Term Report

Zeeshan Aslam 10055 MBA IV Direct

Global Economic & Political Environment Submitted to: Ms. Naheed Memon

Date: 23 August 2011

China

Q.1 Make a short assessment of why China fell behind of West Europe in economic strength from 18th century onwards?
Ans. Few reasons why China has left behind Europe in terms of economic strength are:

Background
China is the country which has long and deep roots in the history. This country has witnessed many changes in terms of leadership, cultural revolution, political systems and wars. China is the most populous state in the world with population over 1.3 billion. Current political system that has been followed is Communism. China is considered as one of the oldest civilizations in the world and with that we can expect that this country has seen many different situations and outlooks.

Reasons
Following can be some of the reasons why China has fallen behind of Western Europe:

1. Inconsistent Leadership China has been very unfortunate when it comes to having a leadership who can guide the nation on his way and can carry it forward with other leader after him. And the policies that are constructive for the whole country can be carry forward by other leaders. But this has never happened, new leader has always refuted the policies of prior one and to put the nation under misery, they have put even tougher conditions. 2. Population Crisis Population has always been a factor of curiosity for Chinese government. Government has always tried to control the population through various means i.e. one child policy etc. Such a large population has different needs which the government has to fulfill. Here in China, governments were we can say least bothered about issues but rather suppressed them. 3. Rebellions Chinas periodical economic growth was hampered and in many cases destroyed by periodical rebellion like Taiping Rebellion, Punti-Hakka Clan Wars (185567), Nien

Rebellion (18511868), Miao Rebellion (185473),Panthay Rebellion (18561873) and the Dungan revolt (18621877). All the destruction after rebellions pushed the economy in extreme backwardness as things were destroyed. 4. Wars with other countries China has not only faced internal/civil wars but has also fought wars with other countries like Japan i.e. sin-Japanese war, Opium War with Europe etc which costed China not only million of peoples lives but also destruction on large scale. The Second Sino-Japanese War which started in 1937 and ended in 1945 resulted in conflicts between the Communists and Nationalists. With that it also resulted in loss of around 20 million deaths. At that time Japanese army had three policies for the war "kill all, burn all and destroy all". But later with the fall of Japan in the World War, China regained its powers but was financially weak and couldnt support its economy. Due to this financial position and mistrust between both the parties triggered a civil war in the country. Later on rules was established, but due to the civil war many provisions of the ROC constitution failed to work in China.

Comparison of China with Europe

If we try to compare the situation in both the regions we will observe that China has always been surrounded by issues which has disrupted any economic advancement that has occurred in the period had gone to zero level again, while Europe has maintained the growth on a constant basis. Europe has utilized the industrial revolution to the fullest while in China, Industrial revolution started but couldnt sustain due to the above said reasons. And when China started to show industrial growth, There was a war named as opium war with Europe, if we observe how it started we will come to know that at that time China was ruled by The Qing Dynasty, which lasted until 1912, and that was the last dynasty in China. Qing Dynastys approach to the economy was defensive towards the Western Europe. At this time China opened to the rest of the world, the West in specially. As China showed growth in foreign trade and other productive activities, opium produced by British in India was forced onto Qing China. And due to which 2 Opium Wars were fought with Europe that resulted in collapse of the growth trend in China and its open economy to rest of the world.

This is how China from very beginning of Industrial Revolution i.e. in 18th century kept side lined due to various issues and wars and couldnt cope up to the rest of the worlds progress. And due to weak economy China couldnt open itself to rest of the world for economic expansion and as a result was left behind.

Q.2 What might have been some important pre conditions that helped China strong growth trend after 1978
Ans. Chinese economy prior to reform During the 1930s, China established a modern industrial sector, which stimulated unsure but significant economic growth. Before the downfall of international trade that followed the beginning of the Great Depression, Chinas portion of world trade and its ratio of foreign trade to GDP achieved levels that were not regained for over sixty years. The economy was seriously interrupted by the war against Japan and the Chinese Civil War from 1937 to 1949, after which the triumphant Communists fitted a planned economy.

The Global Economic Environment from 1800 to 1949

From 1800 until 1949, the global economic environment was categorized by European-led industrialization, as well as intensive European colonization activities. The pre-1949 global economic environment, presented chances for non-Western countries that remained independent to economically develop. There were international markets for many non-Western commodities and products, such as tea and silk, and Western industrial and military technology was accessible to sovereign non-Western countries that had the aspiration and the financial means to purchase industrial technology. But, to be successful at economic development, a country needed to have enough independence to keep mechanism of its economy and foreign trade, and the headship to design a design for economic development. Qing China tried to carry out economic development but the result was China as semisovereign, thereby depriving it of important areas of sovereignty and placing obstacles in the path of Chinese economic development efforts.

Chinese Sovereignty and Economic Development Efforts from 1800 to 1949

Imperial China had for many years allowed global trade allowing foreigners to buy tea, silk, ceramics, and other Chinese products that enjoyed great international and European demand. Chinese authorities did little more than normalize and lightly tax the foreign trade in Chinese goods. Until the 1800s, foreign products commanded little market demand in China. Qing China was never entirely colonized but it still had plenty sovereignty and financial properties to endeavor modest modern economic development. Chinese officials and entrepreneurs initiated Chinese-owned steam shipping, a modern coal mine, a steam railway, a telegraph company, and modern mechanized cotton mills. The Qing government also agreed the setting up of a modern iron and steel mill and a Western-style bank. But China's losses from

opium, from the limits placedon China's sovereignty, and the financial burden of indemnities in the wake of the two Opium Wars, combined to limit the funds available to support Chinese economic development. One short period during the 89 years from 1860 to 1949, China had a period of about 5 years of greatly lessened foreign control and economic competition. During this period, Chinese economic development efforts significantly accelerated. Chinese historian Mary Wright and others have referred to this period as a "golden age" of Chinese industrialization, when Chinese-owned businesses flourished (Thomas, p. 165). But this period ended soon after WWI with the return of the full force and power of the European colonial governments. There were also some constructive characteristics to Western inroads on China's sovereignty and independence during the period of intense Western colonization from 1860 to WWII. First, the Western military invasion and occupation of Chinese "Treaty Ports" caused the Qing Chinese government after 1870 to move toward "defensive modernization." This was a policy of trying to import foreign military and industrial technology to give China wealth and power, under the banner of "self-strengthening." Chinese-designed economic expansion enterprises were modestly successful. These Chinese enterprises enjoyed forward and backward economic linkages with other Chinese-owned modern enterprises, and provided a blueprint for the economic development that Qing China would have continued to support if it had had full sovereignty and resulting substantial government income from taxes on foreign trade and foreign-owned businesses (Thomas, all). The second positive aspect of the global economic system was that it did provide a market for China's exports as well as access to advanced Western military and industrial technology. But China needed to have sufficient sovereignty to collect the tax funds needed for making the purchases. A third positive aspect of Western military pressure of China was that Chinese reformers, particularly after 1895, began to look abroad for political and social models to help strengthen China and save its civilization from demolition through colonization. Beginning in the 1870s, many Chinese leaders reluctantly concluded that China needed to adopt selected aspects of European culture, such as militarism, in order to strengthen China to save it from destruction by Western imperialism. China had to wait until World War II to regain its full sovereignty and resultant Chinese legal controls over its domestic economy and over foreign enterprises in China. During WWII for the first time in 89 years, Chinese authorities had the opportunity to try to economically develop their country with the benefit of full political and economic sovereignty.

Chinese Economic Development from 1949 to 1978

In obvious contrast to the pre-1949 period, from 1949 on the new Chinese communist management, using its full sovereignty, took complete control of China, containing the economy. The new government carried out sequences of economic reorganizations that included land reform in the countryside and the gradual takeover of ownership of almost all sectors of China's modern economy, including railways, shipping companies, the energy sector, the communications sector, agriculture processing, light and heavy industry, and the financial sector. The government also took control of China's foreign trade and tariff administration. The government destroyed opium manufacture, gradually eradicated opium addiction, and addressed many other social problems such as homelessness and rampant disease left over from the poverty and corruption of the earlier Chinese governments. The post-1949 Chinese authorities recognized a new commodity-based currency and abolished paying on foreign loans. They implemented a successful plan for faltering the widespread inflation of 1946-49 that had been so hurtful to the Chinese middle class. Chinese authorities established new laws and regulations to restore Chinese confidence in a society and political system run for Chinese benefit rather than in the service of foreign political and economic interests. They also carried out land reform in the countryside and economic reconstruction in the cities, using a state-planning economic system based on the Soviet model. The Chinese government took control of most large economic enterprises and industries, as well as the financial sector, and began to channel investment into economic development. Economic development was also carried out with modest but crucial assistance from the Soviet Union, and with little interaction with the rest of the global economy, except through Hong Kong. The result was an economic growth rate in the Chinese economy of about 4 percent per capita from 1949 to 1978, starting from a per capita base of about US$50. There were expensive and enormous failures, especially the tragic loss of about 30 million Chinese lives during the policycreated famine of the "Great Leap Forward" during 1958-60, and the social destruction, chaos, and persecution of intellectuals and party members during the Cultural Revolution of 1966-76. Yet, despite all of China's developmental problems, by 1978 the World Bank reported that China's economic growth rate was faster than that of India and of most other similarly poor countries, and the government's social and economic policies had vastly improved the education and health levels, and life expectancy of most Chinese (World Bank, unpublished, 1978). In some ways, China's 1978 to 2006 economic development goals are similar to those of the 1870 to 1949 period. The major differences are in the levels of Chinese sovereignty and Chinese regulation and control, and in the nature of the global economic system. Before 1949, China had only limited sovereignty, but since 1949 Chinese officials have been in total control of their

country's economy. Prior to 1949 foreigners owned and controlled large parts of the Chinese economy without economic and legal accountability to the Chinese government; since 1949, China's economy has been strongly organized, regulated, and taxed by the Chinese government. Since 1949, colonization and other forms of gunboat diplomacy have gradually become less acceptable in international relations and examples of successful non-Western economic development through intensive interaction with the global economic environment are prevailing. A major criterion of pre-1949 Chinese policies, of will a policy benefit China and the Chinese people, is the same in post-1949 China. But in the post-1949 period, China has had sufficient sovereignty to successfully pursue this policy criterion.

Q.3 In establishing its priorities for galvanizing the Chinese economy what were the most important considerations in thinking of Chinese planners. What business sectors today have greatest significance for China
Ans. Important Considerations towards Chinese Economic Development Refining associations and relations with the exterior world was one of the important philosophical shifts outlined in Chinese leaders perspective of reform. The local, communal, political, and particularly, economic systems underwent significant changes. The goals of these reforms were summed up by the four modernizations those of agriculture, industry, science and technology and the military. The strategy for achieving these aims of becoming a modern, industrial nation was the socialist market economy. The leaders argued that China was in the primary stage of socialism. This eventually reduced the role of philosophy in economic decision-making and deciding policies of verified effectiveness. The leaders believed that socialism does not mean mutual poverty. There was a political elasticity towards the foundations of socialism. The reforms actually included the introduction of planned, centralized management of the macro-economy by precisely proficient bureaucrats. However, unlike the Soviet model, management was indirect through market mechanisms. At the local level, material inducements, rather than political appeals, were to be used to motivate the labor force, including allowing peasants to earn extra income by selling the product of their private plots at free market. In the main move toward market distribution, local metropolises and provinces were allowed to invest in industries that they considered most profitable, which encouraged investment in light manufacturing. Thus, these reforms shifted China's development policy to an emphasis on light industry and export-led growth. Light industrial output was vital for a developing country coming from a low investment base. With the short incubation period, low capital requirements, and high foreign-exchange export earnings, revenues generated by light manufacturing were able to be reinvested in more technologically-advanced production and further capital expenditures and investments.. After suffering decades of shattering results under central planning, China began experimenting with free-market principles. China began shifting the power of deciding what and how much to produce from central planners to entrepreneurs and the free market. To attract foreign investments and know-how, China cut down governmental red tape and market interventions while developing a legal and physical infrastructure to support free enterprise.

To spur foreign trade, China began developing industries where it has relative advantages. One thing China had and still has in abundance is cheap labor, which is why so many labor concentrated industries were developed in China. As China's economy began to boom, the Chinese government began shutting down or privatizing inefficient state-owned enterprises. Although a significant portion of China's production still comes from state-owned enterprises, the trend toward denationalization is anticipated to continue.

Major Business Sectors

Many of China's resourceful industries are facing rapid growth powered by a mixture of state driven and private sector investment in infrastructure and technology, by a rise in the digitization of information. Industry growth has been sustained by a vigorous economy and a young population. But there are noteworthy regional differences with growth intense to date on the southern and coastal areas of the country important to an overall concern to redistribute wealth, expand knowledge and improve social capital with strong implications for many of China's creative industries. China is the world's largest manufacturer and consumer of agrarian products and the world's largest producer of rice and is among the principal sources of wheat, corn, tobacco, soybeans, potatoes, sorghum, peanuts, tea, millet, barley, oilseed, pork, and fish. Major non-food crops, including cotton, other fibers, and oilseeds, furnish China with a small proportion of its foreign trade income. Agricultural exports, such as vegetables and fruits, fish and shellfish, grain and meat products, are exported to Hong Kong. Yields are high because of thorough cultivation, for example, China's cropland area is only 75% of the U.S. total, but China still produces about 30% more crops and livestock than the United States. China expects to further increase agricultural production through developed plant stocks, fertilizers, and technology.

Energy
Since 1980, China's energy production has grown intensely, as has the percentage allocated to domestic consumption. Although electric-generating volume has grown rapidly, it has continued to fall considerably short of demand. This has been partly because energy prices were long fixed so low that industries had few incentives to conserve. Petroleum production, which grew rapidly from an extremely low base in the early 1960s, has increased much more gradually from 1980. Natural gas production still sets up only a small (though increasing) fraction of overall energy production, but gas is replacing coal as a domestic fuel in the major cities.

In 2003, China surpassed Japan to become the second-largest consumer of primary energy, after the United States.

Mining
Outmoded mining and ore-processing technologies are being substituted with modern techniques, but China's rapid industrialization requires imports of minerals from abroad. Including iron ore, coal, and petroleum majorly, China produced 2,450 tons of silver and 215 tons of gold.

Industry and manufacturing

Industry and construction constitutes around 47% of China's GDP. Main industries include mining and ore processing; iron and steel; aluminum; coal; machinery; armaments; textiles and apparel; petroleum; cement; chemical; fertilizers; food processing; automobiles and other transportation equipment including rail cars and locomotives, ships, and aircraft; consumer products including footwear, toys, and electronics; telecommunications and information technology. China has become a favored endpoint for the relocation of global manufacturing facilities. Its strength as an export podium has backed to incomes and employment in China. The principal focus of progress in the chemical industry is to swell the output of chemical fertilizers, plastics, and synthetic fibers. The progress of this industry has placed China among the world's leading producers of nitrogenous fertilizers. In the consumer goods sector the main stress is on textiles and clothing, which also form an vital chunk of China's exports. China's construction sector has grown substantially since the early 1980s.

Steel industry
China is the prime manufacturer of steel in the world and the industry has been rapidly increasing its steel production. Iron ore production kept pace with steel production in the early 1990s but was soon outperformed by imported iron ore and other metals in the early 2000s. China is the top exporter of steel in the world.

Automotive industry
China had become the world's third largest automotive vehicle manufacturer (after US and Japan) and the second largest consumer. China's automotive industry has been so fruitful that it began exporting car parts in 1999. China began to plan major moves into the automobile and components export business starting in 2005. A new Honda factory was built in 2004 solely for the export market and was projected to ship 30,000 passenger vehicles to Europe in 2005. By 2004, 12 major foreign automotive manufacturers had joint-venture plants in China. They

created a wide range of automobiles, minivans, sport utility vehicles, buses, and trucks. In 2003 China exported US$4.7 billion worth of vehicles and components. The vehicle export was 78,000 units in 2004, 173,000 units in 2005, and 340,000 units in 2006. The vehicle and component export is targeted to reach US$70 billion by 2010.

Other industries
Others include Telecommunications, Pharmaceutical, Defense and Shipping industry.

Services
China's services productivity stands fifth worldwide and high power and telecom density has ensured that it has persisted on a high-growth route in the long-term. In 2005 the services sector produced 40.3% of China's annual GDP, second only to manufacturing.

Tourism
China's tourism industry is one of the reckless emerging industries in the national economy and is also one of the industries with a very different global competitive edge.

New and High Technology

China has completed 522,000 key scientific and technological achievements since 1981, of which nearly 20 percent have touched the advanced global ranks. To speed up the relocation of scientific and technological achievements, and endorse the progress of high-tech industry, the government has executed a series of policies.

Prospects and Challenges

Despite of tremendous growth in textile and technology China faces strong competition with India. It so requires China to continuously improve on its initiatives in competition for the market share.

Q.4 Outline some of the key issues of china growth strategies and some of the challenges to Chinese leadership.
Ans. Since 1978, China has reformed and unlocked its economy. The Chinese leadership has embraced a more practical outlook on many governmental and socioeconomic problems, and has abridged the role of philosophy in economic policy. China's ongoing economic transformation has had a insightful impact not only on China but on the world. The marketoriented reforms China has implemented over the past 2 decades have released individual initiative and entrepreneurship. The result has been the largest reduction of poverty and one of the fastest increases in income levels ever seen. China today is the third-largest economy in the world, and is projected to overtake Japan to become second-largest by the end of 2010. It has sustained average economic growth of over 9.5% for the past 26 years.

After three decades of growth: Key issues and the challenges of the present and the future
There has been great argument over Chinas economic problems and challenges. One view is that the country faces a massive real estate bubble, and that its bursting could jeopardize the Chinese banking system, destabilize the economy and create a huge negative shock to the rest of the world. Other is that the Chinese economy is on the threshold of a major epidemic of inflation. Although these issues represent serious challenges to Chinas economic growth, they are only symptoms of a much deeper problem: the waning momentum of Chinas long-term economic reforms and broader restructuring. After three decades of spectacular economic growth in China, the problem is no longer how to achieve growth but how to achieve growths consequences and how to endure growth. Chinas spectacular growth and poverty reduction has been accompanied by rising inequality, environmental degradation, and increasing social tensions. The institutions that have brought rapid growth so far are now under stress, and there is a need to reform and innovate on this front in order to sustain rapid growth, and to obtain growth with equity (Lindbeck, 2008). Rising inequality is one of Chinas most serious problems (Demurger et. al., 2007, Benjamin, Brandt and Giles, 2005). Specifically the regional dimension of inequality, rural/urban and inland/coastal dominates in a country as large as China. Regional inequality has become a key issue for China and a number of involvements have been introduced to talk over the problem. As shown by Kanbur and Zhang (2005), the pattern of Chinas regional inequality strictly follows the history of its development strategies in the past half century. The heavy industry oriented development strategy justified the creation of the household registration system which was a

major provider to the large rural urban divide. The open door policy, which granted preferential treatment to coastal areas, has helped the coast to better exploit its comparative advantage in the international markets, but left many interior provinces lagging behind. Likewise, fiscal decentralization policy promoted local government officials to develop their own economies, but differences in initial legacies tends to leave the effective tax rate regressive across Chinese regions (Zhang, 2006b). Regions with better endowments thereby have more revenues left to invest in public goods and improve business environment after turning over a portion of their fiscal revenues to the upper level government and maintaining the daily operation of local government. In contrast, the local governments in poor regions have difficulty in competing with the governments on the coast to attract investment and develop the local nonfarm economy. Their local revenues are sometimes barely sufficient to cover the salaries of civil servants on the public payroll. Consequently, they are more likely to levy heavy taxes on existing enterprises, worsening the business investment environment. In responding to rising rural urban disparity and stagnating agricultural growth, China has launched a new rural movement campaign in the past several years. Agricultural taxation has been abolished; the government has provided direct grants for grain production. However, significant challenges still remain. Facing rising food and fuel prices, the government has placed a ceiling on the grain procurement price, which may dampen famers incentives to increase grain production in the long run. The inter juridical competition is a key contributing factor to the increasingly serious environmental problems. In order to appeal venture, many local governments loosen their environmental regulations to allow polluters to operate as long as they generate lucrative revenues for the local government. In the rapidly industrializing coastal areas the degree of water pollution and industrial waste hazard is alarming. The cost of cleaning up the environment problem may eat up a large portion of the gains from industrialization. The investment driven growth model also induces local officials to collude with investors at the expense of the rights of individuals (Zhang, 2007). In order to attract investment, many local governments provide better treatment to investors, such as free land. In the process of procuring farming land for industrial or other commercial use, the payment to farmers was often far below the market level. Resenting this unfair treatment, many relocated farmers filed petitions to the upper level government for help, and land disputes have become a breeding ground for social unrest all over China (Yu, 2003).

Major Challenges Facing the Chinese Leadership

The great trademark of the present government has been its emphasis on social justice, income equality and building a harmonious society. The current government has taken steps to implement minimum wages, inspire collective bargaining, set up a social security system and enable pension funds, and is now beginning to roll out a social medical program that covers every individual. Addressing matters of income inequality and societal fairness is completely essential and should be regarded as an essential step in moving the Chinese economy from raw capitalism to a more civilized society. Nevertheless, the rapid implementation of these very costly programs when Chinas per-capita GDP is only $4,400 could add an unbearable financial burden to future generations. Most importantly, there have been no new reforms proposed or initiated to enhance the longterm growth of the economy. There is much to be done to reorganize the economy. Chinas rigid financial market structure has become a key obstacle to steady economic growth.

Public Unrest
For Chinas Communist Party leadership, a growing economy is its main source of political lawfulness. However, every year numerous protests occur in China over a number of issues, including pollution, government corruption, and land seizures. A number of protests in China have stopped in part from frustrations among many Chinese that they are not benefitting from Chinas economic reforms and rapid growth, and perceptions that those who are getting rich are doing so because they have connections with government officials. A 2005 United Nations report stated that the income gap between the urban and rural areas was among the highest in the world and warned that this gap threatens social stability. The report urged China to take greater steps to improve conditions for the rural poor, and bolster education, health care, and the social safety net. It is estimated that 300 million people in China (mainly in rural areas) lack health insurance, and many that do have basic insurance must pay a significant amount of medical expenses out of their own pocket. The lack of the rule of law in China has led to widespread government corruption, financial speculation, and misallocation of investment funds. In many cases, government connections, not market forces, are the main element of prosperous firms in China. Many foreign firms find it difficult to do business in China because rules and regulations are generally not consistent or transparent, contracts are not easily enforced, and intellectual property rights are not protected. The relative lack of the rule of law

and widespread government corruption in China limit competition and weaken the efficient allocation of goods and services in the economy.

Poor government regulatory environment

China maintains a weak and relatively decentralized government structure to regulate economic activity in China. Laws and regulations often go unenforced or are ignored by local government officials. As a result, many firms cut corners in order to maximize profits. This has led to a proliferation of unsafe food and consumer goods being sold in China or exported abroad.

Growing pollution
The level of pollution in China continues to worsen, posing series health risks to the population. The Chinese government often disrespects its own environmental laws in order to promote rapid economic growth. According to the World Bank, 20 out of 30 of the worlds most polluted cities are in China, with significant costs to the economy (such as health problems, crop failures and water shortages). According to one government estimate, environmental damage costs the country $226 billion, or 10% of the countrys GDP, each year. The Chinese government estimates that there are over 300 million people living in rural areas that drink unsafe water (caused by chemicals and other contaminants). Toxic spills in 2005 and 2006 threatened the water supply of millions of people. China is the largest producer and consumer of coal, which accounts for about 70% of Chinas energy use. In October 2009, Chinas media reported that thousands of children living near smelters had been found to have excessive amounts of lead in their blood. Although growing environmental degradation has been recognized as a serious problem by Chinas central government, it has found it difficult to induce local governments to comply with environmental laws, especially when such officials feel doing so will come at the expense of economic growth. According to a study by ExxonMobil, Chinas energy demand for power generation will more than double by 2030, surpassing U.S. demand by more than one third. In addition, by 2030, Chinas CO2 emissions are expected to be comparable to those in the United States and EU combined. The Chinese government is attempting to address several of these areas. In October 2006, the Chinese government formally outlined its goal of building a harmonious socialist society by taking steps (by 2020) to lessen income inequality, improve the rule of law, enhance environmental protection, reduce corruption, and improve the countrys social safety net (such as expanding health care and pension coverage to rural areas). In March 2007, the Chinese National Peoples Congress (NPC) passed a law to strengthen property laws to help prevent local governments from unfairly seizing land from farmers, and in June 2007, it passed a new

labor contract law to enhance labor rights. In addition, the government has scrambled to improve health and safety laws and regulations. The government has also pledged to boost energy efficiency, crack down on polluting industries, and to promote the development of and use of green technology (such as solar power, wind power, biomass). For example, it has set a target of deriving 20% of energy from renewable sources by 2020. In April 2009, the government pledged to implement a three-year, $124.4 billion plan to begin the establishment of universal health care plan, expected to be in place by 2020. The Chinese governments 12th Five Year Plan (2011-2015) states that rebalancing the economy, promoting consumer demand, boosting rural incomes, addressing income disparity (such as boosting wages), promoting the development of the services sector, and expanding social welfare programs (such as education, social security, and health care) will be major priorities.