BRICS China Case Study

Question 1

China-Background

Answer 1

• Communism China was ruled by Chairman Mao from 1949-1976 (responsible for the Great Leap Forward) and under a strict form of communism the economy stagnated.
• In 1978 Deng Xiaoping took leadership of communism China and brought a series of reforms that transformed China into the most important of the emerging market economies.
• By 2015, China’s economy was the 2nd largest in the world

Question 2

Why is its economy classed as emerging? pt 1

Answer 2

• China’s economy has made rapid economy progress. China’s GDP has increased by an average of 10% annually from 1978-2013. -It is now the world’s second largest economy. China has just under 15% of the world’s GDP itself!
• They attracted many MNCs due to large, low wage labour supply plus SEZs offer low rates of tax and reduced import duties.
• Considerable social and economic development has occurred e.g. 500 million people out of poverty and almost MDGs achieved..

Question 3

Why is its economy classed as emerging? pt 2

Answer 3

• Transport and communications have been modernised and they have some of the best rail networks in the world. Plus, membership in some major world organisations e.g. WTO increases global significance.
• China has 109 million middle class earners having overtaken the USA.
• They have a huge manufacturing base particularly encouraged through the use of SEZs. E.g. The produce 70% of the world’s mobile phones, 60% of the world’s shoes and 50% of the world’s cameras. Approx 24% of the world’s total exports of textiles are from China

Question 4

Reasons for China’s economic growth pt 1

Answer 4

Economic Reforms-A number of important reforms where introduced under Deng Xiaoping’s leadership (SEZs and stock market)

• Late ‘70s a number of Special Economic Zones (SEZ) (see your map) were established-initially 5 but later extended.
• The zones adopted policies to encourage foreign investment and private ownership (neither permitted elsewhere in Communist China.
• They charge low rates of taxation on the profits of foreign firms + reduced import taxes.
• Focused on manufacturing of low cost products for exports-attracted many foreign firms for routine manufacturing.
• SEZs became the driving force behind China’s economic recovery.
• In 1989 the Shanghai stock market reopened for the first time in 40 years.
• Shanghai now a major global financial centre-new banking facilities mad China even more attractive to foreign investors.
• Trade barriers were reduced; more foreign and private investment were encouraged.
• China joined the WTO (World Trade Organisation) in 2001 and established trade agreements with many western countries/regions e.g. USA and EU

Question 5

Reasons for China’s economic growth pt 2

Answer 5

Large low wage labour supply-Opportunities for MNCs to maximise profits, encouraged by economic reforms so routine manufacturing relocated here.

• Large number of rural migrants moved to cities for work e.g. between 1990-2011 estimated at 250 million people moved to cities in the East.
• By 2014 rural migrant = 40% of urban workforce.

Question 6

China’s economic success

Answer 6

• Largely based on the export of goods which have been assembled in China. E.g. Electronic and telecommunications goods, clothes, shoes, concrete, steel and vehicles amongst others. List below 6 large MNCs currently operating in China. E.g. Apple, Intel, Audi, Samsung, Coca Cola and Volkswagen.
• China’s GDP increased by an average of 10% annually from 1978-2013.
• China is the leading producer of concrete, steel, ships and textiles in the world.
• In 2008 China produced 10 million cars for their home market. (Tenfold increase from 1992).
• Japanese and other Asian car manufacturers have assembly plants on China as well as luxury brands e.g. BMW and Mercedes-Bendz.
• Three of the world’s busiest ports are in China. In 2013 China was the 2nd largest economy in the world.

Question 7

Recent Developments in China pt 1

Answer 7

• In the emerging markets the number of middle class earners (earns and income of twice the national average) has increased dramatically. In 2014, the number in China exceeded that of the USA.
• By 2030, over 90% of urban dwellers in China will be middle class earners.
• The proportion of affluent people will increase (with a larger amount of disposable income). This growing wealth will create more demand for consumer goods amongst their population. China is now for the largest market for luxury cars and consumer goods e.g. designer fashion. This attracts even more foreign investment.

Question 8

Recent Developments in China pt 2

Answer 8

• Initially China carried out routine manufacturing whilst research and development of goods was MEDCs. China is now investing in its own research and development capabilities.
• China are investing in science and engineering research whilst offering favourable taxation to firms willing to upgrade their production.
• Many Chinese students currently attend universities in the UK and USA where they will acquire the qualifications necessary to develop modern technology.

Question 9

Issues arising from economic development pt 1

Answer 9

• The economic benefits detailed in this study hide huge inequalities in wealth distribution. There are stark contrasts between the eastern urban areas and the interior rural areas, where many are still employed in traditional agriculture. Close to 100 million people, mostly rural dwellers are below the poverty line.
• China has long been accused of serious human rights violations and many Western leaders have raised this issue with successive Chinese leaders at international meetings. During 1980s, a movement seeking increased democracy was defeated, culminating in the well documented events in Tiananmen Square in 1989. Widespread censorship pervades all aspects of life in China.
• Internet activity is closely monitored and internet activity is closely monitored and internet search engines such as Google have had to comply with Chinese censorship.
• International tourism has developed but tourism destinations and itineraries are strictly controlled by the Chinese authorities.

Question 10

Issues arising from economic development pt 2

Answer 10

• Millions of people have been displaced in the interest of industrial development. Over 1.2 million were displaced to make way for the Three Gorges Dam on the Yangtze River. This dam is the world’s largest hydro electricity supplier and will also improve navigation on the Yangtze river and Chongqing has become a major inland port on the Yangtze as a result of the development of people, this project also raises major environmental and ecological issues. The dam is built in an area subject to earthquakes and dam building is thought to increase the likelihood of earthquake occurrence.
• China’s economic success has been based on the large-scale use of fossil fuels, which are a major source of air pollution and greenhouse gases that contribute to global warming. Efforts have been made to improve this but air pollution remains a major issue in China.
• China has been expanding and investing in Africa, partly in search of raw materials, and may have voiced concern over this move. In addition, China has been expanding and investigating in Africa, partly in search of raw materials, and many have voiced concern over this move.
• China has a low rate of population growth and in the near future will have to deal with the issue of ageing. In 2015, the one-child policy was abandoned but it remains to be seen how this will affect overall population growth.