China_Economic_315_Project

1. Select a developing country and situate it geographically (continent, countries bordering it). China is a developing country. The land boundaries are Bhutan, India, Kazakhstan, North Korea, Kyrgyzstan, Laos, Mongolia, Myanmar, Nepal, Pakistan, Russia, Tajikistan, and Vietnam. China is 9.5 million square kilometers which is smaller than the U.S., however, if you include Mongolia then it would be 11 million square kilometers. China’s water boundaries are the East China Sea, Korea Bay, Yellow Sea, and the South China Sea. 2. Provide the following information: ethnic and religious compositions, colonial history if any, year of independence if any, form of government, and main sources of economic activity. Before the overthrow of the last Qing dynasty in the early 1900’s, most of the past dynasties of China believed in the panentheism system where there was a strong belief in the supernatural force and Heaven being an omnipotent entity. This system was before the development of Taoism “the way”, Confucianism, Buddhism, or Christianity. In China, religion is not a huge part of the majority of the people’s life. About 1.1 billion Chinese people are religious believers. Taoism, Confucianism, and Buddhism could be a philosophy teaching of life. China today is a multi-religious country where the major 5 are Taoism, Buddhism, Islamism, Protestantism, and Catholicism. The largest is Buddhism. There are 56 ethnic groups in China that are officially recognized by the government. Here it is listed: Han, Zhuang, Manchu, Hui, Miao, Uyghurs, yi, Tujia, Mongols, Tibetan, Buyei, Dong, Yao, Korean, Bai, Hani, Li, Kazak, Dai, She, Lisu, Gelao,, Lahu, Dongxiang, Va, Sui, Nakhi (Naxi), Qiang, Tu, Xibe, Mulao, Kyrgyz, Duar, Jingpo, Salar, Blang, Maonan, Taijik, Pumi, Achang, Nu, Ewanki, Gin, Jino, De’ang, Uzbeks, Russian, Yugur, Bonan, Monba, Oroqen, Derung, Tatars, Hezhan, Lhoba, and Gaoshan. The highlighted are the major ethnics. After the Opium War of 1840, China was reduced to a semi-colonial and semi-feudal country. Even through, China tried to prevent this from happening, the corruption within the Qing Dynasty capitulated to the Britain time and time again to benefit individual officials. With the Qing Dynasty weak, Britain, the United States, France, Russia, and Japan took advantage of China by forcing them to sign unequal treaties. This is the beginning of the fall of the Qing Dynasty. The Revolution of 1911 overthrew the last emperor of the dying dynasty. From then on, it was there were more uprising and revolution to the already trouble country. The two main leaders of during this time period was Mao Zedong, of the Communist Party of China and Sun Yat-sen, of the Kuomingtang (KMT) which was a democratic country. After the death of Sun Yat-sen, Chiang Kai-Shek led the KMT which resulted in the “10-Year Civil War.” Chiang Kai-Shek lost to CPR and fled to Taiwan where he reigned as the dictator until his death. October 1, 1949, the People’s Republic established. After Mao Zedong came into power, there was the Cultural Revolution which helped the national income increased by 58 percent in term of constant prices and brought about social changes. Today, China is a Communist party or Socialist country that is rapidly moving in the direction of capitalist world. When measure the nominal GDP, China economy is the 3rd largest in the world. The main sources of the economic activities are the increasing amount of foreign investment and the trade and services. The machine and electronics in China have become some of the leading industries in the nation. The automobile industries are also booming. There is an increasing amount of capital inflows that the government is trying to reign in by using monetary policies. 3. For the following years (1995, 2000 and 2005), give the structure of the economy of your country (share of agriculture, industry and service as a % of GDP). |Years |1995 |2000 |2005 | |Agriculture |21 |16 |14 | |Industry |49 |50 |50 | |Service |31 |33 |36 | 4. What’s the population of this country' What’s fraction of people living in urban area' How does this fraction change over time' The total population is 13.2 billion or about 1,320,000,000. There is about 42 percentage of the China population is living in the urban area. From 1978-2004 China’s cities expanded at an average rate of 10% annually; 17.9% to 41.8% where its population increased from 170 million to 540 million. It is predicted that by 2050, the country’s urbanization rate will rise to 75%. This fraction will increase over time because income inequality, the increasing need of unskilled labor demands in certain economic sectors in the cities, and there is a demand for household servants among dual-career urban residents and further agricultural modernization, that will help increase the agricultural labor surplus. 5. What are the 3 main exports of your country' Machinery, Electronic products, and agricultural exports are the main 3. Others include plastics, optical and medical equipments, iron and steel. Question II (25%) Use the latest World Development Indicators database to do the following about your country. 1. i. Graph the nominal (or current) GDP per capita (in US$) and real GDP per capita (US$ and specify the base year) for the last 10 years for which data are available (plot both on same graph). A clear graph should be provided for full 2. credit. 3. Graph1. [pic]   |1995 |1996 |1997 |1998 |1999 |2000 |2001 |2002 |2003 |2004 | | GDP per capita, PPP (constant 2000 international $) |2702  |2926  |3141  |3372  |3567  |3821  |4089  |4379  |4727  |5085  | | GDP per capita, PPP (current international $) |2488  |2746  |2997  |3253  |3491  |3821  |4187  |4552  |5003  |5495  | | 4. 5. ii. Repeat question i. with the data in Local Currency Unit (LCU). Specify the country’s currency. Exchange Rate = 1$/7.5 Yuan   |1995 |1996 |1997 |1998 |1999 |2000 |2001 |2002 |2003 |2004 | | | GDP per capita (constant 2000 US$) |603  |654  |705  |752  |798  |856  |913  |983  |1067  |1162  | | | GDP per capita (constant LCU) |2711  |2940  |3167  |3381  |3587  |3847  |4105  |4416  |4797  |5220  | | | Consumer price index (2000 = 100) |92  |99  |102  |101  |100  |100  |100  |100  |101  |..   | | |To find the GDP Per capita (current LCU) Multiply GDP per capita, PPP (current international $) and the exchange rate of 7.5 to get the answer.   |1995 |1996 |1997 |1998 |1999 |2000 |2001 |2002 |2003 |2004 | | GDP per capita (current LCU) |18660  |20595 |22478 |24398 |26183 |28658 |31403 |34140 |37523 |41213  | | GDP per capita (constant LCU) |2711  |2940  |3167  |3381  |3587  |3847  |4105  |4416  |4797  |5220  | | Graph 2 6. [pic] 7. iii. Compare the trends between your 2 graphs (real GDP per capita in US$ and in LCU). Comment on any similarities and differences between these 2 graphs. What could be the source of any differences' Explain. The similarities between the 2 graphs would be that they are both sloping upward. The GDP per capita (constant LCU) and the GDP per capita, PPP (constant 2000 international $) are about the same. The difference is that the nominal and real GDP per capita in LCU have a great gap between them because of the inflation rate. The US dollar is also more internationally accepted, while the yuan flexibly keep the other country guessing. 8. 9. iv. Calculate the average annual growth rate in real GDP per capita for that 10 years period (write the formula you are using, be careful). How many years will it take for real GDP per capita in US$ (for the last year of your series) to double' 10.   |1995 |1996 |1997 |1998 |1999 |2000 |2001 |2002 |2003 |2004 | | GDP per capita growth (annual %) |9  |8  |8  |7  |6  |7  |7  |8  |9  |9 | | Total of the GDP per captia growth (annual%) = Average annual GDP per capita growth Total # of Years 78/10= 7.8 It will take 70/7.8 about 8.974 or 9 years Question III (25%) 1. Find the following about your country (each for the latest year available): 1. i. Life expectancy; 2. Total population: 71.9% 3. Male: 70 years 4. Female: 73 years (2004, World Bank Group) 5. ii. Adult literacy rate; (according to the official numbers, 15 and over) 6. Total population:90.9% 7. Male:95.1% 8. Female:86.5% (2004, World Bank Group) 9. iii. Primary school enrollment rate; 92% 10. Combined gross enrolment ratio for primary, secondary and tertiary school=70% iv. Headcount ratio; and 4.9% (1993-2000) 11. v. Human Development Index (HDI) =0.768 2. What is HDI formula' (not seen in class but you should be able to find it over the internet, check the UNDP website). The Human Development index consisted of the average of three components of life expectancy, adult literacy rate, and the decent standard of living. Formulas: Life Expectancy Index=LE-25 85-25 Education Index= 2/3 * ALI + 1/3* GEI Adult Literacy Index (ALI) = ALR-0 100-0 Gross Enrolment Index (GEI) = CGER-0 100-0 GDP Index= log (GDPpc)-log (100) Log (4000)-log (100) • GDPpc-GDP per capita at PPP in USD • CGER-Combined Gross enrollment ratio for primary secondary and tertiary schools • LE- Life expectancy at birth • ALR- Adult literary rate (15+) After you find all the information for each of the index, then average it to found out the human development index Life Expectancy Index= 71.9-25/60 → 0.78 Education Index=2/3* 0.909 + 1/3* 0.70 →0.84 Adult Literacy Index (ALI) =90.9 -0 → 0.909 100-0 Gross Enrolment Index (GEI) = 70-0 →0.70 100-0 GDP Index= log (5,896)-log (100) → 0.68 Log (4000)-log (100) 3. Why is the HDI index a better or worse measure of living standards than per capita GDP alone' Explain. In some cases, to determine whether a country is a developed, developing, or underdeveloped country, the HDI is not much better off then using per capita GDP in measuring the standard of living because of its limitations of only measuring the three basic dimensions of human development. Note: A large percentage of the adult literacy rate is based in the cities. However, compared to measuring the living standard to the per capita income, the HDI focuses attention on aspects of development more sensible and useful and also leading more research into a wider variety of information in the Human Development Reports. The GDP doesn’t take into consideration the income of the poor considering that rural areas of China are mostly poor. HDI is better than GDP per capita!! Question IV (25%) (This will require you to do some reading regarding your chosen country.) Identify 5 obstacles to your country’s economic development over the past 5 years. Outline any actions that could be taken to redress these obstacles. You may consult UN reports, World Bank reports or IMF reports that have been written in relation to that country to help you answer the questions. Rapid growth of investment and even more rapid saving in the corporate sector. China need to reduce it’s reliance on foreign investments and net exports. And decrease the amount of capital inflows that is coming into the country. To solve this problem is to encourage more domestic consumption and greater exchange rate flexibility which allow monetary policy to take into affect of slowing down the rapid credit growth and excessive investment. Also, good macroeconomic policy would be highly positive in the long run, with less restriction on exchange rate flexibly, China would benefit from this action; however, there is a chance that this action would intensify trade restrictions on China which in turn would have negative effects on other countries that is connected to the China’s production chain. China needs to increase it consumption of products to help its economic development. To solve this problem is to enact reforms to strengthen social safety nets, redistribute public spending toward social areas, and improving the financial intermediation. Income inequality and underutilized labor force Compared to the United States or Russia, China displays recently show a more skewed income distribution that was enforced by the Gini coefficient result. There are many reasons that contribute to this problem. The main reasons that there is an increasing amount of inequality among household would be the skilled-bias technical progress and the transition from agriculture to industry. This is not to say that globalization is a bad thing to a developing country, however it is the cause of differential wages and developments. To solve this growing problem, China need to address this problem directly by carrying out policies that generate more effective spending on education and infrastructure in rural areas. In strengthening of social safety nets, labor reforms that facilitate hiring, and giving the low-income household greater access to the market, China would be about to shorten the distance between the rich and poor. Another problem would be the increasing percentage of urbanization that has increase in the past decades. With the stampede of people immigrating to the cities, we have cities officials rushing to accommodate the growing number. The improper urban development result in waste of both human resources and money, which cause rampant illegal infrastructure being built, declining quality of life for residents, and weakened competitiveness because of business cost hikes. For the promise of tall skyscrapers and western urbanization, China is in the process of racking more debts for the future generation. Experts pointed out that to solve this problem the cities must place more laws and watch the market more closely to measure the amount of urbanization the country can have. Bibliography Burton, David. Director of Asia and Pacific Department. “Asia: Ten Years On—Taking Stock and Looking Forward.” 5 June 2007. www.imf.org. Singapore Press Club, Singapore. de Rato, Rodrigo. Managing Director of the International Monetary Fund “Capital Flows in an Interconnected World.” Bangkok, Thailand. 28 July 2007. www.imf.org. SEACEN Governors Conference. “China’s Urbanization Encounters “Urban Disease.”China Observer. Nov. (2005). 13 Aug 2007. < http://www.chinanews.cn/news/2005/2005-11-18/14441.html> “Human Development Index” Wikipedia Aug 2007. < http://en.wikipedia.org/wiki/Human_Development_Index> “People’s Republic of China” Wikipedia August 2007. < http://en.wikipedia.org/wiki/People%27s_Republic_of_China> “China”CIA-TheWorldFactbook.13Aug 2007. “China”World Development Indicator .2007.The World Bank Group. 13 August 2007