Two Economies
Different Remedies
Group Two
Group Two Members
Khuong
M997z212
Jarinthon
M997z225
Thao
M997z216
Rattaya
M997z230
Huong
M997z226
Son
M997z209
Content
Chinese Strategy
 China’s Economy Overview
 Advantages and Disadvantages
 Chinese Remedy to overcome crisis
 SWOT analysis
American Strategy
 Context of economy crisis
 The 3 signs of troubles
 Deflation
 Actions to Prevent Deflation
 Is the Remedy in Sight?
Chinese Strategy
China’s Economy Overview
 China's economy is huge and expanding rapidly.
 Averaging 8% growth in Gross Domestic
Product (GDP) per annum.
 Grown more than 10 times during that period,
with GDP reaching 3.42 trillion US dollars by
2007.
 China already has the biggest economy after the
United States.
 Economic reforms started in China in the 70s and
80s.
 Change the center of agriculture from farming to
household activities.
 More independence was granted to the business
enterprises that were owned by the state
government.
 Opened its economy to the world for the purposes
of trade and direct foreign investment.
 International trade has also increased rapidly.
Advantages and Disadvantages
of China’s Economy
Advantages
 Economic and Institutional Regime:
- The leader companies in economic have strong
vision can develop the market of China.
- Since the open-door policy was launched in early
1980s, the Chinese company gradually opened to
foreign trade and investment.
- A high rate of saving was able to withstand
remarkable institutional changes, and to meet
strong investment it needs incurred from rapid
economic expansion.
- China’s private sector started to develop in mid1980s, it is the major reason to run the economy in
the country that make the GDP grew.
Education and Skills:
- The education is the great point to focus
to develop the well-economy.
- Many companies become more
knowledge-company especially the private
sector that can mark-driven, flexible and
suit for business need.
 Innovation system:
- China has great emphasis on science and
technology that can develop the economy.
- China has built some national key labs
laboratories in the field of physics, chemistry,
biotech, pharmaceuticals, optics, space etc.
 Information Infrastructure:
- The ICT of China has been growing rapidly such
as internet user, personal computer, and mobile
phone were higher than the average.
- China’s ICT exports have been very strong. It
became biggest exporter if ICT goods in 2004.
Disadvantages
 Incentive and Institutional Regime:
- The legislative body has been a relatively weak
player in the government function and largely
controlled by the party. The more substantial
problem is the enforcement of laws.
- The financial sector is still not functioning
efficiently and the financial market does not
provide enough investment channels for China’s
huge savings.
 Education and Skills:
- The overall educational attainment of the
population is still low.
- It seem focusing more on quantity rather than
quality.
 Innovation System:
- China still mainly remains as an imitator or adaptor of
foreign technologies with innovation mostly occurring in
process rather than in product.
- China’s exports of medium and high tech products have
been increasing rapidly but not many of them are actually
invented in China.
 Information Infrastructure:
- The top ten IT-service companies have only about 20
percent share of the market, compared with 45 percent
commanded by India’s top ten.
- The problem including weak process controls and
product management.
- It has only about 7.3 percent of the internet users saw
online shopping as one of their online activities.
- The major constraints are issue with logistic,
distribution and payment system.
Chinese Remedy to overcome
crisis
China depended totally on state
to overcome the crisis
Actions
 States run companies instead of private
entrepreneurs.
 Has pumped public money into companies.
 Reaffirmed their faith in their own more statist
approach to economic management.
 The expansion of Government.
 To create a vibrant state sector in important
industries.
Vast bulk of stimulus package pumped out
for new highways, railroads…
Some companies used money to strengthen
their dominance in their market or to enter
new ones.
State control of energy supplies.
Set up 8000 state owned investment
companies at the local level.
SWOT
Analysis
Strength
The socialist system’s advantages:
- to make decisions efficiently.
- to organize effectively.
- to concentrate resources.
China always had a major industrial
policy.
State control of energy supplies played a
vital role on China’s growth.
First in line for financing by state banks.
First in line for state bailouts when
getting in trouble.
First in line for the stimulus gusher.
Weakness
Distortions and waste will push growth
rates down well.
Too much confidence in a top-down
economics strategy.
Opportunities
Expanding business field.
To compete globally and manage the
country’s domestic development.
Threats
The deeply of Gorvenment meddling
can lead to reduce in competitiveness
between private competitors.
American Strategy
AMERICA
REMEDIES for ailing economy
Context of Economy Crisis
American – The world’s largest Economy
The USA is the world's largest economy. However, its share in
world GDP in PPP terms has declined from 23.7% in 2000 to
20.2% in 2010 due to faster growth of emerging economies
as well as the severe impact of the financial crisis in 20082009. Real GDP contracted by 2.4% in the USA in 2009. The
economy has recovered since early 2010 owing to stimulus
measures
Context of Economy Crisis
Early 2010, Business Grows
Early this year, some economists declared
that the cycle was finally righting itself.
Businesses were restocking inventories,
yielding modest job growth in factories.
Hopes flowered that these new wages
would be spent in ways that led to the
hiring of more workers — a virtuous cycle
Context of Economy Crisis
Fears of a second recession
 The American economy, long the engine of
global growth, is once again tilting toward
danger.
 The collapse of the real estate market.
 Despite an aggressive regimen of treatments,
fears of a second recession are growing.
 Signs weaken — plunging home sales, a bleak
job market.
 Investors lose faith in real estate and stocks,
they are flooding into government savings
bonds, keeping interest rates exceedingly low.
Context of Economy Crisis
Government policy makers cannot deliver
meaningful intervention
Nearly any proposed curative could risk
adding to the national debt -a political
impossibility.
Bad economic news has delayed the plans
of the Fed in an effort of seeking a graceful
exit from its interventions.
American 3 Signs of Troubles
American 3 Signs of troubles (cont.)
American 3 Signs of troubles (cont.)
The Dramatic Expansion of The Debt
 Began in the Bush administration-via large tax
cuts and two wars.
 Creditors like China and Japan might demand
sharply higher interest rates to finance
American spending.
 Inflict the reverse of deflation: inflation, or
rising prices.
 Merchants lose faith in the sanctity of the dollar
and demand more dollars in exchange for oil,
electronics and other items.
What If China Collected on U.S. Debt ?
http://www.youtube.com/watch?v=T
1dDIrOCbUo
Deflation – Why is America afraid of it?
 Falling prices can be good news for people in need of
cars, housing and other wares, a sustained, broad
drop discourages businesses from investing and
hiring.
 Less work and lower wages translates into less
spending power, which reinforces a predilection.
 Against hiring and investing — a downward spiral.
 Deflation is both symptom and cause of an economy
whose basic functioning has stalled. It reflects too
many goods and services in the marketplace with not
enough people able to buy them.
Deflation Explained
You will lose your job in deflation
http://www.youtube.com/watch?v=C
4wHVkuuy78
American’s Actions to Prevent Deflation
 Inject credit into the economy.
 Adjusts a benchmark overnight rate for banks that
influences rates on car loans, mortgages and other
forms of creditThe Fed pulled this lever long
ago, and has kept its target rate near zero.
 Stimulate consumers the ability to spend.
 The Fed also relieved American banks of troubled
investments, many linked to mortgages, to give
the banks room to make new loans.
Is The Remedy in Sight?
 Most economists praise the Fed for confronting
the possibility of another depression.
 But the Fed added to the nation’s debts,
provoking talk that it was testing global faith in
the dollar.
 Most economists believe that austerity is the
wrong medicine for the American economy.
 First, they argue, take the medicine and stave
off the lethal threat; then deal with the
collateral problems.
Q&A