i chose this topic because…… economics is fun wondering why was some better off than others?...
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The Effects on Developing Countries -
China
I chose this topic because……
Economics is fun
Wondering why was some better off than others?
Heard and read stuff about financial crisis
Outline• Brief Introduction of Facts of China
• Initial Conditions of China (before Financial Crisis)
• Brief Explanation of the Impact of Financial Crisis of 2008 on China
• China’s Reaction to Financial Crisis
• Possible Outcomes (issues) and Solutions
Case Study - China
Thesis Statement: China is a fast emerging country from
the recession of the world Financial Crisis of 2008 through
abiding its sets of agendas and proper self-adjustments
both before an economic catastrophe and the aftermath of
it.
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)
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
Initial Condition of China
III. Limited exposure to external risks
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)
1. Highly Administrative System
2. High Interest Rate, Reserve Ration
3. Limited Exposure to External Risks
4. Lower down Interest Rate, Reserve Ration Increase
spending
5. Tax Cuts Save exporting enterprises Save job lost
6. $586 Stimulus Package Numerous domestic investments
projects (urbanization) Domestic Market vs. Export
Oriented
CONCLUSION
THE END ~ ~ ~
References:
http://chinadigitaltimes.net/2008/12/2008-financial-crisis-and-china/
http://www.nytimes.com/2008/11/27/business/worldbusiness/27yuan.html
http://www.jordantimes.com/?news=23852
http://chineseculture.about.com/od/thechinesegovernment/a/Chinastimulus.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/19yuan.html
http://www.china.org.cn/business/2010-07/01/content_20396527.htm
http://www.cfr.org/india/financial-crisis-may-worsen-poverty-china-india/p17812
CIA Factbook
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