China: Basics

Question 1

What policies have the Chinese Government used to take advantage of globalisation?

Answer 1

1) Most significant policy: Joining the WTO in 2001 (while continuing protection)
2) Special Economic Zones
3) Opening up to FDI (but restricting portfolio investment)
4) Made in China 2025
6) Belt and Road Initiative

Question 2

Apart from trade and investment, what other policies has the Chinese Government used to improve economic development?

Answer 2

• Serious greenhouse gas emissions reduction policies were established in 2013
• Consistent budget deficits and massive fiscal stimulus during the GFC and covid-19 pandemic to stimulate growth

Question 3

To what extent has China been impacted by globalisation?

Answer 3

Since China’s opening up’ in 1978, China has become the biggest exporter in the world and the biggest recipient of FDI in the world

Question 4

What has been the trend in China’s economic growth?

Answer 4

• Export-led growth led to average GDP growth above 10% between 1991 and 2011
• Has slowed to 5% per year over the past 10 years
• Dropped to -7% in 2020 (pandemic), but has recovered since

Question 5

To what extent has economic development improved in China?

Answer 5

• Average incomes were 57 times higher in 2020 than 1980
• 850 million people have been lifted out of poverty since 1985
• Life expectancy has increased by 11 years since 1979
• HDI increased from 0.5 to 0.75 in 25 years

Question 6

What aspects of economic development have worsened in China?

Answer 6

• Environment

- Inequality

Question 7

To what extent has China’s environment worsened?

Answer 7

• Air pollution causes 1.2 million people to die prematurely every year
• 2 in every 3 cities have water shortages
• 25% of rivers and lakes are too dangerous for human contact
• Greenhouse gas emissions have tripled since 2000

Question 8

To what extent has inequality in China widened?

Answer 8

• Coastal and industrial areas that produce exports have grown much faster than inland, agricultural areas
• Gini coefficient has increased to 0.47 (50% higher than Australia’s)

Question 9

Why did joining the WTO in 2001 increase China’s growth and development?

Answer 9

By joining the WTO, other WTO members lowered their tariffs on Chinese products.
This gave Chinese firms increased access to export markets, boosting exports and AD

Question 10

What are the features of China’s SEZs?

Answer 10

• Originally 6 SEZs, including Shenzen
• Cities with low taxes and no tariffs or export fees
• Deregulated foreign investment and easy building approval

Question 11

Why have China’s SEZs increased growth and development?

Answer 11

• Foreign investment funded new infrastructure and factories

- TNCs in SEZs created a demonstration effect for local firms

Question 12

State statistics showing the extent to which China has received foreign investment.

Answer 12

• Became the biggest recipient of FDI in the world in 2018
• 80,000 TNCs now in China
• 1 in 5 TNCs in the world are now Chinese in origin (and partly owned by foreigners)
• Limits on foreign portfolio investment into China (to reduce volatility)

Question 13

Why have foreign investment and TNCs into China increased growth and development?

Answer 13

• Funded increased infrastructure and capital (machinery, factories) to increase AS
• TNCs provide the demonstration effect

Question 14

How does the Chinese Government protect domestic industries?

Answer 14

Has found ways to protect industries without breaching outdated WTO rules, including:

• Forced technology transfer
• State subsidies

Question 15

What is the Made in China 2025 policy?

Answer 15

A goal to increase domestic production of elaborately transformed manufactures (ETMs) such as robotics, aerospace and IT

Question 16

How is the Chinese Government increasing production of ETMs through the Made in China 2025 policy?

Answer 16

• $22b subsidies per year to firms conducting R&D
• Banks and energy businesses provide cheap credit and energy to priority industries
• Intellectual property theft: mandatory joint-ventures and hacking to gain corporate IP

Question 17

How has trade affected the Chinese economy?

Answer 17

• Since joining the WTO in 2001, China has become the biggest exporter in the world
• Experienced rapid export-led growth, averaging 10% per year from 1991 to 2011

Question 18

How has globalisation affected the environment in China?

Answer 18

Globalisation has led to increased production, but the Government has had minimal environmental regulations because they would worsen international competitiveness.

The race to the bottom and increased production levels have worsened air pollution, water pollution and greenhouse gas emissions