CHINA

“Let China sleep.

For, when she wakes up, the world will tremble”

— Napoleon Bonaparte
Agenda
• History – China in 20th century
• Political background
• Government of China
• Socio-political issues
• Nobel Peace Prize
• China’s Economy
• Economic issues
• Currency manipulation
• Indo – China relations
 Political (background)
• Hereditary monarchies (dynasties)
• Qing dynasty ended in 1911
• Republic of China founded by Kuomintang (Chinese
Nationalist Party)
• Communist Party of China founded in 1921
• Civil war follows; ends in 1949
• Communists win; establish the People’s Republic of
China
• Kuomintang relocated to Taipei (Taiwan)
• 1947 – 1949: War of liberation
 Political
• Mao Zedong – father of modern China
• Great Leap Forward (1958 – 65)
– aimed at state control over agriculture (collectivization)
and rapid industrialization
• Cultural Revolution (1966 – 77)
– attempted to root out elements seen as anti-
Communist
• Tight control/ no dissent
• One-child policy introduced in 1978
• Deng Xiaoping
 Govt. of China
• All power divided among three bodies:
– The Communist party of China
– The State
– The People’s Liberation of Army
• President Hu Jintao heads all three bodies
• Legal power of Communist Party is guaranteed
by the PRC Constitution
• National People’s Congress
• Premier – Wen Jiabao
 Socio-political issues
• Chinese democracy movements
– Tiananmen Square protests of 1989
• Rural Chinese treated as second-class citizens
• Human rights violations
– Freedom of speech, incl. internet
– Freedom of press
– Freedom of movement
• Capital punishment in China
• Social status of Tibetans
• Lack of legal rights; no independent judiciary
 Liu Xiaobo
• Chinese writer, professor, human rights activist
• Called for political reforms; end of one-party rule
• Currently, a political prisoner in China
• Charter 08 manifesto
• Arrested on suspicion on “inciting subversion of
state power”
• Sentenced to 11 years imprisonment
• Awarded Nobel prize “for his long, non-violent
struggle for fundamental human rights in China”
 Charter 08 – Demands
• Separation of powers
• Democracy
• Independent judiciary
• Guarantee of human rights
• Abolition of hukou system
• Freedom of expression/ religion
• Free markets
• Social security
 Economy
• 1949-1978; Chinese economy devastated
• Reforms started in 1978; open to FDI in SEZs

• Decollectivization of agriculture

• Privatization of much state-owned industry

• 1978-2010: GDP growth rate of 9.5% p.a.

 Financial superpower
• Second largest GDP: $5.8 trillion; projected to overtake
USA in the next 10-15 years
• Largest trading nation – largest exporter ($1.2 trillion)
and second largest importer ($1 trillion)
• Agriculture sector: 13%
• Manufacturing sector: 47%
• Services sector: 40%
• World’s largest producer and consumer of agricultural
products
• Ranks 2nd in manufacturing output; 5th in services output
• $100 Billion FDI in 2010; Forex reserves $3 trillion
 INDIA CHINA
Population 1.2 billion 1.35 billion

GDP (nominal) $1.3 trillion $5.8 trillion

GDP (PPP basis) $3.9 trillion $9.7 trillion

GDP growth rate 7.4% in 2009-10 9.1% in 2009-10

Literacy rate 64% 93%

Per capita income $1000 $4200

Forex reserves $300 billion $3 trillion

 INDIA CHINA
FDI (2010) $24 billion $100 billion

Exports $210 billion (16th) $1500 billion (1st)

Imports $325 billion (11th) $1300 billion (2nd)

Major Trading USA, China, UAE, USA, Hong Kong,

Partners Saudi Arabia Japan, S. Korea
Unemployment 10% 4%

HDI Rank 119 89

Ease of doing 134 (2011); 79 (2011);

business (Rank) 133 (2010) 89 (2010)
 INDIA CHINA
Agriculture 15% 13%
(as %age of GDP)

Manufacturing 28% 47%

(as %age of GDP)

Services 57% 40%

(as %age of GDP)

Agriculture 52% 49%

(%age of manpower)

Manufacturing 12% 22%

(%age of manpower)

Services 27% 29%

(%age of manpower)
 Financial superpower
• Current account surplus of 6% vs. India’s current
account deficit of 3%
• “Lender of last resort” to troubled European countries
• “Lender of first resort” to poorer developing countries
esp. African, Latin American nations
• China has lent more to developing countries in the last
two years than the World Bank
• “Loans for oil” deals signed with Russia, Venezuela, etc.
• World’s largest consumer of commodities like steel,
cotton, copper
• Global leaders in high-speed rail network, renewable
energy…
 Issues/ Problems
• Need to re-balance economic activity with a much lower
reliance on exports for growth
• English speaking, high-skilled workforce for the services
sector
• A poor HDI rank (89)
• Environmental damage
• Large scale underemployment
• Demographic shift resulting from one-child policy
• Energy dependence/ demand
• Bad loans
• Income disparity
Currency manipulation
 Undervaluation of Yuan
• US accuses China of keeping its currency, Yuan
artificially low by hoarding foreign reserves
• It gives Chinese exports an advantage over
competitors
• Possibility of inflation
• Fear that other countries like Brazil, Japan may
follow China’s example
• US says it is in China’s interest to allow the Yuan to
appreciate more rapidly
• China says Yuan revaluation won’t solve US
problems
 India – China
• China’s strong strategic/ military relationship with
Pakistan
• PLA – largest in the world
• Disputed border – LAC i.e. Line of Actual Control
• Management of trans-border rivers
• Trade imbalance between the two countries
• China’s fears of encirclement
 India – China
• Trade with China continues to grow rapidly
• India needs huge investments in infrastructure –
China can participate in the process
• Large number of Indian students study in China;
CBSE set to introduce Chinese in curriculum
• Partnered well in BASIC (climate change
negotiations)
• Joint control of $2 billion Myanmar gas pipeline;
jointly developing hydel projects in Nepal; Chinese
railways coming across the Himalayas
 THANKS!!
Any other queries? Mail me: kapil.verma@time4education.com