china :economic development and fdi angang hu tsinghua university jan.19 2003
TRANSCRIPT
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China :Economic Development and FDI
Angang HuTsinghua University
Jan.19 2003
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What is the model for China’s economic development: catch-up model
Why dose China take off and catch up with development?
Why dose China become No.2 FDI country in the world?
How to evaluate China’s investment climate
What’s challenges for China’s leaders
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The forerunner, the late comer; the pursuer and the staying behind in modernization.
The innovator, the follower, the leader and the follower of technical progress
Modernization: a progress of continuous catch-up and competition
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China’s Long-run Economic Development China is the late comer of
catch-up in modernization From an international
perspective,China is the fourth model of catch-up in world’s history of economic development
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International Examples 1870-1913: USA catch-upped U.K. 1950-1992: Japan catch-upped USA
1965-1997: “the four dragons of the Asian” catch-upped the developed countries
1978-2020:China’s taking-off
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GDP(PPP, current international $)
GDP, PPP (current i nternat i onal $)
0
2E+12
4E+12
6E+12
8E+12
1E+13
Chi naUni ted StatesJ apan
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Ratio of China’s GDP to US’sRati o of Chi na' s GDP to US' s
0. 00
10. 00
20. 00
30. 00
40. 00
50. 00
60. 00
1970 1975 1980 1985 1990 1995 2000
PPPPPP, Gen ui n e
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GDP (PPP), % of WorldGDP percentage , PPP ( current i nternat i onal $)
0. 00E+00
5. 00E+00
1. 00E+01
1. 50E+01
2. 00E+01
2. 50E+01YR
1975
YR19
76
YR19
77
YR19
78
YR19
79
YR19
80
YR19
81
YR19
82
YR19
83
YR19
84
YR19
85
YR19
86
YR19
87
YR19
88
YR19
89
YR19
90
YR19
91
YR19
92
YR19
93
YR19
94
YR19
95
YR19
96
YR19
97
YR19
98
Chi naJ apanUni ted StatesI ndi a
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GDP per capita, (PPP, current international $)
GDP per capi ta, ppp (current i nternat i onal $)
2
2. 5
3
3. 5
4
4. 5
5
Chi naUni ted StatesJ apanWorl d
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Effects of Catch-Up Speed effect: higher economic
growth rate Structural effect: faster change
of structure Technical effect: more prompt
diffusion of technologyOpenness effect: more open polities of trade and investment
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Trandency of Five Economies for Long Run( 1965- 1999年)
Growthrate ofGDP
Growthrate of
GDP percapita
1965-1999 1965-1999 GDP 人均GDPChina 8.1 6.4 2.45 4India 4.6 2.4 1.4 1.5Japan 4.1 3.4 1.24 2.13Russia NA NA NA NAUSA 3 2 0.91 1.25
World 3.3 1.6 1 1
Country
Growth potencial Index
Source:World Bank, 2001, World Development Indicator, 2001, Table 1.4, Oxford University Press 。
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Growth Index of GDP (1990=1.0)
GDP (1990=1. 0)增长指数
0
1
1
2
2
3
1990 1991 1992 1993 1994 1995 1996 1997 1998
Bul gar i a
Chi na
Hungary
Pol and
Russi an Federat i on
Ukrai ne
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% of China and Russian’s GNP per capita(PPP) to US’s
% of GNP per capi ta (PPP) to US' s
05
101520253035404550
Chi naRussi an Federati on
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Gross Domestic Investment, % of World
Gross Domest i c I nvest ment , ( % of t he Wor l d)
( 2. 00)
3. 00
8. 00
13. 00
18. 00
23. 00
1975 1980 1985 1990 1995 2000
Chi na I ndi aJ apan Russi an Federat i onUni ted States
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Institutional innovation effect: to encourage the innovation and transfer of technology and the protection of intellectual property rights, to encourage the adjustment and upgrading of the industrial structure
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Ratio of Planning and Market
Price(%) 1978 1995 2000
General Purchasing of Farm products
Ratio of Planning Price
94 17 6.7
Ratio of Planning guide price
4.4 2.9
Ratio of Market Price
6 78.6 90.4
Means of Production
Ratio of Planning Price
15.6 9.6
Ratio of Planning guide price
100 6.5 4.6
Ratio of Market Price
0 77.9 85.6
General retail goods
Ratio of Planning Price
97 8.8 3.7
Ratio of Planning guide price
2.4 1.5
Ratio of Market Price
3 88.8 94.8
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Market-oriented Development Index (1978-1999)
0. 0
10. 0
20. 0
30. 0
40. 0
50. 0
60. 0
1975 1980 1985 1990 1995 2000年份
市场化指数
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From Planning Economy to Market Economy:Major Rapid Changes Market structure:increasing
income,consumption structure changing;
Free market: overcapacity,price decreasing,intensive competition, consumer products
Restricted market: regulations remain,telecom services,bank,insurance
Towards liberalization,de-regulation,lesser bureaucracy
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Demographic transition effect:
From high growth of population to low growth of population
Ages 15-64: 888million, account for 70.15% of total population
Urban population: 458 million=2 times of US, growth rate is 4.3%, 650-700 million by 2010.
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Demographic transition(1982-2000)
1982 1990 2000
Birth rate 2.22 2.11 1.40
Death rate 0.66 0.67 0.65
Growth rate 1.57 1.44 0.76
% of total population
Age 0-14 33.6 27.7 22.9
Age 15-64 61.6 66.7 70.2
Age >64 4.9 5.6 7.0
Ratio of urban population
21.13 26.41 36.22
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Human capital: average school year of population is 7 years; high educated population is 45.57 million
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Economic Revolution China has the fast growing
economic in the world, 9% real GDP growth over past 23 years
China will become the largest economy in the world by 2015-2020
China will become one of the largest trade country in the world by 2020(World Bank,1997)
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Potential domestic market: No.1 in 10 emerging markets
Relative high real purchasing power
World products bases
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China Will Be One of the Largest IT Countries in the World
Total number of telephones will be up over 500 million in 2005 from 324 million in 2001;penetration rate up from 24% in 2001 to 40% in 2005;the penetration rate of internet users will reach over 8% in 2005 from 4% in 2001; users of cable-television will be over 150 million .
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Comparison of National Powers(% of World Total)
Country 1980 1985 1990 1995 1998
Changefor1980-1998
AnnualChange
China 4.736 5.306 5.646 7.163 7.782 3.046 0.1692
India 3.376 3.615 3.735 4.008 4.365 0.989 0.0549
Japan 6.037 6.337 7.317 8.535 7.749 1.712 0.0951
Russia 0.569 0.53 1.607 3.271 2.808
USA 22.485 22.022 22.138 21.903 22.785 0.3 0.0167
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China’s Diversity and Unevenness One China, two systems: urban
population(36.2%), rural population(63.8%) Two different institutional governances ID Education Employment and social security system Public service Public expenditure and financial transfers Political election
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One China,four worlds: First world:high income
regions(2.2% of total population), Second world:upper-middle income
regions(21.8%), Third world:lower middle income
regions(26.0%), Fourth world:low income
regions(50%)
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One China, four societies:
Agricultural society:50% of total employment population;
Industrial society:22.5%; Service society:22.5%; Knowledge society:5% As for rural areas, agricultural labor
accounts for 65.8%,industry is 13.6%, service is 16.8%,knowledge is less than 2%
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Impacts of WTO on Chinese Economy Entry to WTO: reduce tariffs,lower
trade barrier for imports, open domestic market
Increase FDI,Increase competition,more diversified economy, integration into world economy
Economic growth: potential GDP growth rate increase 0.5-3% per year
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Factors of investment climate in China Macro-economic stability international integration, infrastructure, governance, Market entry and exit, human resources and skills, access to finance.
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China’s Present Economic Situation Macro-economic stabilization: No
fluctuation,no inflation Economic efficiency High revenue growth Low stock of GDP Low energy consumption, coal
demand decline
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The Fluctuation of GDP Growth Rate(%)
Period average Standard balance fluctuation Maximum Minimum
1953—2000
8.0 7.9 99 21.3 -27.3
1953—1978
6.7 10.3 154 21.3 -27.3
1979—2000
9.6 3.1 33 15.2 3.8
1991—1995
12.0 2.1 17.5 14.2 9.2
1996—2000
8.3 0.96 12 9.6 7.0
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Table II. Comparison of China’s Main Economic Index Average Growth Rate (%)
GDP Average Growth Rate 12.0 8.3Fluctuation 17 0.9Growth Rate of employment 1.2 0.9Investment Growth Rate Fixed assets 36.9 11.2Growth Rate of national financial revenue 16.3 (13.4) 16.5 (14.7)Growth Rate of national financial expenditure 17.2 (4.3) 18.4 (16.6)
Growth Rate of the index of citizens’ consumption 12.9 1.8
Growth Rate of the index of commodity retailing prices 11.4 -0.1
Growth Rate of energy total production 4.4 -3.3Growth Rate to energy total consumption 5.9 -0.5
Growth Rate of the retailing total of social consumer goods 23.2 (11.8) 10.6 (10.7)
Growth Rate of export 19.1 10.9
IndexThe 8th Five Year
PeriodThe 9th Five Year
Period
Growth Rate of import 19.9 11.3
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China’s Economic Growth in Short-term Keeping relative high economic
growth rate Relative low inflation Relative high foreign currency
reserves Stable currency exchange rate Relative low nominal ratio of
government balance(<3% of GDP) But some political and economic risks
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In general, China compares favorably in areas such as macro and political stability, integration into the world market, and infrastructure. Abundance of cheap labor associated with rural-urban migration has been and continues to be a comparative advantage of China.(World Bank,2002)
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China has done spectacularly well, and is the unchallenged leader of the pack. The country has doubled its ratio of trade to GDP over the past two decades (to 41 per cent of GDP in 1999), and has had per capita GDP growth of nearly 8 per cent during 1990-99.
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Figure 2.1Growth remained strong through the East Asian Crisis
-15
-10
-5
0
5
10
15
1994 1995 1996 1997 1998 1999 2000 2001
Per
cent
GD
P g
row
th
China
Korea, Rep.
Malaysia
Indonesia
Thailand
Philippines
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While China and India had comparable levels of GDP per capita (measured at purchasing power parity) in 1990 (approximately $1400), over the following decade India’s per capita income nearly doubled, while China’s nearly tripled. Thus, today, China’s per capita income is about 50% higher than that of India. Together with its faster growth, China has also had significantly faster poverty reduction
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Figure 1.2. Poverty reduction in India and China is closely related to the growth rate
* India poverty reduction figure is for 1993-99
Percent per annum (1992-98)
8.4
China
9.9
India
4.4
5.4*
0
2
4
6
8
GDP per capita
growth ratePoverty
reduction
10
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International Integration
China has reduced tariff rates to about one-third of what they were two decades ago: from 49.5 percent in 1982 to 16.8 percent in 1998, 15%in 2002. Partly as a result, trade increased from 15 percent of GDP in 1980 to nearly 50 percent of (a much larger) GDP by 2002. Imports increased from about $US 36 billion in 1980 to $US 285 billion in 2002. Likewise, exports increased from $US 27 billion in 1980 to $US 300 billion in 2002.
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China is Second Country of Net FDI in the World
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Ratio of Net FDI to GDPFDI GDP净 占 比重(%)
0. 00E+001. 00E+002. 00E+003. 00E+004. 00E+005. 00E+006. 00E+007. 00E+008. 00E+00
Chi naUni ted States
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Figure 2.4FDI as a share of GDP in China is high, but declining
0
1
2
3
4
5
6
7
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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Ratio of FDI to Capital Investment(%)
FDI净 占资本投资总额比重(%)
0. 00E+00
5. 00E+00
1. 00E+01
1. 50E+01
2. 00E+01
1982
1984
1986
1988
1990
1992
1994
1996
1998
Chi naUni ted States
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Ratio of Country’s FDI to World Total
FDI中国和美国净 占世界总数比重(%)
0. 00E+001. 00E+012. 00E+013. 00E+014. 00E+015. 00E+016. 00E+01
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Chi naUSA
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-4
-3
-2
-1
0
1
2
3
4
5
6
China
India
S. KoreaMalaysia
Indonesia
ThailandPhilippines
Brazil
Argentina
Figure 2.3FDI as a share of GDP, 2000
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Human Development Indicator( 1950-1999)
1950 1975 1980 1985 1990 1995 1999
China 0.159 0.522 0.553 0.590 0.624 0.679 0.718
India 0.160 0.406 0.433 0.472 0.510 0.544 0.571
Japan 0.607 0.851 0.876 0.891 0.907 0.920 0.928
Russia 0.809 0.826 0.823 0.778 0.775
USA 0.866 0.861 0.882 0.896 0.912 0.923 0.934
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Total Human Capital ( 1975- 2000 )
1975 1980 1985 1990 1995 2000
human( year)
China 4.38 4.61 4.94 5.51 6.08 7.11
India 2.70 3.27 3.64 4.10 4.52 5.06
Japan 7.78 8.51 8.74 8.96 9.23 9.47
Russia 9.27 9.23 9.77 10.5 9.77 10.0
US 9.69 11.9 11.6 11.7 11.9 12.1
% of total human capital in world’s
China 17.5 17.6 18.7 20.2 21.9 24.0
India 7.27 8.40 9.06 9.98 11.1 12.3
Japan 4.60 4.36 4.01 3.73 3.55 3.27
Russia 6.57 5.69 5.30 5.05 4.26 4.06
US 10.5 11.6 10.2 9.3 9.0 8.6
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Figure 2.5Share of firms reporting that infrastructure was "no obstacle" to doing business
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Thailand India
Brazil
East AsiaChina
South AsiaMalaysia
OECD
Source: World Business Environment Survey
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Figure 2.7. Shipping cost advantages
-10%
0%
10%
20%
30%
40%
50%
Thailand Indonesia China S. Korea Brazil
Cost advantage compared to IndiaE. CoastW. CoastUSA
Textiles
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6.7
21.0
9.210.6
0
10
20
India Shanghai
Last timeLongest
0
4
8
1210.6
7.0 7.0
India Korea Thailand
7.8
China
Figure 2.8. Days to clear imported inputs through customs
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Figure 2.9Telephones per hundred people
0
5
10
15
20
25
30
35
40
45
50
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Korea
Malaysia
Brazil
China
Thailand
India
Source: International Telecommunications Union
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Figure 2.10Mobile telephone users per hundred people, 2001
0
10
20
30
40
50
60
70
China
IndiaIndonesia
S. Korea
Malaysia
Philippines
Source: International Telecommunications Union
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Figure 2.11Electric Generation Capacity (MW/thousand people)
0
0.2
0.4
0.6
0.8
1
1.2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Korea
Malaysia
Orissa (India)
Brazil
Thailand
China
Philippines
Punjab (India)
Source: US Energy Information Agency
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IndiaPolitical stability
Government effectiveness
RegulationsRule of law
Corruption
ChinaPolitical stability
RegulationsRule of law
Corruption
BrazilPolitical stability
RegulationsRule of Law
Corruption
ThailandPolitical stability
RegulationsRule of Law
Corruption IndonesiaPolitical stability
RegulationsRule of Law
Corruption
Government effectiveness
Government effectiveness
Government effectiveness
Government effectiveness
Figure 2.12 Governance ‘pentagons’
Source: Kaufman, Kraay and Zoido-Laboton, 1999
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China scores very high on political stability, near the median for government effectiveness, regulations, and rule of law, but below the median for corruption.
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Figure 2.13Management time spent dealing with public officials on
regulations, administrationPercent of management time
0
5
10
15
20
IndiaChina Transitional Europe
LAC OECD
Source: World Business Environment Survey (WBES) ©2000 The World Bank Group
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Ranking out of 75 countries surveyed in the Global Competitiveness Report 2001
China
0 15 30 45 60 75
Hiring and firing of workers
Administrative burden for startups
Median number of days to start a firm
Number of permits to start a firm (6 permits)
(10 permits)
(30 days)
(90 days)
Figure 2.16Entry and exit
Strongest Weakest
India
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Figure 2.18Illiteracy and School Enrollment, 1999-2000
*Philippines data is for 1998-1999** No data for India & Indonesia
Source: UNESCO, through SIMA
0
10
20
30
40
50
60
70
80
90
100
illiteracy rate secondary enrollment tertiary enrollment**
ChinaIndiaIndonesiaKorea, Rep.MalaysiaPhilippines*Thailand
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Figure 2.22R&D Expenditures in China
0
5000
10000
15000
20000
25000
30000
35000
40000
1991 1992 1993 1994 1995 1996 1997 1998 19990
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Total R&D expenditure (PPP $)Left Axis
As % of GDPRight Axis
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Figure 2.23R&D as Share of GDP, latest year available
0
0.5
1
1.5
2
2.5
3
China India Brazil Korea Malaysia Thailand
19971994
1996
1996
19961996
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Fig.2.26 Sources of finance
India
Retained earnings
Parent Bank loan
Equity Other(largely
other loans)
<20 20-100 100 plus
China
Retained earnings
Parent Bank loan
Equity Other (largely other loans)
0
20
40
60Percent
0
20
40
60Percent
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Overall Evaluation International integration increased significantly
in the past decade, culminating, of course, with China’s entry into the WTO. On this measure China compares well to other Asian countries. Infrastructure, too, compares well to other countries and seems to be improving rapidly. Most elements of governance compare favorably to other countries. Human resources and skills are, despite high illiteracy rates and low tertiary school enrollment, largely comparable to several other Asian countries and appear to be improving(World Bank,2002).
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China is Facing the Economic Challenges High unemployment in urban The gaps between the rural and
urban areas Poverty in both rural and urban
areas Regional disparities Environmental challenge
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美国兰德公司对中国不确定因素影响经济增长率的估计( 2005-2015 年)
类型 Negative influence on GDP growth
1.Unemployment,poverty, social destability 0.3-0.6%
2.Economic cost of corruption 0.5%
3. IV/AIDS, epidemic 1.8-2.2%
4.Water shortage, pollution 1.0-2.0%
5.Consumption of energy and price rising 1.0%
6.Financial system and SOE 0.9-1.3%
7.FDI decline 0.8-1.6%
8.Taiwan conflict and other regions conflicts
1.0-1.3%
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High Unemployment in Urban
laid-off workers:54million( 1995—2001 )
Register Unemployment Rate was 3.6% in 2001
Real Unemployment Rate was around 8-9%
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Price Index of Agricultural Products in Domestic Market(1985-2000) 1978 100农产品收购价格指数( 年= )
0
100
200
300
400
500
600
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Wheat Price ComparisonWheat Pr i ce Compari son(1995- 2000)
0
50
100
150
200
250
1995 1996 1997 1998 1999 2000
US$/
ton
Chi na US
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Corn Price ComparisonCorn Pr i ce Compar i son(1995- 2000)
020406080
100120140160180200
1995 1996 1997 1998 1999 2000
US$/
ton
Chi na US
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Volume of Business of Agricultural Products and its Loss because of Price reduction
Year Volume of Business of Agricultural Products (100 Million RMB) a
Growth Rate of the Index of the Purchasing Price of
Agricultural Products (%) b
Loss for Price Reduction 100 Million RMB) c
1996 7600
1997 9136 -4.5 411
1998 10123 -8.0 810
1999 11018 -12.2 1344
2000 12443 -3.6 448
1997-2000 33620 -22.6 3013
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Per capita Income in Rural and Urban(1978-2001)
Per Capi ta I ncome i n Rural and Urban
010002000300040005000600070008000
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
RuralUrban
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The Urban-Rural Relative Gaps(1978-2001)
Urban/ Rural
00. 5
11. 5
22. 5
33. 5
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Urban Poverty Population by Region,1998
Urban Poverty Popul at i on by Regi on, 1998
020406080
100120140160
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Ratio of Urban Poverty by Region(1998)
Rati o of Urban Poverty by Regi on, 1998
0. 00
2. 00
4. 00
6. 00
8. 00
10. 00
12. 00
14. 00
16. 00
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Annual Growth Rate of Income in Urban(1996-2000)
Annual Growth Rate for Urban Househol d(1996-2000)
02468
1012
Averag
e
Lowst
Income
(10%) Low
stIno
me(5%) Low
Income
(10%) Lower
middle
(10%)
Middle
(10%)
Uper M
iddle
Income
(10% High
Income
(10%)
Highes
tInc
ome(10
%)
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Rural Inequality
Gini Coefficients of Rural Income
YEAR
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
Gin
i C
oe
ffic
ien
ts
.36
.34
.32
.30
.28
.26
.24
.22
.20
.18
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Overall Inequality in China
Inequality in China
YEAR
.
1994
1992
1990
1988
1986
1984
1982
1980
1978
1970
1953
Gin
i In
de
x
.60
.55
.50
.45
.40
.35
.30
.25
.20
.15
.10
.05
Gini Index
Rural Gini
Urban Gini
Regional Gini
Overall Gini
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Regional Divergence of China ( Standard Error of the
Log of Real GDP Per capita)
0. 51
0. 52
0. 53
0. 54
0. 55
0. 56
0. 57
0. 58
0. 59
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Year
StantardError
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Inequality Between-Regions
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
19
52
19
56
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
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China’s Regional Inequality in international Comparison
Country Year Max/Min CV
China(a) 1994 13.96 0.87 China(b) 1994 4.13 0.39 Yugoslavia 1988 7.80 0.54 Greece 1988 1.69 0.10 Spain 1988 2.23 0.17 Germany 1988 1.93 0.13 France 1988 2.15 0.26 Canada 1988 2.30 0.28 Japan 1981 1.47 0.12 Italy 1988 2.34 0.26 Portugal 1988 1.66 0.23 Belgium 1988 1.61 0.15 Britain 1988 1.63 0.15 Netherlands 1988 2.69 0.19 USA 1983 1.43 0.11 Australia 1978 1.13 0.05 South Korea 1985 1.53 0.15 India 1980 3.26 0.36 Indonesia(a) 1983 5.30 0.46 Indonesia(b) 1983 4.00 0.34
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China’s Overall Regional Inequality in international Comparison
Region/Country 1980s 1990s East Europe 0.250 0.289 High-Income 0.332 0.338 South Asia 0.350 0.319 East Asia and Pacific 0.387 0.381 Middle-East/North Africa 0.405 0.380 Sub-Saharan African 0.437 0.470 Latin America/ Caribbean 0.498 0.493 China 0.299 0.388 China (Zhao Renwei) 0.382 (1988) 0.445 (1995) China (Qiu Xiaohua) 0.450 (1997) China (Li Qiang) 0.458 (1997) China (Chen Zongsheng) 0.403 (formal economy, 1997) China (Cheng Zongsheng) 0.515 (including informal
economy1997)
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Energy Depletion(% of GDP)
0
5
10
15
20
25
30
China India Japan United States
Genuine savings: energy depletion (% of GDP)
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Genuine Domestic Savings(% of GDP)
-5
0
5
10
15
20
25
30
35
China India Japan United States
Genuine domestic savings (% of GDP)
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Economic Costs of GDP(%) Unemployment rate:8-9% of GDP( 1999- 2001 )
Natural disaster: 3- 5%( 1990s ) Natural assets: 4- 5%( 1998 年) Pollution: 3- 8%( in mid
1990s,World Bank,1997 ) Corruption: 14- 15%( 1999-2001 ) Consumers: 2- 3%( 2000 ) The loss from unemployment was around
6-9% of GDP