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Economy
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Unemployment Rate: 20% (2003)
Inflation rate: 1.9% (2005 est.)
GDP (purchasing power parity): $8.158 trillion (2005 est.)
GDP - real growth rate: 9.2% (2005 est.)
GDP - per capita: $6,200 (2005 est.)
GDP - by sector: agriculture: 14.4% (2005)
industry and construction: 53.1% (2005)
services: 32.5% (2005)
• Second Largest Economy (PPP) After the U.S. (2005)
http://www.cia.gov/cia/publications/factbook/geos/ch.html#top
GDP Real Growth Rate
China
10.00%
8.00%
United States of
America
6.00%
Japan
4.00%
Germany
2.00%
Canada
0.00%
GDP Real Growth Rate
Competitiveness
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The collection of factors, policies and institutions which determine the level of
productivity (economic growth) of a country. (World Economic Forum)
- The macroeconomic environment (33rd), the state of a country’s
public institutions (56th), and the level of technological readiness (64th).
- Ranked 49th in the world out of 117 (2005)
- Medium Competitiveness
- “Marginal Deterioration” since 2004
How one country competes with another country for FDI.
- The devaluation of the yuan increased the attractiveness of FDI in
China by increasing exports and decreasing imports.
- Devaluation = reduced production cost = Increased profit of foreign
investors = Higher Return that attracts more FDI inflows.
http://www.weforum.org/site/homepublic.nsf/Content/Global+Competitiveness+Programme
http://faculty.washington.edu/~karyiu/confer/beijing03/papers/xing.pdf#search='competitiveness%20FDI%20in%20China'
Competitiveness Cont.
• Index of Economic Freedom.
• The higher the score on a factor, the greater the level of
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government interference in the economy and the less
economic freedom a country enjoys. (1-5)
112th out of 157 (3.34)
Trade Policy = 3.0 (1.5 pts. better than last year)
FDI = 4.0
“Mostly Unfree”
http://www.heritage.org/research/features/index/country.cfm?id=China
Competitiveness
• In comparison…
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- Both indexes are measuring different elements
to achieve different goals, but the results of one
index may effect the other.
World Economic Forum: Competitiveness is
deteriorating when compared to previous years.
Could be due to the lack of freedom measured
in the Index of Economic Freedom.
Barriers of Trade
• High Tariffs
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- Down to 17% from 42% in 1996
Investment Restrictions
- Contract Provisions
Rules and regulations
- Secretive, Hard to appeal
Trading Rights
- Number and Types Imported
http://cnie.org/NLE/CRSreports/Economics/econ-35.cfm#_1_10
International Trade
• 1970’s Reforms
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- Centrally Planned System to Market Economy
- Foreign Trade and Investment
- GDP increased more than 10x’s since 1978
World Trade Organization
- November 2001
- Tariffs, Foreign Competition
China's primary trading partners include Japan, United States, European Union,
South Korea, Taiwan
Exports: $436,100,000,000 (2005)
- Export Partners: US 21.5%, Hong Kong 18%, Japan 14.9%, South Korea
4.8%
Imports: $397,400,000,000 (2005)
- Import Partners: Japan 18.1%, Taiwan 12.8%, South Korea 9.7%, US 9.2%,
Germany 5.6%
Major Export Products: Light industrial and textile products, mineral fuels, heavy
manufactures, agricultural goods
Major Import Products: Machinery, steel, chemicals, miscellaneous manufactures,
industrial materials, grain
Exports of goods surged 23.3% above the average and imports
surged 21.2% above normal
http://www.eco.utexas.edu/faculty/Norman/sup/E2-proj-S04/China-India-Russia/Whole%20Project.htm
International Trade Totals
( in Billions)
1999
2000
2001
2002
2003
Exports
194.9
249.2
266.2
325.6
438.4
Imports
165.7
225.1
243.6
295.2
412.8
Total
360.6
474.3
509.8
620.8
851.2
31.50%
7.50%
21.80%
37.10%
% Change
Agriculture
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Large Producer of: rice, potatoes, millet, barley, peanuts, tea, and pork
Non Food Crops: cotton, other fibers, and oil seeds
Before WTO
- 1970’s = 40% of GDP
- 1997 = 20% of GDP
Imports: $25.9 billion (2004)
- 30% of Imports
Exports: $15.8 billion (2004)
- 45% of Exports
Imports doubled between 2002-2004
- Basic Commodities
- More open Trade (WTO)
- Lowered Tariffs (WTO)
Half of Import growth: Oils, Raw Soybeans
http://www.ers.usda.gov/publications/WRS0504/wrs0504.pdf#search='china%20%20agricultural‘
http://aic.ucdavis.edu/oa/iartccarter.pdf#search='china%20agriculture%20percent%20of%20GDP
%20trade'
Agriculture Continued
• Exports grew more Slowly- $3 billion between 2002 and
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2004
Major Exports: Corn, vegetables, fruits, processed foods
Exports to U.S.: Increased 17.70% (02-04)
2002
2003
2004 % increase
Imports
10.8
17.4
25.9
58.30%
Exports
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15.4
15.8
17.70%
(Billions)
Trade with the U.S.
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After WTO admission
U.S. is China’s Largest Overseas Market
China is U.S.’s 4th Largest Market (13% of imports) 2004
Advanced Technology Sectors
- Office and data processing machines, sound equipment.
Trade Surplus U.S.: $68.7 billion (1999)
U.S. Deficit with China = $15.8 billion (2005)
http://www.usembassy.it/pdf/other/RL31403.pdf
Trade with the U.S.
( In Billions)
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
H1
2005
US
Exports
9.3
11.8
12
12.8
14.3
13.1
16.3
19.2
22.1
28.4
34.7
19.1
%
change
5.7
26.9
1.7
6.7
10.9
-8
24.4
18.3
14.6
28.5
22.2
10.4
US
Imports
41.4
48.5
54.4
65.8
75.1
87.8
107.6
109.4
133.5
163.3
210.5
109.2
%
change
22.8
17.1
12.2
21
14.1
16.9
22.6
1.6
22
22.3
29
27.3
Total
50.7
60.3
66.4
78.6
89.4
100.9
123.9
128.6
155.6
191.7
245.2
128.3
%
change
19.3
18.9
10.1
18.4
13.7
12.9
22.8
3.8
21
23.2
27.9
24.4
US
Balance
-35.7
-36.7
-42.4
-53
-60.8
-74.7
-91.3
-90.2
-111.4
-134.9
-175.8
-90.1
http://www.uschina.org/statistics/tradetable.html
Conclusion
• China has become the fastest growing country and has
accumulated more FDI in the past seven years than
almost every country in the world. However, according to
the World Economic Forum and the Index of Economic
Freedom, China’s economy is slowing down. Do you
think these predictions are true? If you do, how long will
China be able to keep up with the demands that other
countries have placed on them when referring to trade?