塑料制品业
工艺品及其他制造业
橡胶制品业
电气机械及器材制造业
金属制品业
食品制造业
造纸及纸制品业
饮料制造业
燃气生产和供应业
废弃资源和废旧材料回收加工业
印刷业和记录媒介的复制
农副食品加工业
化学纤维制造业
通用设备制造业
化学原料及化学制品制造业
纺织业
专用设备制造业
医药制造业
木材加工及木、竹、藤、棕、草制品业
非金属矿物制品业
有色金属冶炼及压延加工业
黑色金属冶炼及压延加工业
电力、热力的生产和供应业
石油加工、炼焦及核燃料加工业
水的生产和供应业
石油和天然气开采业
非金属矿采选业
有色金属矿采选业
黑色金属矿采选业
煤炭开采和洗选业
烟草制品业
Share of Different Ownership in Different Industries
in China:2005
不同所有制企业在工业总产值中的比重(%)
“三资”
私营
国有及国有控股
100
90
80
70
60
50
40
30
20
10
0
通信设备、计算机及其他电子设备制造业
仪器仪表及文化、办公用机械制造业
其他采矿业
文教体育用品制造业
家具制造业
皮革、毛皮、羽毛(绒)及其制品业
纺织服装、鞋、帽制造业
交通运输设备制造业
塑料制品业
工艺品及其他制造业
橡胶制品业
电气机械及器材制造业
金属制品业
食品制造业
造纸及纸制品业
饮料制造业
燃气生产和供应业
废弃资源和废旧材料回收加工业
印刷业和记录媒介的复制
农副食品加工业
化学纤维制造业
通用设备制造业
化学原料及化学制品制造业
纺织业
专用设备制造业
医药制造业
木材加工及木、竹、藤、棕、 草制品业
非金属矿物制品业
有色金属冶炼及压延加工业
黑色金属冶炼及压延加工业
电力、热力的生产和供应业
石油加工、炼焦及核燃料加工业
水的生产和供应业
石油和天然气开采业
非金属矿采选业
有色金属矿采选业
黑色金属矿采选业
煤炭开采和洗选业
烟草制品业
全国总计
Take away Profits, Leave GDP
and…
Pollution
Pollution in the World:1999
Searching a Job？Or a War？
What’s the Real Problem?
 Too much foreign Reserves
 Too much foreign capital
 High CA surplus (most of them owned by
foreign capital)
 Pressure for appreciation of the currence
 Easy solution or not?
Why We are always the Victim?
 Should we just solve the urgent problem or
should we rethinking the world political and
economic system?
Thanks!