trade liberalization & exchange rate policy in china
DESCRIPTION
Trade Liberalization & Exchange rate policy in China. Hisanobu Otsubo. 1.Population. China has the largest population in the world. Source: UN stat Unit: million. 2.GDP. China is the 4 th largest economy in the world (2007). The scale of the Chinese economy is 1/4 of the U.S. Source: IMF - PowerPoint PPT PresentationTRANSCRIPT
Trade Liberalization & Exchange rate policy in China
Hisanobu Otsubo
1.Population
China has the largest population in the world
1,329.0
1,169.0
306.0232.0 192.0 164.0 159.0 148.0 143.0 128.0
0
200
400
600
800
1000
1200
1400 Source: UN statUnit: million
2.GDP
China is the 4th largest economy in the world (2007).The scale of the Chinese economy is 1/4 of the U.S.
13,843.83
4,383.76
3,322.15 3,250.832,772.57 2,560.26
2,104.67
1,438.96 1,432.14 1,313.59 1,289.58 1,098.95 957.05 908.83 893.37
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000Source: IMFUnit: billion USD
3.GDP per capitaNow, China is the 4th largest economy But, in terms of GDP per capita, China is still in LDC level.Per capita GDP in China is about 1/20 of the U.S.
0
20,000
40,000
60,000
80,000
100,000
120,000 Source: IMFUnit: USD
4.GDP Growth (IMF’s estimate)
IMF estimates that China will be the second largest economy by 2010 .
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Japan
U.K
Germany
ChinaSource: IMFUnit: billion USD
5. Trade (Export) China is now the second largest exporter in the world.Increasing trade has been the driving force of China’s economic growth.
0
200
400
600
800
1,000
1,200
1,400
Merchandise Export in 2007
Source: WTO Unit: Billion USD
6. Trade Liberalization Process 1(FTC reform)
1989: The government gave trade license to 4,000 FTCs in order to encourage the competition among FTCs by 1989
1993: The government allowed private commercial firms to conduct foreign trade freely.
(almost completed liberalization)
1978: The reform started
11 years
4 years
In communist era, trade was conducted by only 10 Foreign Trade Companies (FTCs) (Trade was monopolized by central government)
7. Trade Liberalization Process 2 (FDI)
1992: FDI was opened to almost all foreign investors. China allowed the foreign investors to own the real
estate in urban cities, which accelerated the FDI inflow.
1986: China opened 14 coastal cities for FDI
2 years
4 years
1978: The reform started Initially, China pursued ISI policy. The government did not
encourage the FDI.
1988: China opened 140 coastal cities for FDI
8 years
8. Characteristics of China’s liberalization approach China’s reform process is very incremental.China advanced the liberalization process gradually and deliberately.It is different from the former Soviet Union countries’ “Big Bang” approach
-20
-15
-10
-5
0
5
10
15GDP growth rate after reform in Russia
0
2
4
6
8
10
12
14
16GDP growth rate after reform in China
Source: WDI
China did not experienced the negative growth
Russia experienced the negative growth
9.China’s ExportsAs a result of the reform, China’s export increased dramatically since 1978.
0
200
400
600
800
1,000
1,200
1,400
FTCs increased to 4,000
Private companies start trade
Open 140 coastal cities
Joined WTO
Source: WTOUnit: billion USD
10. Problems – RMB exchange rateThe U.S and advanced countries criticize that RMB has been depreciated in order to maintain price competitiveness of made in China products.Now China is under international pressure for revaluation.
- 8
- 6
- 4
- 2
0
2
4
6
8
10
12
YR1990YR1991YR1992YR1993YR1994YR1995 YR1996YR1997YR1998YR1999YR2000 YR2001YR2002YR2003YR2004YR2005YR2006
0
1
2
3
4
5
6
7
8
9
10
Source: WDI
% RMBRMB rate (right scale)
China current acct balance (%GDP left scale)
U.S current acct balance (left scale)
Trade balance in U.S is deteriorating
China’s trade surplus is growing
11 Recommendation
China should keep incremental approach Because - China has many domestic problems to be solved ex) Economic disparities between rural side and urban Environment – sustainable growth Ethnic problems
- Chinese economy is still vulnerable to the external shock ex) Low per-capita GDP - it need further poverty reduction efforts.
In the future, the revaluation of RMB should be undertakenBut simultaneously, Chinese government has to solve the domestic problems.
12 Reference: Economic disparities
The economic development gap between Shanghai (coastal area) and Chinzou (inland area) is 10 times.
5,874
4,807
3,989
1,5911,280 1,144.0
469 354.9
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
U.S China EU 25 Russia J apan India Korea Australia14
13 Reference: CO2 emission
China is the world second largest source of CO2 emission.
Unit: Million Ton
Source: OECD Environmental Data Compendium 2004