Chinas Development Trends Issues and Progress Chinas Economic

China’s Development Trends, Issues and Progress

China’s Economic Nodes

Development Background Even before economic reform began in 1970 s, China’s economy had large share of industrial output—almost 50% of GDP Unusual because vast majority of people work land Share of agriculture has gradually fallen from 33% in 1985 to 15% in 2002 Structure of China’s secondary industry changed fundamentally during 1980 s

Growing Role of Private and Collective Enterprises Until 1978 industry dominated by large state-owned enterprises (SOEs) Since then manufacturing output has been produced by “collective” enterprises under aegis of local governments-particularly township and village enterprises (TVEs) But increasingly by private entrepreneurs or foreign investors— either wholly owned or in joint ventures

Value of Chinese Exports and Received FDI, 1983 -2002 (Billions of $US)

Hungry Dragon: China’s Demand for Raw Materials China’s booming economy driving up prices minerals and metals Oil imports rose by 30% in 2003 exceeding those of Japan Raises problems of supply bottlenecks and encourages local growth of needed resources

Transport Logjam Strained by rapid growth China’s transport system has bogged down Railroads are so overburdened that power plants in southern China have trouble getting coal from the north This has caused ‘brownouts’ forcing factories to operate on limited schedules Overloaded heavy duty trucks are breaking down roads and enforcement of weight limits forcing trucks to make more trips

Shipping Growth Huge need for raw materials and production of finished goods has fueled a new demand for the world’s shipping industry This has produced a major pressure on China’s port system Shortages of trucks and rail cars are preventing distribution of shipments from overseas Imported iron ore and steel clog docks and new arrivals are forced to wait as long as a month at a cost of up to $100 K a day per vessel

Other Impacts of Transport Congestion But exports of shoes to furniture have not been affected. Because these goods are containerized and loaded on different trucks to different specialized ports China’s boom has pushed up global commodity prices and freight rates all over the world Rising freight rates have hurt competitiveness of some US agricultural exports to China: grain from Gulf Coast to China now costs $70/ton as opposed to $18/ton in last two years Collision between China’s booming private sector benefiting from foreign investment and older, less prosperous aspects of economy Much recent investment in China has gone to roads and not railways. Chinese railways are in public sector and form monopoly

The Role of Ports The cargo port in Zhanjiang, a southern city in China. Foreign investment in China for the first 11 months of last year totaled $47 billion; Chinese officials had predicted $57 billion for the entire year.

Huge Need for External Resources Despite the deep energy resources, such as coal, which are available in Shansi province, the rapid economic growth has forced China to import coal. A power plant in Guangdong Province in southern China is importing coal from as far as Australia

Shanghai’s Visionary Thinking Grand vision- build it and they will come! 1990 plan successful to turn marsh and old factories into new financial district. Pudong Major financial and retail complexes World’s tallest hotel 54 floors

Shanghai’s Maglev System German produced mass transitmagnetic levitation World’s first in commercial service Reaching 270 mph 20 mile, 8 minute journey to airport from center of Shanghai Cost of one way ticket is $10 but only 4, 000 passengers on a typical day less than 1/6 th of capacity

Problems of the Boom Critics, even some Chinese leaders, are saying that heavy state investment has led to waste and has not improved incomes of vast majority of Chinese people Promise to overhaul urban and rural welfare payments, improve grain production, reduce rural taxes and improve education Perhaps simply clever public relations for CP but many of 800 million outside wealthy coastal nodes have stagnant incomes