progress of china’s economic reform and opening up ma xiaofang phd, associate professor department...

Progress of China’s Economic Reform and Opening Up

MA XIAOFANG

PhD, Associate Professor

Department of Economics

Chinese Academy of Governance

03/09/2013

Curriculum VitaeEducation Background:

• 2005- 2008 Phd in Economics , China Renmin University• 2001-2002 Msc. in International Banking and Finance Studies, Southampton

University in UK

Work experience:

• 2006- Associate professor, Economics Department, Chinese Academy of Governance

• 1999-2006 lecturer, Economics Department, Chinese Academy of Governance

• Research Focus:

• Macro-economy, Financial markets, risk management, banking regulation.

Contents China’s economic achievements from 1978

• Three stages of China’s R&O

• Current situation of economy

• Guiding concept of the 12th five-year plan

• Targets of the 12th five-year plan

GDP growth (1978-2011) (100M Yuan)

05, 000

10, 00015, 000

20, 00025, 000

30, 00035, 000

40, 00045, 000

50, 000

The second biggest economy in the world

• The annual average growth rate

of GDP is 9.7% after 1978

• GDP of 2010 is 39800 billion

yuan, which is 109 times of 1978

• The second biggest economy by

the end of 2010

• The growth rate is 2.5 times of

that of the world

Fiscal revenue (1978-2011) (1M Yuan)

01, 000, 0002, 000, 0003, 000, 0004, 000, 0005, 000, 0006, 000, 0007, 000, 0008, 000, 0009, 000, 000

10, 000, 000

1978年

1980年

1982年

1984年

1986年

1988年

1990年

1992年

1994年

1996年

1998年

2000年

2002年

2004年

2006年

2008年

2010年

Fiscal revenue (1978-2011)

• The annual average growth rate of FR is 13.45%

after 1978

• FR of 2011 is 10374 billion yuan, which is 78

times of 1978

Export and import (1978-2011) (1M Yuan)

0

2, 000, 000

4, 000, 000

6, 000, 000

8, 000, 000

10, 000, 000

12, 000, 000

14, 000, 000

: FOB出口: CI F进口

Export and import (1978-2011)

• The trade volume of export and import was 2974

billion US dollar in 2010, ranked second in the world

• The annual average growth rate of E&I is 16.8%

after 1978, the trade volume of 2010 was 143 times

of 1978

• Chinese export ranked 32th in the world in 1978

• Chinese export ranked first in the world in 2010

China’s export commodities structure (1980-2010)

Products made in China account for the share in international market

China’s ten big trade partners

Foreign Exchange Reserves• The annual average growth rate of FER is

36.74% after 1978

• 3200 billion US dollars reserve by the end of

2011, ranks first in the world

improvement of people's living conditions unit: yuan

yearIncome of

farmer

Income of

urban residentThe ratio

Consumption of

farmer

Consumption of

urban residentratio

1985 397.6 739.1 1.86 317.4 673.2 2.12

1990 686.3 1510.2 2.2 538.1 1278.9 2.4

1995 1577.7 4283.0 2.71 1310.4 3537.6 2.7

2000 2253.4 6280.0 2.79 1670.0 4998.0 2.99

2002 2475.6 7702.8 3.1 1834.3 6029.9 3.29

2004 2936.4 9421.6 3.21 2184.7 7182.1 3.29

20053255.0 10493 3.22 2555.4 7942.9 3.11

2010 5919 19109 3.23 4382 13471 3.07

Comprehensive reform model on national income distribution form (after 2003)

Abolishing agriculture taxes

• Abolishing 4 kinds of taxes of agriculture, including

agriculture tax, slaughter tax, animal husbandry tax and

special tax

• Abolishment of all these taxes releasing 133.5 billion

yuan of farmers’ burden

• Government increasing 60 billion yuan direct subsidies

Mr li, A farmer , planted 5 acres of rice. Every year he can get 350 yuan subsidies for planting from government and net income of 2000 yuan from cultivating. He said, after attending the countryside cooperation medical treatment, he got 50% to 75% of reimbursement from medical fee, but every year he only needs to deliver 10yuan. In addition, all the study incidental expenses and book expenses are exempted during the students’ compulsory education period. Reading rooms are built in the villages. Drinking system and public transportation are more convenient.

A story

Contents China’s economic achievements from 1978

Three stages of China’s R&O

• Current situation of economy

• Guideline of the 12th five-year plan(2011-2015)

• Targets of the 12th five-year plan (2011-2015)

Three stages of China’s R&O

From planed economy to socialist market economy

• Stage 1: 1978 to 1992. Primary stage

• Stage 2: 1992 to 2001. Deepening stage

• Stage 3: 2001 to present. Opening up stage

Stage 1: 1978 to 1992. Primary stage

• Started from 1978, primary and experimental stage of R&O

• Features of first stage:

Loosening and activating the economy

Clarifying different ideologies

Reform of commodity prices

Put the countryside reform first

Conflicting opinion• Socialism or capitalism?

• Deng’s answers:

No arguments about S&C. Market economy

does not stand for capitalism

No matter white or black cat, the one who

catches the rats are good cats

Cross the river by groping the stone

Reform of prices

• Under planed economy, most commodity prices are

under control, even a match

• Then changed to two-track price mechanism

• Nowadays more than 90% prices are determined by

the market

• Some important prices are still under control

Electricity, petroleum, coal, interest rate,

etc

Put the countryside reform first 1.1 The household contract responsibility system

• Inspiring the enthusiasm of Chinese farmers

• Making tremendous achievements in the rural economy

• Combining family income with production investment

• Decreasing the cost of supervision and management

• The peasants getting decision-making power for their production

Put the countryside reform first

• From1978 to1984, the annual average growth rate of agriculture

output was 7.7%

• From 1978 to1984, the total value of agriculture output

increased 42.23%, half of which from the high efficiency of

household contract responsibility system

A story

Thirty years ago, Mr Li, an old

farmer in Jiangxi Province, used a

tractor to take his bride home.

When his son got married a couple

of years ago, he rented ten

luxurious cars on his wedding day.

The old farmer said: “it is really like

a dream”.

Put the countryside reform first

1.2 Developing the role of local governments

• Loosening the regulation of the household registration system

• Guiding the orderly flow of the labor force between urban and

rural areas or between regions

• Promoting the transfer of surplus agricultural labor

• City expansion enhancing development of property

Stage 2: 1992 to 2001. Deepening stage

• In 1992, Deng Xiaoping pointed out the direction of China: socialist market economy . The reform and opening up deepened

Case of SOEs reform

• Initially give more freedom, rights and profits to SOEs

• Keeping big enterprises and sell shares of mid and small firms, more than 90% are partly or completely

private owned

Reform of big enterprises

• Only big SOEs are kept, aiming at maintaining national

pillar industries. Trying to support internationally

competitive big enterprises. Now 43 enterprises in

world top 500

• Change from state-owned to multi ownership:

private capital, foreign capital, etc

• 159 big enterprises are under control of central

government, aiming at restructuring them into 80-100

Reform of big enterprises

• Only big SOEs are kept, aiming at maintaining national

pillar industries. Trying to support internationally

competitive big enterprises. Now 18 enterprises in

world top 500

• Change from state-owned to multi ownership:

private capital, foreign capital, etc

• 159 big enterprises are under control of central

government, aiming at restructuring them into 80-100

Development of private economy

• The ratio of private economy to GDP was only 42.8% in

2000, increased to 65% by the end of 2005.

• The employment of private economy in urban areas

increased from 65% in 2000 to 75% in 2005

• Private economy is more flexible and innovative,

occupies the competitive fields

Main products: manufacturing,light industry

products

Stage 3: 2001 to present. Opening up stage• In November 2001, entry WTO; in November 2006, 5-year

transitional period ended. China is fully opened up, a new era comes

• China is now an inseparable part of global economy. It is like a swimmer swimming from a pool to the sea. Challenges and opportunities are coming together

Challenges: competition from global competitors

Opportunities: bigger market, more profit, and risk diversifying

Legislative build-upLegislative build-up

Review of over 2500 laws and regulations, abolished Review of over 2500 laws and regulations, abolished 840, amended nearly 400, to keep in line with WTO 840, amended nearly 400, to keep in line with WTO rules;rules;

Over 40 new legislations on opening up sectors in Over 40 new legislations on opening up sectors in service trade sector covering: banking, accounting, service trade sector covering: banking, accounting, legal service, insurance, logistics, commerce, legal service, insurance, logistics, commerce, telecommunications, architecture, tourist, telecommunications, architecture, tourist, transportation, etc.;transportation, etc.;

More transparency, simplification on administrative More transparency, simplification on administrative procedures;procedures;

62.5% of service areas, extend of openness 62.5% of service areas, extend of openness close to that of developed countries.close to that of developed countries.

Areas commented: banking, insurance, Areas commented: banking, insurance, securities, telecom service, distribution, etc. securities, telecom service, distribution, etc. A few limitations in telecommunication, A few limitations in telecommunication, audio-video, construction, financial and legal audio-video, construction, financial and legal services.services.

Market Market AccessAccess

国有企业43%

民营企业等 6%

外资企业51%

国有企业20%

外资企业55%

民营企业等25%

2001年 2010年

the contribution of Different enterprises in trade volume

From 1980’s to 1990’s,

the open policy focused on coastal

regions

In the 1990’s, China opened and developed Shanghai Pudong New Area

In 2000, the 10th “Five Year Plan” , the strategy of “developing the western region”

In 2001, China became a member of WTO

Experience 1. Socialist market economy

• Breaking the doctrine of socialism conflicted

with market economy

• From planned economy to market economy

• Inspiring everyone’ s potential

Experience 2.Put countryside reform first

• Countryside population accounting for the

majority

• From traditional agricultural society to

industrial society

• Three stages of reform: land system reform,

price reform, and comprehensive reform

Experience 3. Opening up

• Taking the chance of globalization

• From close economy to open economy

• Making up for insufficiency of capital

• Alleviating the employment burden

• Enhancing reform pace

Experience 4. Gradual reform

• Keeping good balance in reform,

development and stability

• From the bottom to the top

• From the point to the line , then to the wide

area

• From the experimental area to the whole

country

Contents China’s economic achievements from 1978

Three stages of China’s R&O

Current situation of economy

• Guiding concept of the 12th five-year plan

• Targets of the 12th five-year plan

Current situation of economy1. Economic strength has improved a lot, however,

there is no dramatic change in structural imbalance

and extensive mode of growth

• Economic growth mainly depends on industry, agriculture as the

foundation of the economy is still very weak. Living on the

nature in some places is still very common. Contribution made

by agricultural science is still very low.

• Economic growth depends heavily on physical resource investment and cheap labour.

• Weak in independent innovation , lack of core technology, insufficient famous brands.

The ratio of the three industries from 1978 to 2008 年（ % ）

Energy consumption ration in 3 industries from 1980 to 2008

Innovationand R&D

Processing and assembling Branding

According to the statistics, in ten big textile products in the world ,

the cost of china’s labor is 0.62 $/hour, this figure is only ¼ of

Korea, 1/13 of USA, 1/16 of Italy, and 1/20 of Japan

Current situation of economy

2. Imbalance between urban and rural areas

• Since the opening-up policy, China’s urbanization increased from

17.9% to 46.6%,10 million rural residents become urban residents per

year. however, the level of China’s urbanization is far behind the world

average level.

• The annual average net income per capita for rural residents is 5153

yuan, which is less than one third of urban residents.

The progress of China’s urbanization

　 2005 2006 2007 2008 2009 2015 2035

中国 40.4% 41.3% 42.2% 43.1% 46.6% 52.0% 65.0%

美国 80.8% 81.1% 81.4% 81.7% 　 英国 89.7% 89.8% 89.9% 89.9%

法国 76.7% 76.9% 77.1% 77.4%

德国 73.4% 73.5% 73.6% 73.6%

日本 66.0% 66.2% 66.3% 66.5%

澳洲 88.2% 88.4% 88.6% 88.7%

俄罗斯 72.9% 72.9% 72.9% 72.8%

巴西 84.2% 84.7% 85.1% 85.6%

印度 28.7% 29.0% 29.3% 29.5%

Current situation of economy

3. Regional differences

• Since the national strategy to develop the western part of

China was implemented in 2000, western provinces has had an

average annual GDP growth of 12%. Although this figure is

1.8% higher than the whole country ‘s average level, GDP per

capita in the most undeveloped areas in the west is only one

tenth of that in the coastal area.

• In 2008, urbanization reached 56% in eastern area, but in

central and western area it was 43% and 38% respectively.

In the 11th Five Year Plan, economy in eastern areas in China accounts for a big proportion in China

中國經濟規模區域佔比

66.966.566.868.969.1

33.533.230.9 31.1 33.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

05

20

06

20

07

20

08

20

09

東部佔比 中西部佔比

FDI distribution among areas FDI distribution among areas （（ by the end of 2008by the end of 2008 ））

Share of each area innumber of projects

Eastern area 83%Central area 11%Western area 6%

Share of each area inContractual capital

Eastern area 87%Central area 8%Western area 5%

Share of each area in actualforeign investment

Eastern area 86%Central area 9%Western area 5%

Eastern area 86%Central area 9%Western area 5%

Current situation of economy4. People’s living standards are high, but there is still

huge poverty and low income

• GDP per capita ranks the 99th in the world

• There are still 150 million people who live on less than 1 US dollar a day, 40 million rural residents still have not solved the basic problems of food and clothing, 23 million urban residents live at minimum subsistence level

Current situation of economyThree advantages

1.Great potential for urbanization

Current situation of society and economy

Three advantages

2. Huge domestic consumer market

Current situation of society and economy

Three advantages

3. Strong in capital, labor and technology

GDP : 5879.1 billion US$ in 2010

Total volume of export and import :2972.7 billion US$ in 2010

Foreign exchange reserves: 3000 billion US$

The total output of grain : over 546 million tons

Contents China’s economic achievements from 1978

Three stages of China’s R&O

Current situation of economy

Guiding concept of the 12th five-year plan

• Targets of the 12th five-year plan

Guiding concept of the 12th five-year plan

• Subject ： scientific development

• Mainstream: improving the transformation of

the mode of economic development

• Highlight : improving people's living standards

Basic requirements for improving the transformation of the mode of economic development

• Strategic adjustment of the economic structure as main thrust

• Advancement and innovation of science and technology as the

important support

• Ensuring well-being of the people and improving their lives as

the means and ends

• Resource-conservation and environment-friendly society as

the acting points

• Reform and opening up as the strong driving force

Strategic adjustment of the economic structure

• Increasing domestic demand , thus, consumption, investment

and export will be coordinated to boost economic growth

• Adjusting industry structure. Improving manufacturing core

competence ,developing emerging industry , picking up the

development of service industry ,thus, agriculture, industry

and service will be coordinated to boost economic growth

• Adjusting regional structure.

Strategic adjustment of the economic structure

Savings and investment rate in China (1978－ 2005)

0

10

20

30

40

50

60

19

78

年

19

80

年

19

82

年

19

84

年

19

86

年

19

88

年

19

90

年

19

92

年

19

94

年

19

96

年

19

98

年

20

00

年

20

02

年

20

04

年

20

06

年 -6

-4

-2

0

2

4

6

8

10

净出口率

储蓄率

投资率

Surplus in balance of payment

• Surplus of current account ： export >import

• Surplus of capital account ： inviting FDI > outward

investment

• Surplus of current account + Surplus of capital account =

increase in foreign exchange reserves (error

and omissions excepted ）

• Saving-Investment = Export-Import

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

(RMB, R)城鄉人均可支配收入差距 7, 238 8, 132 9, 645 11, 020 12, 021

(RMB, L)城鎮人均可支配收入 10, 493 11, 760 13, 786 15, 781 17, 175

(RMB, L)鄉村人均可支配收入 3, 255 3, 587 4, 140 4, 761 5, 153

2005 2006 2007 2008 2009

Regional adjustment policies are beneficial to shortening income difference

Contents China’s economic achievements from 1978

Three stages of China’s R&O

Current situation of economy

Guiding concept of the 12th five-year plan

Targets of the 12th five-year plan

Economic targets

• GDP to grow by 7 percent annually on average;

• More than 45 million jobs to be created in urban

areas;

• Urban registered unemployment to be kept no higher

than 5 percent;

• Price to remain generally stable.

Economic restructuring

• Increase in domestic consumption;

• Breakthrough in emerging strategic industries;

• Value-added output in the service sector to account

for 47 percent of GDP, up 4 percentage points;

• Urbanization rate to reach 51.5 percent, 4 percent

higher.

Environmentally friendly & clean energy

• Non-fossil fuel to account for 11.4 percent of primary energy

consumption;

• Water consumption per unit of value-added industrial output

to be cut by 30 percent;

• Energy consumption per unit of GDP to be cut by 16 percent;

• Carbon dioxide emission per unit of GDP to be cut by 17

percent;

• Forest coverage rate to rise to 21.66 percent and forest stock to

increase by 600 million cubic meters;

2000年消费总量构成

67. 8%

23. 2% 2. 4%6. 7%

原煤石油天然气水核风电

Comparison in the structure of primary energy consumption

2008年消费总量构成

68. 6%

18% 3. 4% 10%

原煤石油天然气水核风电

Livelihood

• Population to be no larger than 1.39 billion;

• Life expectation to increase by one year, reaching

74.5 years on average;

• Rural cooperative medical service to cover all rural

residents , Basic endowment insurance to cover 357

million urban residents;

• Construction and renovation of 36 million

apartments for low-income families.

THANKS !

Contact details： 13651156158

01068929895

E-mail: xiaofang0304@nsa.gov.cn

2.First stage

• Started from 1978, primary and experimental stage of

R&O

• Features of first stage:

Loosening and activating the economy

Clarifying different ideologies

Reform of commodity prices

Primary steps of SOEs reform