I chose this topic because……
Economics is fun
Heard and read stuff about financial crisis
Wondering why was some better off than others?
Outline
Thesis
China isofa Facts
fast emerging
• Statement:
Brief Introduction
of China country from
the •recession
of the world
Crisis Financial
of 2008 through
Initial Conditions
ofFinancial
China (before
Crisis)
abiding
its sets
of agendasofand
• Brief
Explanation
the proper
Impact self-adjustments
of Financial Crisis
of 2008 on China
both before an economic catastrophe and the aftermath of
it.
• China’s Reaction to Financial Crisis
• Possible Outcomes (issues) and Solutions
Facts of China• Largest Exporter
China $1.506 trillion (2010 est.) #2 (behind EU)
US $1.270 (2010 est.) #4
• Imports
China $1.307 trillion (2010 est.) #3
US $1.903 trillion (2010 est.) #1
Reference: CIA World Factbook
Export
Import
Facts of China• GDP (real growth rate) –
China 10.30% (2010 est.) # 7
US 2.7% (2010 est.) # 138
Taiwan 10.50% (2010 est.) #6
European Union 1.8% (2010 est.) #154
• Debt - External
China $406.6 billion (31 December 2010 est.) #23
US $13.98 trillion (30 June 2010) #1
Reference: CIA World Factbook
GDP (real growth rate)(%)
Initial Condition of China
I.
Highly administrative – Government controls the flow of
loanable funds
II. High interest rate – Higher saving
Comparison of BRIC countries and world average savings rate
(Share of total savings to Gross National Income (GNI)(%)
1990
2000
2001
2002
2003
2004
2005
2006
China
40
37
38
41
44
47
51
54
Brazil
19
14
14
15
16
19
17
18
India
22
26
26
27
29
32
33
34
Russia
30
37
33
29
30
31
32
31
World
22
22
21
20
20
21
21
22
Reference: ZHANG Xiaojing, TANG Duoduo, LIN Yueqin
(Institute of Economics, Chinese Academy of Social Sciences)
Initial Condition of China
III. Limited exposure to external risks
Economy
Current
account/GDP
(Expected
value of
2009)(%)
Short-term external
debts/Foreign
exchange reserve
(Expected value of
2009)(%)
Bank
loans/deposits
Overall risk
ranking
South Korea
1.3
102
1.3
14
Brazil
-1.5
22
1.36
10
Russia
1.5
28
1.51
9
India
-2.4
9
0.74
4
Taiwan
7.9
26
0.87
3
Malaysia
11.3
15
0.72
2
China
5.2
7
0.68
1
Reference: ZHANG Xiaojing, TANG Duoduo, LIN Yueqin
(Institute of Economics, Chinese Academy of Social Sciences)
Impact of Financial Crisis of 2008 on China
• Investment in the US
• US Decreasing in Demand
When world financial crisis strikes…
Decrease demand for Chinese imports  Chinese job losses 
Social and economical unrest
Cuts in interest rate  Encourage lending
Tax cuts  Increase willingness to consume
Monetary stimulus  $586 billion (roughly 4 trillion yuan)
stimulus package  Domestic investment increased
Reference: ZHANG Xiaojing, TANG Duoduo, LIN Yueqin
(Institute of Economics, Chinese Academy of Social Sciences),
(Fan, The Jordan Times, 2011)
China’s $586 Stimulus Package
• Housing
• Rural Infrastructure
• Transportation
• Health and Education
• Environment
• Industry
• Disaster Rebuilding
• Incomes
• Taxes
• Finance
Reference: (Chiu, 2008)
Possible Outcomes (issues) and Solutions
• Hasty and wasteful projects
• Increased government steerage
• Appreciation of renminbi
======================================
• Upgrade industrial structure
• Increase domestic market
Reference: (NewYorkTimes, 2008), (Naughton, China Leadership Monitor, No. 29)
C ONCLUSION
1. Highly Administrative System
2. High Interest Rate, Reserve Ration
3. Limited Exposure to External Risks
1. Lower down Interest Rate, Reserve Ration  Increase
spending
2. Tax Cuts  Save exporting enterprises  Save job lost
3. $586 Stimulus Package  Numerous domestic investments
projects (urbanization)  Domestic Market vs. Export
Oriented

References:

http://chinadigitaltimes.net/2008/12/2008-financial-crisis-and-china/

http://www.nytimes.com/2008/11/27/business/worldbusiness/27yua
n.html

http://www.jordantimes.com/?news=23852

http://chineseculture.about.com/od/thechinesegovernment/a/Chinas
timulus.htm

http://www.gees.org/files/documentation/doc_Documen-03520.pdf

http://www.xiaojingzhang.com/pdf/economicrecovery.pdf

http://epress.anu.edu.au/china_new_place/pdf/ch09.pdf

http://www.imf.org/external/pubs/ft/wp/2009/wp09172.pdf

References:

http://www.bus.indiana.edu/riharbau/harbaugh-chuxu.pdf

http://www.nytimes.com/2008/11/19/business/worldbusiness/19yua
n.html

http://www.china.org.cn/business/201007/01/content_20396527.htm

http://www.cfr.org/india/financial-crisis-may-worsen-poverty-chinaindia/p17812

CIA Factbook