Chinese Economy China Overview

The largest population (1.4 billion)
Professor Dr. Yanming Wang
Lingnan College The largest world factory 
Sun Yatsen University (produce very much products, manufacture
(p y p
Jan. 10  2019, Guangzhou
OEM  Original Entrusted Manufacture)
stswym@mail.sysu.edu.cn
The largest (potential) market 
wechat 13332892133
(raw material, luxury products, service )

Four goals of macro economy policy Four goals of macro economy policy
Economy growth‐‐‐‐‐GDP growth rate
Economy Consume Price Stable  ‐‐‐‐ CPI growth rate
growth
Improve employment ‐‐‐‐ unemployment rate
Balance budget ‐‐‐‐ Export – Import， Debt
Price Impro e
Improve
Stable employment Government choice

Balance US, China

budget

1
 Priority ‐‐ Growth GDP 

Logic behind it
Keep growth – more opportunity to work
Keep growth – more product and stable price
Keep growth – more export and more reservation
Gross Domestic Product
G = Agriculture + Industry + Service
G = Consume + Investment + Export - Import

Consume = Household consume + Government consume

Data Resource Population
1980 1990 2000 2010 2017
IMF
China 987.05 1,143.33 1,267.43 1,340.91 1,390.08
http://www.imf.org/external/index.htm
Germany 76.84 78.95 81.46 80.29 82.71
India 685.50 847.50 1,029.50 1,200.66 1,316.90
CIA Japan 116.77 123.44 126.83 127.59 126.75
USA 227.62 250.05 282.30 309.75 325.89
https://www.cia.gov/library/publications/the-world-
https://www.cia.gov/library/publications/the world
factbook/geos/ch.html Increase rate 1990 2000 2010 2017
China 15.83% 10.85% 5.80% 3.67%
State Bureau of China Germany 2.74% 3.18% -1.44% 3.02%
India 23.63% 21.47% 16.63% 9.68%
http://www.stats.gov.cn/ Japan 5.71% 2.75% 0.60% -0.66%
USA 9.85% 12.90% 9.72% 5.21%
GDP 2018 top 5 population.xlsx

2
2017 GDP Top 4 （Trillion US $ ） GDP top 4 (billion US $)
Rank Country Official Increase
Exchange rate rate 1990 2001 2017
1 US 19.36 2.2% China 398.62 1344.08 12014.61
2 China 12.01 6.9% Germany 1592.59 1951.98 3684.82
3 Japan 4.88 1.5% Japan 3132.82 4303.54 4872.14
4 Germany 3.65 2.1% USA 5979.58 10621.83 19390.60
EU 28’ 16.52 1.9%

https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
GDP $ 2018 Top 4.xlsx

GDP Growth Data
Increase since 1990
2017 2001 1990
Times
China 12014.61 1344.08 398.623
China 30.14
Germany 3684.82 1951.98 1592.591 Germany 2.31
Japan 4872.14 4303.54 3132.817 Japan 1.56
USA 19390 60
19390.60 10621 83
10621.83 5979 575
5979.575 USA 3.24

Compare with China

1990 2001 2017
Germany 4.00 1.45 0.31
Japan 7.86 3.20 0.41 GDP $ 2018 Top 4.xlsx
GDP $ 2018 Top 4.xlsx USA 15.00 7.90 1.61

3
 Big change Growth rate since 1991

GDP $ 2018 Top 4.xlsx

GDP $ 2018 Top 4 share.xlsx

Top 1 by data GDP Per capital

Manufacture 1980 1990 2000 2010 2017

Investment China 309.35  348.65  958.57  4524.06  8643.11 

Germany 11067.74  20172.59  24003.86  42641.55  44549.69 
Export
J
Japan 9466 40
9466.40  25379 60
25379.60  38535 58
38535.58  44673 60
44673.60  38439 52
38439.52 
Foreign Exchange Reservation USA 12575.57  23913.76  36432.51  48311.38  59501.11 

China is a developing country!

GDP 2018 top 5 population.xlsx

4
GDP Driven and Stable Guaranty Agriculture Reform

Deng’s Policy:
Economy growth is the priority Give more freedom to
The passbands.
Environment pressure,
Let them do whatever
Social stable is the guaranty they like!
Don’t debate much

Today’s Xiaogang Vellege Industry reform – Open to the world

More agriculture products. Food is the priority! Cheap labor, favorable tax and land policy
50$/moth, 3 year free, 5 year half, free

5
1980’s 1990’s

2000’s 2010’s

6
 Advantage GDP (official exchange rate):
Note: because China's exchange rate is not determined
Large population and skillful young workers
market forces, the official exchange rate measure of GDP is
Very good professional education system not an accurate measure of China's output. In China's
Very solid supply chain in manufacture situation, GDP at purchasing power parity provides a better
Very good competition system for local government measure for comparing output across countries.

2017 PPP Top 4 （Trillion US $ ） Big change
Rank Country PPP
1 US 19.36
2 China 23.12
2017
3 Japan 5 40
5.40 20

Germany 4.15
18
4 16

EU 28 19.97
14

PPP 2018 Top 5 share.xlsx 12

10 2017

https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html 世界经济.xls 6

0
China Germany India Japan United States

7
 Market Share
PPP 2018 Top 5 share.xlsx
Analysis—Key factors
1. Open and Reform，Market economy, Competition
2. Investment，industry park, road and real estate
3. Private property protect
4. Local government incentive
Big Difference
Is socialist market economy a market economy?
Land and many natural resources are
not owned by private
Take more attention to poor people
More public resource to stimulate economy
Vote Mechanism
1. Vote with foot People move to find chance.
2. Vote with fund Money move to get profit
3. Vote with information People express their opinion
Hoe to solve big problems?
Wait or let the members to discuss and vote
8
 Weakness Unbalanced 

Labor protect -- Blood Manufacture

International unbalance
Environment protect -- Pollution
District unbalance
Less Innovation -- Copy too much
Industry
I d t unbalance
b l
Income unbalance

Different Pattern GDP structure by end use
US economy ‐‐ Consume driven
GDP = Domestic Consumption + Investment + Net Export
Service driven =(HC+GC)+ Inv + (Exp –Imp)
China economy ‐‐‐ Investment driven  HC -- Household consume
GC -- Government consume
Manufacture driven 
Exp – Export

Which is better? Imp -- Import

Balance!

9
 GDP ‐ composition, by end use GDP by sector of origin
2013 USA China
household consumption 68.60% 36%
government consumption 19.50% 13.50%
investment in fixed capital 14.80% 45.70%
investment in inventories 0.40% 2.10% GDP = Agriculture + Industry + Service
Net export -3.40% 2.70%
exports of goods and services 13.50% 25.80%
imports of goods and services -16.90% -23.10%

2017 USA China

household consumption 69.10% 39.10%
government consumption 17.20% 14.60% Developing Developed
investment in fixed capital 16.30% 43.30% country
country
investment in inventories 0.60% 1.10%
Net export -2.90% 1.90%
exports of goods and services 12.20% 19.60%
imports of goods and services -15.10% -17.70%

GDP ‐ composition, by sector of origin Structure

2013 USA China
Agriculture 1.10% 10.10% 2017 USA China EU Japan
Industry 19.20% 45.30%
Service 79.70% 44.60% Agriculture 0.90% 8.20% 1.60% 1.00%

2017 USA China Industry 18.90% 39.50% 25.60% 29.70%

Agriculture 0.90% 8.20%
Industry Service 80.20% 52.20% 74.00% 69.30%
18.90% 39.50%
Service 80.20% 52.20%
GDP structure.xls

10
 Structure Labor cost increase fast
Monthly Salary
Monthly Salary Increase
USA China EU Japan 7000
2007 2100
household consumption 69.10% 39.10% 56.30% 55.90% 2008 2400 14.29% 6000

2009 2700 12.50%

government consumption 17.20% 14.60% 20.50% 19.50%
5000
2010 3100 14.81%
4000
2011 3600 16.13%
investment in fixed capital 16 30%
16.30% 43 30%
43.30% 19 50% 23.50%
19.50% 23 50% 2012 4100 13.89% 3000

investment in inventories 0.60% 1.10% 0.10% 0.20% 2013 4700 14.63% 2000
2014 5300 12.77%
Net export -2.90% 1.90% 3.40% 1.00% 2015 5700 7.55% 1000

2016 6050 6.14%

exports of goods and services 12.20% 19.60% 43.90% 17.80%
0
2017 6400 5.79% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

imports of goods and services -15.10% -17.70% -40.50% -16.80%

Salary in manufacture.xlsx

New Normal State Not too bad
GDP 100m imcrease
Goal Real
2010 397983 2011 73581
12

2010 8 10.6
2011 8 9.5
10
2011 471564 2012 47758
2012 7.5 7.9 8
2012 519322 2013 45594
2013 7.5 7.8
2014 75
7.5 73
7.3
6
Goal
Real 
2013 564916 2014 72712
2015 7 6.9 4 2014 637628 2015 39080
2016 6.5 6.7
2017 6.5 6.9 2
2015 676708 2016 67292
2018 6.5 6.6 0
2016 744000 2017 83122
2019 6 6.3 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2017 827122
China GDP growth.xlsx China GDP growth.xlsx

11
 2018‐2020 Macro Economy Policy Analysis
Billion 2018 2019 2020
30.0%

25.0%

GDP RMB 88,900.00 100,000.00 96,047.04 20.0%

15.0%
GDP

GDP USD 13,592.00 15,000.00 16,952.01 10.0%

10 0%
CPI

5.0%

PPP USD 25,238.56 27,438.28 29,726.43 0.0%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

‐5.0%

Balance the growth and inflation

China GDP forecast.xlsx GDP 2018 top 5.xlsx
GDPCPI.xls

Decision Export and Import
GDP = Domestic Consumption + Investment + Net Export
• Stimulate
=(HC+GC)+ Inv + (Exp –Imp)
• Cool down
(G-C-I)=Export – Import
Saving = GDP-HC-GC
• Tools: Investment, project‐based
• Monetary and Fiscal Policy S-I = Exp – Imp
This rate decrease from 30% to 2%

12
 Export Export
China export $2.157 trillion China export $2.157 trillion
Electrical and other machinery, including computers and
Main countries and regions
telecommunications equipment, apparel, furniture, textiles
US 18.2%
US export $1.576 trillion
Hong Kong 13.8%
EU export $1.9 trillion
Japan 6.1%
Japan export $683.3 billion
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
South Korea 4.5%

Export Import
China import. $ 1.731 trillion
electrical and other machinery, including integrated circuits
and other computer components, oil and mineral fuels; optical
and medical equipment, metal ores, motor vehicles; soybeans

EU import $1.727 trillion

US Import $2.352 trillion
Japan Import $625.7 billion

GDP 2018 top 4 export and import.xlsx

13
 Import Import increase rate
China import. $ 1.731 trillion
electrical and other machinery, including integrated circuits
and other computer components, oil and mineral fuels; optical
and medical equipment, metal ores, motor vehicles; soybeans
Main countries and regions
South Korea 10%, ?
Japan 9.2%,
US 8.5%,
Germany 5.4%
GDP 2018 top 4 export and import.xlsx
Australia 4.4%

Export and import Unbalance and Rebalance
China export $2.157 trillion, China import. $1.731 trillion
USA export $1.576 trillion, USA Import $2.352 trillion Billion US$ China USA China -US % in China % in USA
EU export $1.9 trillion, EU import $1.727 trillion. Good Trade 4225 -8112 2758 65.28% 34.00%
EU Import $1 727 trillion
$1.727 US Import $2 352 trillion
$2.352
United States 14.50% China 21.10% Service Trade -2654 2427 -575 21.67% 23.69%
China 20.10% Mexico 13.40%
Canada 12.70%
EU Export $1.9 trillion US Export $1.576 trillion
US need more manufacture
United States 20.70% Canada 18.30%
China need more service
China 9.60% Mexico 15.90%
China 8%

14
 New Driven Engine
Manufacture update and Domestic Consume

1、Export Tech R&D and high quality

2 I
2、Investment
t t I
Innovation
ti and
d reform
f
3、Consume Domestic market

International cooperation  Thank you!
UN
IMF
World Bank
WTO
…….

15