1. ST CATHARINE’S COLLEGE,
CAMBRIDGE UNIVERSITY,
ECONOMICS SOCIETY ANNUAL LECTURE 2012
Mo Tanweer; Head of Economics; Oundle School;
Mohammed.Tanweer@cantab.net

3. China‟s growth miracle
The World‟s Workshop
WTO
Socialism with
Chinese characteristics
Xiaping‟s market
oriented economic
reforms
Great Leap Forward

4. Quarterly growth rates…
Average 9.5 % GDP growth rate annually since 1978
600+ million out of poverty…

5. Overtaking them all…
“Since 2001, China‟s GDP has risen fourfold…
Economically speaking, China has created three new
Chinas in the past decade” Jim O’Neill

6. Growth splutters…?
2012 target: 7.5%

7. Economy is too reliant on investment as a driver
Consumption has underperformed as a driver
Export-led growth has been important too
Re-balancing required
“China has made remarkable achievements…. But there
is a lack of adequate balance, coordination or
sustainability in our development” (Premier Wen, 2011)

8. China‟s 2008 Stimulus Package
$586 bn (4 trillion yuan) fiscal stimulus
Fixed investment growth accounted for
over 90% of the growth in the Chinese
economy in first 9 months of 2009

9. Infrastructure boom Easy money
Large pool of domestic savings;

10. 2008-09: A new era and a new pace of
infrastructure development…
35 airports in one year
In 2010, 175 airports

11. Infrastructure boom
$228bn – 2011-2015 in aviation

12. High speed rail links…

13. Sustainability…
2011: 70 new railways
Debts and ticket sales 2012: 9 new ones

14. Exporting HSR…

15. Build it… but will they come?

16. No such thing as a free lunch…
“growing resource and environmental constraints are
hindering growth.” Premier Wen Jiabao,
2011

17. The Minister for the Environment: “In China’s thousands of years of
civilization, the conflict between humankind and nature has never been as
serious as it is today…. The depletion, deterioration and exhaustion of
resources and the worsening ecological environment have become
bottlenecks and grave impediments to economic and social development.”
<1% clean air
20 of the 30 most polluted cities
2/3 cities breach air quality targets

18. Re-prioritising targets…
“We absolutely cannot again sacrifice the environment as the cost for
high-speed growth, to have blind development, and in that way to
create over-capacity and put greater pressure on the environment and
resources. That economic development is unsustainable.”
Premier Wen 2011
“to raise the quality and the efficiency of growth”

19. CO2 emissions rise…
Doubling in CO2
emissions since
2003

20. 2007-08 overtakes
USA as biggest CO2
emitter

23. Sustainability…
Cap-and-trade?
Since 2009, majority of cleantech
IPOs
2006, 2 companies from China in the
global list of top 10 solar cell producers
In 2010, there were 6 of global top 10
2009: 50% increase in
2010: $30 billion in low-cost loans to
green energy
the top 5 solar manufacturers

24. Energy consumption…
China surpasses the
USA as the world‟s
top energy
consumer
China has accounted for 75% of the
global increase in coal consumption;
and 60% of increase in oil use

25. China‟s Primary Energy Consumption
China‟s energy demand has
surged over 250% vs world
average of 20%
Coal-driven economy: 70%
(vs Brazil: 6%; India: 51%)

26. Ratio of Domestic Coal Production to
Consumption, 2008
World‟s largest consumer of coal
World‟s largest producer of coal
Currently self-sufficient in coal; but for
how long?

27. Chinese steel consumption is greater than
US+EU+Japan+India combined
2000-10: 600m tonnes extra consumed – China: 85%
1980 – 5%; 2008 – 40%
Mln tonnes
Largest exporter of steel

28. Soya beans: 1995 - 2010
Already a large commodity consumer
Corn: 2003 - 2010
World‟s largest
consumer/producer of cotton
World‟s second largest consumer
of sugar
World‟s second largest consumer
of wheat

29. Food security is a top priority…

30. Supply-side constraints…
Second largest consumer of oil
Fifth largest producer; Oil equity;
Hydro power; Solar power; Coal
Oil: imported crude oil
dependence: 1999: 19%... 2010:
55%

31. Efficiency gains…
Energy intensity of a consumption
driven economy is much less than an
investment driven one
2005-2020: Reduce emissions per
unit of GDP by 45%

32. The largest migration in history
Shenzhen – 1978-2010

33. Lewis Turning Point?
1978: „One Child Policy‟

34. China‟s population pyramid

35. Dependency ratio bottomed out…
„Demographic dividend‟
Inflection point
2005: „Ageing society‟
Source: UN World Population Prospects A longer term concern…
Help with rebalancing economy

36. Working age population vs active
population In recent years, economic growth has
not been driven by working age
population growth
Productivity growth

37. Human capital
6.3 mln college
grads p.a
Structural adjustment issue; not a
labour constraint issue

38. It is RULC‟s that matter…
Productivity improvements
Capital deepening
Re-allocation of labour
Healthcare improvements

39. Urban-rural ratio still low…
VS US/Japan/S Korea

40. Further productivity gains remain…
Hukuo
Overemployment in agriculture:
10%:40%

41. „Go West‟ programmes
$325 bn in infrastructure focused
on Western region
West is an important growth
opportunity
The west's share of GDP only
17.8% (2008)
Special Economic Zones (XHTIZ)

42. Chongqing‟s success story…
2020 aim: 640 billion yuan ($100
billion) sized economy

43. Urban:Rural income ratio

44. Rising Gini…
2009:
Shanghai:7.6x richer p/c than Guizhou

45. Inflation concerns…
Top priority in 2011-15 Five Year Plan: controlling inflation
Inflation target of 4%
MNCs told to scrap price hikes
Monetary tightening

46. Minimum wages rise…
2011: Migrant minimum wages
rose 21%
Source: Roubini Group Economics
2006-10: Average minimum wage
increase: 12.5% p.a

47. But: Wage growth is key
to execute the blueprint of
the 12th Five Year Plan
rebalancing and
sustainability
Target of min.wage to
Government target rise of13% p.a be 40% of local salaries
to 2015 by 2015

49. Infrastructure, external
economies of scale, logistics

50. 1990s China vs the „modern China‟…
No longer purely importing
sophisticated inputs and assembling
<10% is
them into consumer goods for the West assembly-line
business

51. Shift towards higher-value add…
China is now a major exporter
of higher-value added products
Source: US Comtrade, The
Beijing Axis Analysis
„Magic Seven‟ industries to
become 15% of GDP by 2020
R&D expenditure to rise to 2.5%
of GDP by 2015

52. Export-led growth…
China‟s X
actually fell 17%
in 2009…
…but it still
overtook
Germany as the
world‟s largest
exporter

53. Currency wars…

54. Current account balances…
help with inflationary
pressure and with Currency wars/WTO
rebalancing

55. Yuan has appreciated
25% in last 6 years...

56. Are exports really doomed?

57. The cost of intervention…
Excess liquidity: Growth in M2

58. Asset bubbles…
Has the stock
market bubble
burst?

59. Shanghai 2003-10: 150%
Real estate
construction is
10% of GDP
1998 housing
stock privatised
2005-09:
Beijing: 27:1 Average house
price:income price tripled
ratio

60. Asset bubbles…
Tipping point
in 2011?
Average price p.s.m halved
since 2009 peak
Local govts revenue in trouble

61. % of cities where housing prices are
down month on month
Negative multipliers…
Govt policies
Source: SocGen Chinese housing market is not the
same as the U.S housing market

62. Growing indebtedness…
1998-05:
$500bn written
off
Non-
performing
loans
Chinese banks have lent an
astounding $8 trillion since 2008

63. Local govt debt
 http://news.xinhuanet.com/english/china/2012-
02/20/c_131420191.htm

64. The future of financial markets…
10-year timetable for easing capital
restrictions; liberalising interest rates

65. Reminiscent of Japan…

66. The Middle Income Trap…

67. GDP/c Japan vs China
GBR: INSERT GRAPH OF
CHINA’S GDP per capita
levels… vs
USA/UK/Japan/Brazil

68. Hard or soft landing…?
Supply-side Rostow‟s Drive to
Maturity phase Inequality
constraints
Rebalancing Fiscal restraints World Bank
Currency 2030
Asset bubbles
reform Inflation/Deflation
Social issues
Labour costs
Socialism with Environment
capitalist th 5-Year Plan
Growth of the
characteristics? 12 middle class

69. ST CATHARINE’S COLLEGE,
CAMBRIDGE UNIVERSITY,
ECONOMICS SOCIETY ANNUAL LECTURE 2012
Mo Tanweer; Head of Economics; Oundle School;
Mohammed.Tanweer@cantab.net