Topic 5 China, the Awakening Giant

1
Topic 5 China, the Awakening Giant

• A The Chinese World
• B Chinese Development
• C Selected Problems and Issues

2
The Chinese World
A

• 1. Unity and Diversity
• What characterizes Chinese geography and in which
  way it has been a factor of unity and diversity?
• 2. Chinese Demography
• How does China cope with its huge demography?
• 3. Communist China
• How communism has changed the Chinese society?

3
Unity and Diversity
1

• Geography
• A factor of unity as well as diversity.
• 3rd largest country in the world.
• Comparable surface with Europe and the United
  States
• U.S. 3.6 million square miles.
• China 3.7 million square miles.
• It is a lot but not enough.
• 65 of the country mountainous.
• Arable land represents 12 of the national
  territory as opposed to 25 for the United
  States.
• Per capita (0.086 hectare) is well below the
  world average.

China
United States
4
Unity and Diversity
1
5
Unity and Diversity
1

• 1- Huang He (Yellow River).
• Can carry up to 40 sediment weight (highest in
  the world).
• Subject to flooding, especially in its delta.
• Changed course many times.
• 2- Chang Jiang (Yangtze).
• Longest river, Chinas main street (6,300 km).
• Flood of 1998 left 14 million homeless.
• 3- Pearl River delta system
• Most productive and sustainable ecosystem in the
  world.
• Rice paddies and fish ponds.
• 4- Heilong Jiang (Amur).
• China's border with Russia.

4
1
2
3
6
Unity and Diversity
1
Beijing

• The Grand Canal
• Achievement of Imperial hydrological engineering.
• First segments completed around 602 AD (Sui
  Dynasty).
• At its peak during the Ming dynasty (1368-1644
  AD).
• Totaled about 2,500 kilometers, 1,700 still in
  use today.
• Grain distribution through the empire, notably
  its capitals.

Tonghui Canal (Yuan)
Yellow Sea
Yongji Canal (Sui and Yuan)
Old course of the Yellow River (Song)
Jiao-Lai Canal (Yuan)
Jizhou Canal (Yuan)
Yongji Canal (Sui)
Jizhou
East China Sea
Tongji Canal (Sui)
Luoyang
Kaifeng
Huaiyin
Bian Canal (Song)
Chuzhou
Yangzhou Canal (Song and Yuan)
Yangzhou
Jiangnan Canal (Sui, Song and Yuan)
Suzhou
400 km
Hangzhou
7
Unity and Diversity
1

• The Chinese Realm
• East sea border.
• West Deserts and mountains.
• North Deserts.
• South Himalayas.
• Cultural division between the Han realm and the
  China of the minorities.
• Han China represents 92 of the population.
• Dominantly live in mountainous or arid regions.
• Geopolitical division
• Russia.
• South Korea.
• Taiwan.

Maritime border
Cultural border
Physical border
Turkic
Mongols
Arid China
Gobi
Takla Makan
Koreas
Highland China
Han
Tibetan
Tai Miao-Yao
Taiwan
Political border
8
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9
Unity and Diversity
1

• Confucianism
• Civil religion
• A basic order in the universe and a natural
  harmony linking man, nature, and the cosmos
  (heaven).
• Man was by nature a social being and the natural
  order of the universe should be reflected in
  human relations.
• Principles of good conduct, practical wisdom, and
  proper social relationships.
• Administrators should be chosen based on
  competence
• The ruler should have moral perfection (no
  apologies).
• Ruler accountable for all human and environmental
  conditions.
• Individual obligations to society
• Values
• The family is the cornerstone of the society
  respect for parents.
• Loyalty to government.
• Keeping ones place in the natural order.

10
Unity and Diversity
1

• Network of relations
• Information, capital, resources or favors are
  drawn from a network of relations.
• Five relationships
• Sovereign-subject husband-wife parent-child
  elder brother-younger brother friend-friend.
• Relatives
• Close relatives coming from male descent.
• Near and far relatives coming through marriage.
• Teachers, co-workers and friends.
• Connections or Guanxi
• When the Chinese have to find a job or buy
  expensive items, they will try to go through some
  connection.
• Often appears to be a form of nepotism
  (favoritism to relatives) that leads to
  corruption.
• Mediators (not to lose face).

11
Unity and Diversity
1

• Civil society
• Surrendering own rights for the good of the
  society
• Absent among the Chinese culture.
• Communism government attempted to implement
  socialism.
• Relations among family members are privileged.
• Little trust for outsiders (not from family).
• Chinese corporations
• Tend to be small and limited in their growth
  potential.
• Key posts for family members at the expense of
  qualifications.
• Difficulties surviving the death of the founder.
• Few charities.
• Undermining factor in a modern world.

12
Unity and Diversity
1

• Agricultural diversity
• North continental climate growing wheat, sorghum
  and corn.
• South subtropical climate growing rice.
• A China of the West with pastoralism and oasis
  agriculture.
• China feeds approximately 25 of the worlds
  population with approximately 7 of the worlds
  arable land.

Pasture and oasis
Wheat Dominant
Rice Dominant
Double-crop rice
13
Unity and Diversity
1

• Chinese Cuisine
• Food and tastes are a cultural expression.
• Reflects the complexity of the country.
• Diversity of the climate, products and customs
• Each cuisine has its own set of base elements
  (grains, meats, vegetables, oils and spices).
• Strive for harmony of sight, smell, taste and
  texture.
• 8 regional / provincial cuisines
• Shandong, Sichuan, Guangdong, Fujian, Jiangsu,
  Zhejiang, Hunan and Anhui.
• Two main local cuisines (Beijing and Shanghai).
• Many minorities cuisines.
• Long history of famines and food shortages
• Anything edible will be used.
• Parts of animals which are often discarded will
  be used (feet, head, tendons, tripes).
• The wok a fuel efficient form of fast cooking.

14
Types of Chinese Tea
1
15
Unity and Diversity
1

• Ethnic homogeneity
• Han group is dominant (92 of the population).
• 55 recognized minority groups.
• Minorities make 8 of the population but occupy
  60 of the territory.
• Tibet and Xinjiang.
• Incoherence and numerous neighbors
• One time zone
• Same time in Beijing than in Lhasa.
• Share a border with 14 countries since the
  collapse of the Soviet Union.
• Creates a sense of insecurity confirmed by
  history (invasions).

16
Unity and Diversity
1

• The three Chinas
• The Coast
• Forefront of modernization.
• Political and economic center.
• Rich, urbanized and open to the world.
• The Center
• Agricultural and demographic hearth.
• Poor and rural China.
• The West
• Sparsely populated.
• Region of minorities.
• Most mineral resources.

Coast
West
Center
17
Unity and Diversity
1

• Contrasts
• Authoritarian Government / Opening of the
  Economy.
• Inward-Looking History / Outward-Looking Future.
• Rural Interior / Urbanizing Coast.
• Wheat Growing North / Rice Growing South.
• Hans / Minorities.
• Mandarin Hans / Non-Mandarin Hans (Cantonese, Wu,
  Hakka, etc.).

Command
Market
Isolation
Openness
Wheat
Urban
Rural
Rice
18
Chinese Demographics
2

• Demographics...
• More people than the combined population of
  Europe, the Americas and Japan.
• Any change has global ramifications.
• The demography of China is a powerful trend (1.29
  billion)
• About 14-17 million people are added each year in
  1980s.
• Average of 13 million people per year in the
  1990s.
• 10 million people per year in the 2000s.
• About 1.5 billion by 2050.
• 400 million Chinese live in towns and cities
  (30-35).
• 64 of the population lives in rural areas (950
  millions).
• 343 million females are in their reproductive age.

19
The Population of China, 0-2050
2
20
Chinese Population, 1949-2000 (in millions)
(projections to 2050)
2
21
Population of Selected Chinese Provinces, 1998
2
22
Chinese Demographics
2

• The problems of controlling it...
• The population exploded after 1949.
• Population control was secondary.
• Mao Zedong saw numbers as a workforce and a way
  to fight the Soviet Union and the United States.
• Calls for women to breed for the motherland.
• Population distribution
• Excessive concentration
• 50 of the population lives on 8.2 of the land.
• Bulk of the population along the coast.
• East China accounts for 90 of the population.
• 56, about 728 million, are living in mountainous
  areas.
• High density rural areas.

23
Population Density of China and Most Populous
Provinces
2
24
Chinese Demographics
2

• Current issues
• Population growth undermines Chinese development
  (education, health, food, transportation).
• About 10 million persons reach the job market
  each year.
• Increasing ethnic diversity
• The government had not enforced the One Child
  Policy among the countrys 55 recognized minority
  groups.
• They had increased their share of still
  predominantly Han population to 8 in 2000 from
  6.7 in 1982.
• Missing female population.
• Sustaining agriculture.
• Coping with huge urban growth.

25
Population Pyramid of China, 2000
2
26
Population Pyramid of China, 2050
2
27
Chinese Demographics
2

• Education
• Traditionally perceived as a path to self
  improvement (Confucianism).
• 20 in 2005 from 1.4 in 1978
• Produces 440,000 engineers per year (10 times
  more than the US).
• Low quality of many college degrees.
• High unemployment among recent graduates.
• Tremendous incurred costs.

28
Chinese Demographics
2

• Huge surplus labor in rural areas
• Development of the rural economy and the higher
  rate of birth.
• Large numbers of surplus rural labor
• Many rural provinces have an excess population
  they cannot sustain.
• Difficult situation in the country side as China
  is running out of land.
• Need to transfer from the agricultural to a
  non-agricultural field.
• Increased urbanization.
• About 20 million people per year migrate from the
  interior to the coastal areas.

29
Chinese Demographics
2

• Aging of the population
• Aging trend of the Chinese population.
• 65 years old or older
• 87 million in 2000.
• 112 million in 2010.
• 340 million in 2050.
• Providing social security and services to a huge
  elderly population.

30
Communist China the Path to the PRC
3
31
Communist China
3

• Chinese flag
• Red the color of revolution.
• One large star communist party.
• Four stars four classes the workers, the
  peasants, the petty bourgeois, and the patriotic
  capitalists.
• Communism and China
• The Marxist ideology is of western origin.
• Leninism (Soviet Union after 1917)
• Compatible with the Chinese ideology.
• Absolute central power.
• Bureaucracy.
• Social division of the society.
• Economic and social control.

32
Communist China
3

• Mao Zedong (1893-1976)
• One of the most important figures of the 20th
  century and of the Chinese history.
• Studied to become an educator but saw that the
  whole Chinese society needed to be educated.
• Founder of the Chinese Communist Party in
  Shanghai (1921)
• The CCP was declared illegal by the Nationalists
  (1927), Shanghai was seized and communists
  massacred.
• Mao fled to the countryside and started
  organizing peasants.
• Leader of the CCP during the Long March (1935).
• Position he kept until his death (1976).

33
Communist China
3

• Maoism
• Mao had evolved a Chinese Communist alternative
  that reflected Chinas different demography.
• Core goals
• Economic self-reliance.
• Power derived from numbers.
• Labor-intensive rather than technologically
  advanced development.
• Local community effort.
• Concept of mass-line leadership
• Integrated intellectuals with peasant guerrilla
  leaders as a fundamental economic and social
  strategy.
• Launched programs of industrialization and
  collectivism.

34
Communist China Maoist Movements
3
35
Communist China
3

• Development strategies
• Based on the Soviet model.
• Land was expropriated.
• Farming was collectivized.
• Industries were reorganized as state-owned
  communal enterprises.
• Emphasis on heavy industry and as source of
  employment.
• Dramatic social changes
• Education formal state education
  (politically-oriented).
• Religion abolition but some level of tolerance.
• Population growth favorable policies.

36
Communist China
3

• Spatial consequences
• Collectivization of the economy
• Creation of work units.
• Difficult to move to another unit.
• Immobility of the population.
• Urban growth
• Controlled by preventing the mobility of the
  population.
• Latent urbanization.
• Rural landscape
• Modified by collectivization.
• From family farms to large-scale collectives.
• Redistribution of economic activities in the
  interior
• Fear of war and vulnerability of the coast.

Collectivization
No mobility
Redistribution
No trade
37
Communist China
3

• The Last Emperor (Deng Xiaoping)
• Probably more influenced China than Mao Zedong.
• Studied in France (1920s) and came back in 1926.
• Joined Mao and participated in the war against
  the Japanese and the Liberation War (1949).
• Becomes a top administrator (1949) and vice prime
  minister (1954).
• Involved in the repression movements (100
  flowers).
• The cultural revolution turned against him
  Imprisoned (1966 to 1973).
• Re-enacted (1973) but again fell out of favor
  (1976).
• After the death of Mao, he established himself at
  the head of the CCP (1977) and controlled the
  Chinese politburo (1980).

38
Communist China
3

• Deng Xiaoping and reforms
• Initiated important agricultural and industrial
  reforms (1978).
• Opened China to the outside world for trade and
  technology
• Different from Maos view of self-determination.
• Characterized by pragmatism
• It is not important if the cat is black or
  white, as long as it catches mice.
• Establishment of socialist market economy to
  help Chinas development.
• Contradictions part of the Chinese ideology.
• Ordered the Tiananmen massacre (1989).
• Died Feb. 1997, before the reunification of Hong
  Kong.
• His death marked a new era but his legacy is
  mitigated.

39
Communist China
3

• Spatial Consequences
• Decollectivization
• Many farms reverted to families.
• Land leased.
• Growth in Coastal zones
• Major cities.
• Special economic zones.
• Most important migratory movement from the
  countryside to the cities in history (still under
  process).
• Increasing participation of China to the global
  economy.
• Assertion of China in regional affairs, mainly in
  Central Asia and in the South China sea.

Decollectivization
Mobility permitted
Urbanization
Migration
Trade
40
Administrative Divisions in China
3

• Provinces
• 7-100 million people.
• Similar to US states.
• Autonomous regions
• Recognition of minorities.
• Buddhist Tibetans (Xizang).
• Muslim Uygurs (Xinjiang).
• Mongols (Inner Mongolia).
• Municipalities
• Beijing, Tianjin, Shanghai and Chongqing.
• Special Administrative Regions
• Hong Kong and Macao.
• One country, two systems.

Central Government
22 Provinces
5 Autonomous regions
4 Municipalities
2 Special Administrative Regions
41
Political Divisions of China
3
Taiwan Rebellious Province
42
Chinese Development
B

• 1. Rural Development
• What is the structure and challenges of Chinese
  agriculture?
• 2. Urbanization
• What is the nature and extent of urbanization in
  China?
• 3. Industrialization
• How China was able to industrialize?
• 4. China and the Global Economy
• How China is becoming a leading element of the
  global economy?

43
Rural Development
1

• Overview
• From collective to market farms.
• Emphasis on the rural world from the 1950s to the
  1970s.
• Shift to industrialization and deregulation (from
  1980s).
• Controlling the agricultural market is a
  difficult challenge for China.
• Have to insure stability both in the countryside
  and in cities.

Land Reform (1950-52)
Liberation
Collectivization (1954-56)
Great Leap Forward
Communes (1956-60)
Cultural Revolution
New Economic Policy (1960-80)
Open Door Policy
Responsibility System (1980-1985)
Price Deregulation (1985-2001)
WTO
Global Competition (2001-)
44
Challenges to Chinas Agriculture
1
45
Production and Yield of Paddy Rice in China,
1961-2004
1
46
Production and Yield of Wheat in China, 1961-2004
1
47
Meat Production, United States and China
1961-2004 (in tons)
1
48
Increase, Decrease and Net-Change of Cultivated
Land in China, 1988 - 1995 (in hectares)
1
49
Rural Development
1

• Rural-Urban Migrations
• Conventional situation
• China fixed its population to its place of work
  and residence.
• Food tickets were only valid at the place of
  residence.
• Residence permit necessary to obtain food (permit
  not transferable).
• Emerging situation
• Possible to transfer the residence permit if a
  sum is paid.
• Surplus labor in the countryside moved to cities
  in order to occupy lowe wages jobs (construction,
  manufacturing and services).
• Migrants around 100-120 millions (about 10 of
  the population).
• 20 of agricultural workers take at least of
  month off per year to work outside the farm.
• About 250-300 million peasants may have left the
  countryside by 2010.

50
Urbanization
2

• Urbanization concern
• Historically underrepresented
• Most of the labor in the countryside.
• Urbanization accelerated only after 1978.
• 32 urbanization level (2000), or 400 million
  urban residents.
• 40 million new urban residents between 2001-05
  (official).
• The reality is more likely to be 50-70 millions.
• 50 urbanization level to be reached by 2030.
• Urbanization occurred at the expense of highly
  productive agricultural areas.

51
Urban and Rural Population in China, 1952 - 2000
2
Urbanization strictly controlled
Migration tolerated
52
Urbanization
2

• Beijing
• The political center.
• Imperial capital transformed into a national
  capital.
• Shanghai
• The head of the dragon (Yangtse).
• The industrial center.
• The new financial center.
• Gateway to Central China.
• Guangzhou
• Old commercial city.
• New industrial center (Pearl River Delta).
• Gateway to South China.

53
Industrialization
3

• Urban industrial economy (1950-1980)
• Creation of vast administrative units.
• The work unit (Danwei)
• In industry, services and administration.
• Controlling the population through geographical
  fixation.
• Stability and material security provided.
• Workers class is the outcome of the communist
  government
• Regrouping of labor in industrial units.
• Employment was guaranteed for life
• Employees have a set of social benefits.
• Health, retiring, housing, education, vacations,
  preferential prices on food.
• Transmission of the job to a member of the
  family.
• Promotions were done by the social position and
  respect of ideology.
• Having a job in a State enterprise was to possess
  an iron rice bowl.
• Currently 140 150 million state factory workers.

54
Industrialization
3

• Open Door Policy and economic development (1980-)
• Employment problems
• Increasing since the 1960s because of
  demographics.
• The State sector is not capable to absorb all the
  new workers.
• Inefficiency of the State sector with diminishing
  returns (classic central planning conundrum).
• Collective and private enterprises
• Growth is occurring in the labor intensive light
  industrial sector.
• The share of the industry outside the State
  control has gone from 20 of industrial
  production in 1978 to 70 in 1993.
• Private enterprises account for growing share of
  the industrial output.
• 1978-2001 200 million Chinese have been lifted
  out of absolute poverty.

55
China and the Global Economy
4

• Integration to the global economy
• Economic growth is mainly driven by exports
• China contributed to 25 of the worlds GDP
  growth (1995-2002).
• With no welfare state, no labor unions and an
  enormous supply of both labor and savings,
  communist China is a capitalist's paradise.
• Lessons from the past
• Each time China opened to the outside, a period
  of relative prosperity resulted.
• Each time China closed to the outside world (e.g.
  the Great Leap Forward and the Cultural
  Revolution) was a period of instability.
• The CCP is embracing this form of development
• Insuring improvements in the populations
  welfare.
• Insuring the growth of the economic power of
  China.
• Insuring technological development.
• Insuring their own survival / legitimacy.

56
Share of Global GDP Growth, 1995-2002
4
57
China and the Global Economy
4

• Growing consumption of resources
• Economic growth has increased Chinas consumption
  of resources
• The Dragon is hungry.
• Consumes 50 of the worlds cement.
• 30 of the coal.
• 40 of the steel.
• Second largest consumer of oil after the United
  States.
• Energy supply problems with increasing blackouts.
• Completion of a natural gas pipeline in 2004
  (Tarim Basin to Shanghai).
• Driving up global commodity prices
• Increased global competition caused by China.
• Fear that China may export inflation.
• China may hit a resource wall inhibiting future
  developments.

58
Crude Oil Production and Consumption, China,
1981-2004 (in 1,000 of barrels per day)
4
59
Chinas Crude Oil Imports, 2004
4
60
China and the Global Economy
4

• Growth of international trade
• Tremendous growth of Chinas involvement in
  international trade over the last 25 years.
• Exploitation of comparative advantages.
• Export oriented strategy
• China is the 4th largest exporter in the world
  (2003), 6 of the worlds trade.
• Exports account for 25 of the GDP while this
  share was 5 in 1978.
• However, 52 of its exports are by foreign owned
  factories.
• United States
• Most important trading partner.
• Account for 40 of Chinas exports and 10 of its
  GDP.
• The European Union the second.
• Japan the third.

61
Chinese Exports to the United States, 2000 (in
billions of US)
4

• Shifts in international trade
• Decrease of raw materials
• From 50 of exports in 1985 to 15 in 1995 to 3
  in 2000.
• Increase in manufactures
• 97 of the value of exports.
• Consumption goods (shoes, toys).
• Textiles and clothes.
• Low level electronics.
• 12 of exports are bought by Walmart.
• Energy and raw materials imports
• 1/3 of its oil.
• Second largest oil importer after the United
  States.

62
China and the Global Economy
4

• World dominance in manufacturing
• Two processes
• Addition of new manufacturing activities either
  the outcome of FDI or internal investments
  (modern facilities).
• The closing down of many manufacturing
  activities, mainly the outcome of Chinese
  competition and/or comparative advantages.
• 50 of the world's TVs.
• 60 of the world's cell phones.
• 50 the world's shoes (and 95 of those sold in
  the United States).
• 80 of the toys sold in the United States.
• 90 of the sporting goods sold in the United
  States.
• 100 of Levi's blue jeans are now made in China.

63
China and the Global Economy
4

• Labor issues
• China supplies a gigantic quantity of labor.
• 200 million people in the countryside are without
  work.
• Constant flow from the interior (poorer
  provinces).
• Often woman to work in factories for about 3
  years.
• Come back to their villages/towns to marry or
  start businesses.
• Wages
• Extremely low wages that are kept low because of
  rural to urban migration and population growth.
• Between 50 and 160 a month.
• The rest of the developed world cannot compete.
• Selling itself with diminishing returns.
• Many factories offer free room and board.

64
Hourly Cost of Wages and Benefits, 2004 (US)
4
65
China and the Global Economy
4

• Mechanisms for opening to the outside world
• China has to rely on extraterritoriality and
  Foreign Direct Investments (FDI).
• Gain capital and investment.
• Using the Chinese diaspora
• About 75 of FDIs came from Hong Kong and Taiwan
• Facing high wages, high land values and scarcity
  of available space for development.
• Geographical concentration
• Global appeal of China.
• Guangdong, Fujian and Shanghai
• Account for 50 of FDIs.
• Coastal provinces account for 85.
• 80 of FDIs are coming from Asia (Hong Kong,
  Taiwan).

66
China and the Global Economy
4

• FDI Phases
• 1st phase (1978-1995)
• Labor-intensive / low technology sectors.
• Comparative advantages of China.
• China received 4.1 of the worlds FDIs in 2000
  (ranked 6th).
• Often used to develop joint ventures /
  subcontracting.
• 2nd phase (1995-)
• Shift towards added value goods is observed.
• Basic to intermediate electronics (keyboards,
  mice, etc.).
• An expertise in many sectors has been developed.
• Integration in global commodity chains.
• Worlds largest manufacturer of consumer
  electronics.
• About half of the world's DVD players are now
  made in China.
• Emergence of a knowledge industry.

67
Value of Chinese Exports and Received FDI,
1983-2002 (Billions of US)
4
68
Sector of Accumulation of FDI, China 2000
4
69
China and the Global Economy
4

• Extraterritoriality
• Development of special economic zones
• Zones in which laws different from a Chinas
  economic laws.
• The goal is to increase foreign investments.
• 5 Special Economic Zones (SEZ) established
  between 1978-1980.
• 14 coastal cities were opened in 1984.
• 3 Coastal areas expanded in 1985 (Pearl River
  Delta, Yangtze Delta and Min River).
• Pudong New Zone of Shanghai in 1990 and several
  cities along the Yangtze.
• All capital cities of provinces and autonomous
  regions in 1992.
• Becoming a mess with national, provincial,
  municipal and army controlled development zones.

70
Special Economic Zones
4
71
Foreign Investments and Special Economic Zones
4
Yangtze Delta
Pudong
Min River
Xiamen
Pearl River Delta
Shantou
Shenzhen
Zhuhai
Hainan
72
China and the Global Economy
4

• Purchase of foreign assets
• Recycling income from exports.
• Initially involved mainly T-bills and debt
  instruments.
• Move to secure strategic resources
• Oil, mines, lumber, food supply.
• Failed attempt to buy US oil company Unocal
  (2005).
• New Chinese presence in Latin America and
  Southeast Asia.
• Purchase of foreign technology and brand names
• Lenovo acquired IBM personal computing division
  (2004).
• Haier Group failed attempt acquire the Maytag
  Corporation (2005).
• Little known Chinese manufacturers seeking an
  international recognition.

73
China and the Global Economy
4

• Trade and tourism
• Very difficult for a Chinese to go outside China.
• Closed under communism (1949-1978)
• Only 210,000 Chinese people were allowed to go
  abroad.
• About 7,000 a year.
• Mainly diplomatic personnel.
• Open door (1979-1985)
• 50,000 per year in the 1979-1985 period.
• Students and trade personnel.
• Economic reforms (1986-)
• 18.1 million people were approved to go outside
  China.
• Average of 1.13 million annually
• In 2001, four million Chinese went overseas
  (mainly HK) for tourism.
• 20 million in 2003.
• 30 million in 2004

74
China and the Global Economy
4

• Over optimistic views on China?
• Analogies with Japan during the 1980s.
• Resources wall.
• National inequalities (civil unrest).
• Over dependence on foreign markets for exports
• Triggers protectionist forces.
• Large misallocations of capital within China
  (export based / real estate).
• Large debt by state enterprises
• Non-performing loans.
• Fiscal irresponsibility.
• Little profits in spite are massive investments.
• The Yuan is a fiat currency like many others
• Money printing (inflation) by the government is
  rampant.

75
Selected Problems and Issues
C

• 1. Family Planning
• What was the One Child Policy and how it impacted
  the Chinese society?
• 2. Modernization
• What are the challenges of modernization in China?

76
Family Planning
1

• Concept
• Designed to help families achieve a desired size.
• 1/3 of the population growth in the world is the
  result of incidental or unwanted pregnancies.
• 210 million pregnancies in the world per year, of
  which 100 million are unwanted pregnancies (47).
• 46 million abortion per year.
• 500,000 women die each year from unsafe
  abortions.
• If women could have only the number of children
  they wanted, the TFR in many countries would fall
  by nearly to 1.

77
Family Planning
1

• Early 1970s
• Known as the later-longer-fewer program.
• Authorized age of marriage 25 for men and 23 for
  women.
• Wait later to begin their families, allow for
  longer spacing in between children, and have
  fewer children overall.
• Began to reduce fertility levels.
• Not fast enough to really slow down population
  growth due to the demographic momentum that had
  already developed.
• End of 1970s
• Government began to promote the two-child family
  throughout the country.
• Slogan One is best, at most two, never a third.
• Contributed to fertility decline but, again, not
  rapidly enough.

78
Family Planning
1

• One Child Policy
• Launched in 1981 when the population reached 1
  billion
• Initial goal Stabilize Chinas population at 1.2
  billion.
• Revised goal Keep Chinas population under 1.4
  billion until 2010.
• Population expected to stabilize around 1.6
  billion by 2050.
• Under the responsibility of the State Family
  Planning Commission (SFPC)
• Population control perceived from a strategic
  point of view.
• Employers and neighborhood committees had to
  enforce guidelines.
• Great variations in performance between the
  countrys urban and rural areas.
• Possible to enforce in China (totalitarian).
• Would have been impossible in most other places.

79
Regulation of the One Child Policy
1
80
Family Planning
1

• System of incentives and disincentives
• Carrot and stick approach.
• Incentives offered to couples with only one
  child
• Monthly allowances paid to couples with only one
  child.
• Child entitled to free educational and medical
  services.
• Disincentives used to discourage larger families
• Fine up to 15 of annual income.
• Couples forced to give up all privileges if a
  second child was born and had to repay any cash
  awards it had received.
• A third child denied free education, subsidized
  food, and housing privileges.
• A third childs parents would be penalized with a
  10 reduction in wages.

81
Family Planning
1

• Urban areas
• Small sized apartments.
• Improving ones status and level of consumption.
• Easier control from the government.
• Rural areas
• Families want more children to work the family
  plots and sustain parents when they get old.
• Want sons who will continue the family line and
  provide ritual sacrifices to their ancestors
  after they die.
• Daughters are leaving their family once they
  marry.
• Girls are accounting for only 20 to 30 of a new
  demographic class in some areas.

82
Percentage of Women Having More Than One Child,
1998
1

• Fertility reduction
• Prevented about 300 million births since 1980.
• When the program began (1970), Crude Birth Rate
  was 34 and TFR was around 6.
• Been brought down to 10 (CBR) and 1.7 (TFR).
• About 40 of Chinese women have been sterilized.
• About 5 of women have more than one child.

83
Family Planning
1

• Fluctuations of fertility
• Fertility has declined substantially before the
  OCP.
• Reached a low in 1984.
• Increased from the mid 1980s to the early 1990s
• Relaxation in enforcement in rural areas.
• In 1986, 2 children per couple were allowed in
  rural areas.
• In 1995, the restriction was lifted for urban
  areas.
• Reductions in the authority of local officials
  responsible for implementing the program.
• Sizeable age cohort entering their reproductive
  years
• Baby boom of the early 1960s (about 40 of the
  increase was due to this).
• A decline in the age of marriage explained the
  other 60.
• Nearly 75 of this increase was offset by
  declines in the age-specific fertility rates.

84
Chinese Fertility Rate, 1949-1998
1
85
Family Planning
1

• Imbalanced sex ratio
• Male children are more valued.
• 120 boys for 100 girls (national average).
• Abandon or abortion of females
• 11 million abortions a year 1 out of 2 live
  births.
• Missing female population as girls are not
  declared.
• 2000 About 900,000 girls were missing (0 to 4
  years group).
• Only 1 of females are unmarried by the age of
  30.
• Psychological consequences
• Currently around 70 million single child.
• 4-2-1 syndrome (4 grand parents 2 parents 1
  child)
• Little emperors or little empresses.
• Self-centrism.
• Pressure to succeed.

86
Males minus Females, China, 2000
1
87
Family Planning
1

• Governments response
• Laws giving girls and women equal rights with
  males.
• Propaganda and consciousness-raising slogans
  about the equal value and contributions of
  females and males.
• Laws outlawing infanticide, prenatal sex
  identification, and sex-selective abortion.
• Policies in most provinces allowing rural couples
  to have two children, or a second child if the
  first is a girl.

88
Family Planning
1

• The Population and Family Planning Law
• One-child policy was a policy for one
  generation.
• Relaxed in the mid 1980s
• 2 children permitted in rural areas.
• A new family planning law started in 2002.
• Same goal than the One-child policy, but offer
  more flexibility
• One child, but permission may be granted for a
  second under specific circumstances.
• Late marriage and childbearing.
• More flexibility for provinces, autonomous
  regions and minorities.
• People in reproductive age have to use
  contraception.
• Provisions for sex-determination and sex-specific
  abortions.
• Government keeping a close eye on demographics to
  see if population control is required.

89
Modernization
2

• The appeal of modernization
• For the last 500 years, China developed an
  inferiority complex.
• Strong pressure to portray China as a modernizing
  nation.
• Large investments in grandiose projects
• Three Gorges Dam.
• First maglev train in Shanghai (2003).
• First Chinese in space (2003).
• New international airports (Beijing, Shanghai,
  Guangzhou).
• 2008 Olympics.

90
Modernization
2

• Development of the telecom market
• Easier and cheaper to switch to the latest
  technology.
• Worlds largest mobile phone market
• 376 million cell phone subscribers (2005).
• 25.7 mobile phones for every 100 Chinese.
• 5 million new subscribers per month.
• 70 of Beijing resident have a cell phone 60
  for Shanghai (2002).
• 42 of the Guangdong province population 30
  million.
• Half of the rural residents have a television.

91
Modernization
2

• Industrial development problems
• Pulling out millions of Chinese out of poverty
• More than 200 million peasants live on less than
  1 a day.
• Justifies any policy and project.
• Inequality is becoming a standard
• Wages remain 50 to 70 per month.
• With inflation, standards of living are going
  down.
• Guangdong the Manchester of the 21st century.
• Chinese exports are similar to Pacific Asian
  exports
• Intense competition from Thailand, Indonesia, and
  South Korea.
• China is however winning the competition/debasemen
  t war.
• Industrial overcapacity
• Over investment.
• Over supply of consumption goods, driving prices
  down.
• Limited profits.

92
Modernization
2

• The business environment
• The rule of law is not applied.
• Local abuses and racketing
• Joint ventures must contribute to local
  development.
• Different price systems.
• Good Guanxi enables to bend most of the rules.
• The parasite economy
• 55 million members of the CCP working for the
  government or managing State enterprises (1998).
• Duplication of functions in every sector of the
  civil service at the national, provincial and
  township level.
• 90 of civil servants are redundant.
• Institutionalized racketing of economic
  activities by all levels of government.

93
Modernization
2

• Environmental degradation
• Limited attention placed at the protection of the
  environment.
• Development is a priority over the environment.
• Air pollution
• China is the second largest CO2 emitter in the
  world.
• 16 of the worlds 20 worst polluted cities.
• 75 of the urban population suffering from health
  problems.
• Water pollution
• 20 of rivers in China are severely polluted.
• 80 cannot sustain commercial fishing.

94
Modernization
2

• Counterfeiting and intellectual property
• One of the greatest industrial subsidy ever
  seen.
• Technological expropriation
• Copy a well known product without paying any
  royalties or RD costs.
• Illegal copies
• More than 90 of the movies, music and software.
• Legal CD has a 1.2 market share.
• About 40 of pharmaceutical products.
• Two levels
• International software and brand names.
• National books and music.
• Role of government
• Weak (non-existent / arbitrary) legal
  environment.
• Counterfeiting is controlled by local authorities
  and protected by judiciary instances.
• High levels of profits prevent any governmental
  intervention, except when counterfeiting involves
  Chinese brands.

95
Modernization
2

• Speculation
• Short term perspectives of investments.
• Real estate, not production, is the favored
  sector
• Development zones are often created for this
  sole purpose.
• Over supply of office space in many cities.
• Vacancy rate of more than 25 large
  non-performing assets.
• People cannot afford to buy most of the housing.
• Stock markets
• Most of the issued shares are took over by local
  administrators.
• Low level of education of shareholders.
• The notion of investment is not well understood
  (perceived as a sure-winning lottery.
• The stock market has been declining due to low
  profits.

96
Modernization
2

• Consumption
• Symbol of modernity and of achievement
• Mass consumption and mass media has created needs
  while the employment market offered limited
  opportunities to many.
• Access to new sources of information providing a
  globalized culture.
• Mass media is new to China and there is no
  tradition of consumer behavior.
• Development of Western consuming behavior
• Fashion and beauty products.
• Weddings.
• Christmas (the consumption segment of it).
• New housing complexes and home decoration.
• Emergence of a middle class
• About 100 million as of 2004.
• A tool of social change, but also instability.

97
Modernization
2

• Nationalism
• Promoted by the government, especially among the
  younger generation.
• A tool of national cohesion when the communist
  control is slipping away.
• Portraying China as a victim state
• Other powers as bullies, namely the United
  States.
• Human rights
• About 95 of the worlds executions take place in
  China.
• Political system ill-adapted to cope with the
  variety of views generated by a modern society.