China sixty years on: changes, challenges and possible strains on Chinas relations with the rest of

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China sixty years on changes, challenges and
possible strains on Chinas relations with the
rest of the world presented by the global
recession
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• Questions
• To what extent has Chinas situation changed?
• What challenges does the recession present?
• How can China avoid repeating past mistakes?

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• To what extent has Chinas situation as
• an economic power changed in the past
• sixty years?

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Value of industrial production2003 - 2007

• Average annual increase - 16.5

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Value of total GDP2005 - 2007

• Average annual increase - 12.0

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IMF projections of 2009 growth

• Japan - 6.2 China 6.5
• Russia - 6.0 India 4.5
• Germany - 5.6
• Italy - 4.4
• UK - 4.1
• US - 3.8
• France - 3.0
• Spain - 3.0
• Canada - 2.5

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Challenges

• How to reduce greenhouse
• gas emissions
• How to justify law order
• policies
• How to develop trusted
• commercial practices

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• What challenges does the global recession
  present for the new
• China?

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Economic growth rate2009

• 6.5
• (approximately half 2005 - 2007 rate)

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Unemployment in China(December 2008)

• Official figures 20,000,000 ( 4)
• Unofficial estimate 40,000,000 ( 8)
• 2009 projection 30,000,000 ( 6)
• Unofficial 2009 proj 50,000,000 ( 10)

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The worker unrest challenge

• For a nation long focused on social stability,
  this (recession) is a worrisome development. If
  it persists, more slack will open up in the
  labour market - raising long dreaded risks of
  worker unrest. The Chinese leadership will do
  everything in its power to avoid such an outcome.
  In this global recession, the challenge is
  daunting, to say the least. (Roach)

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• How can China and the rest of the world avoid
  repeating the mistakes made during
• the Great Depression ?

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Increase in value ofexports to the US

• 10
• per annum between 2002 2007

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Smoot-Hartley Act,1931

• Watchword for the perils of protectionism
• (US State Department website)

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Criticisms

• The Peoples Bank controls
• the value of the yuan
• China has used its export
• trading surpluses to buy
• US Treasury stock

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But

• Experts say the yuan is
• under-valued by 10 at most
• US happy to borrow to fund
• the gaudiest spending spree
• and the Iraq War

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China must

• Develop an indigenous, consumer based economy,
  pursue welfare enhancing policies including
• Upgrading rural education
• services
• Building community enriching infrastructure in
  the country
• Providing better social welfare support

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China must also

• Handle unemployment sensitively, without
  recourse to repression
• Maintain its current production base

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Cooperation, not confrontation

• There is hope (of economic recovery within a
  reasonable time) but it comes with a big if -
  if China and the United States pull together in
  forging common solutions. If, however, these two
  nations end up at odds with one another, they
  will both suffer - with dire consequences for the
  rest of a crisis-torn global economy. The
  stakes are enormous. There is no margin for
  error. (Roach)

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A challenging conclusion

• A confrontational approach, almost inevitably,
  will poison Chinas relations with other
  countries to the extent that the whole world may
  suffer damaging consequences, on many fronts,
  for generations.

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• The US-China Economic and Security Review
  Commission of the United States Congress
• www.uscc.gov/hearings