CSE Lecture 1.3: China's Approaches towards sustaining its Economic Development

Increasing domestic demand

- create private enterprises, more vibrant private sector - incentives for innovation - increase SOL -> mitigate disparity through e-commerce - less reliant on foreign economies - more important to foreign economies to appear as an attractive market Between 1990 and 2011, private consumption as a share of China's GDP declined from almost half to around one-third. The imbalance is created because of the abnormally high share of investment in China's GDP. In 2004, the Chinese government recognised the need to re-adjust the balance between investment and consumption as sources of China's economic growth. Stoking China's domestic private consumption is currently a top national policy agenda. In September 2009, Premier Wen emphasised that China should "make greater effort to enhance the role of domestic demand, especially final consumption, in spurring growth" and highlighted that this would be "a long-term strategic policy for China's economic growth". It is evident that even a competitive export-driven economy like China could not sustain rapid increases in living standards without an accompanying degree of broad-based private consumption.

2020 Dual Circulation

-motivated by geopolitical challenges from USA -long term response to challenges from global economy -Internal + External Circulation Internal - grow domestic consumption - harnassed domestic potential for consumption through restructuring/rebalancing - 2020 increase in SME by 130% - domestic tourism increased from 4.5 trillion in 2017 to 5.7 trillion in 2019 - incease in 12.5% investment in 2018-2019 for scientific research to overcome trade war - Guangzhou Knowledge City with Singapore External circulation - open up to FDI/more liberalization in trade and financial monetary policies -more expansion and integration into global economy

Benefits of New Urbanisation and Green development

1) Reduce disparity/urban-rural division - higher paid jobs, better education and access to same social services and amentities 2) Increase in consumption - wider availability and variety of goods and services 3) Develop services sector/ tech-based economy 4) Better economies of scale/specialisation of economic activities synthesised, more efficient allocation of factors of production 5) Long term vision of promoting integrated living and work

Limitations of New Urbanisation and Green development

1) structural unN due to uneven educational qualification across the agglomerated localities 2) Decentralised institutions and legal standards (land laws) must be overcome for the agglomeration to be completed - laws governing Hukou must be standardised, laws on land use must be consistent 3) Environmental consequence of over construction

China's plans to boost domestic consumption in the midst of US trade War

2019, China's economic growth slowed to 6.2 percent in the second quarter from 6.4 percent in each of the previous two quarters. traditional retailers and distributors had room to innovate and was still potential to be tapped in both urban and rural consumption - e-commerce companies to partner with factories to customise production designs to improve sales, remodelling struggling department stores and turning old sports stadium and factories into shopping malls and entertainment centres - Chinese exports that are caught in the middle of the trade war to develop their own branded products and expand domestic sales channels, central gov to expand cross-border e-commerce import business to more Chinese cities to meet demand for high-quality foreign goods - 2019, Beijing has released 13 measures to build a "thriving night economy" such as extending operating hours for tourists sites and subsidising tickets for performances - car sales have underperformed with sales falling by 2.6 percent in 2019. to improve weak car slaes, the central gov said areas that restricted car purchases should consider gradually relaxing them. Even in cities that limited car registrations to control air pollution, local gov should allow sales of used cars

Industry-city integration

A city must provide four basic functions, namely, living, working, recreation and transportation. Among them, the core functions are living and working. To promote rural-urban migration and employment in non-agricultural industries, the development of industries and industry-city integration are important factors. Nurturing manufacturing and service industry centers to promote job creation, and the simultaneous construction of neighbourhood centers to enhance living conditions in industrial park has become industrial parks' planning priority. For example: The Chinese government plans for The China (Chongzuo)-Thailand Industrial Park is to feature export-oriented manufacturing industries that showcases the best of Chongzuo, Thailand and other ASEAN countries, including ASEAN food processing (nuts, fruits, frozen fish etc.), sugar production, home decoration manufacturing (wooden furniture), electronics manufacturing, logistics, cultural and leisure tourism. In the medium term, other related upstream and downstream industries will be developed in order to drive the primary industries up along the value chain. Through incubating the research and development, logistics, education, medical and other production and living services and implanting related facilities, industrial parks will be upgraded. In the long-term, focus will be put on cultivating R&D incubators, convention and exhibition, finance and insurance, information technology and other high-end industries.

Redistributing income and wealth

A reform plan was introduced in 2013 to reduce inequality aimed at boosting minimum wages to at least 40 percent of average salaries, loosening controls on lending and deposit rates, and increasing spending on education and affordable housing. Other reforms include a requirement that state-owned enterprises (SOEs) should contribute more of their profits to the effort of reducing inequality, and a commitment to push through market oriented interest rate reforms to give savers a better return and more security

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (BP 4)

Adding fuel to fire, the current trade disputes with America further inhibited China's resolution of these challenges. Tens of billions were lost as multinational corporations relocated their manufacturing base from China to other more competitive countries like Vietnam and Mexico. This has resulted in many jobs lost and factories closed down; the extent of which remained unknown as data has not been disclosed by the Chinese government. Restricted supplies of America's technological components have also crippled Beijing's strategy to attain its 'Made in China 2025' goals. Companies like ZTE and Huawei were dealt serious blow by Washington's decision not to supply them with advanced parts from 2018. The Chinese were therefore forced to rely on its domestic consumption, which is growing strong but still nascent. With hostile international climate towards the perceived assertiveness of Chinese war-wolf diplomacy, many developed economies have dropped the use of advanced imports from China, such as Huawei's 5G equipment. This has also forced China to depend on less developed economies for its export revenue. It is therefore doubtful if China could effectively resolve its problems given that more challenges are originated externally.

Potential gains (Enterprises)

Agglomeration effect: higher factor input intensity, companies gather related businesses and adjacent areas to form a cobweb structure Specialisation increases economies of scale which will increase productivity markedly. Strengthening comparative advantage of firms in transportation, inventory, raw materials, sales, and reputation Increased human capital and industrial clustering which is conducive to innovation. Increased agriculture productivity

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (Intro)

Although the Chinese economy continued to growing strongly since its opening up in 1978, even during this period of COVID pandemic, it faces many challenges that are highly detrimental to the sustainability of its rapid development. Issues such as regional disparity, eroding comparative advantages in low-cost labour production as well as hostile global climate threaten China's growth. The government on the other hand has been quick and decisive at undertaking drastic measures to manage these problems. This essay argues that while many challenges are mitigated by the Chinese government, it is still too early to conclude if they have been effectively dealt with because the policies have yet been fully implemented neither has any run its full course. Due to poor enforcement and political motivated reasons, some of these problems are unlikely to be resolved effectively.

Potential gains (Households)

An increasing middle class More employment opportunities Better public services and convenience stimulate consumption Knowledge dissemination and learning made easier, conducive to human capital accumulation Increased propensity to purchase services

Is Made in China on track

As the trade war escalated, by June 2018, references to the industrial policy disappeared from Xinhua reports and there was a general toning down of the rhetoric about a resurgent nation set to challenge the US. The 21st century conflict between USA and China is over technology. It covers everything from artificial intelligence (Al) to network equipment. The fundamental conflict is with respect to semiconductors. Companies from America and its allies such as South Korea and Taiwan dominate the most advanced areas of the industry. China, by contrast, remains reliant on the outside world for supplies of high-end chips. China imports most of the chips for these devices and last year the value was $260 billion. Semiconductors therefore figure prominently in the ''Made in China 2025" national development plan. Alarm bells have been ringing in the USA for a while. President Obama had blocked intel from selling chips to China in 2015, and stymied the attempts by China to acquire a German chipmaker by a Chinese firm in 2016. His administration had recommended taking action against Chinese subsidies and forced technology transfer. Taiwan and South Korea have policies to stop purchases of domestic firms by the Chinese companies and to stop the flow of intellectual property

Challenges facing China's New Urbanisation

Because China's urbanization has been so rapid, institutions have not yet fully caught-up. There is a disjuncture between the institutions that exist and those that are actually necessary. One pressing example is the household registration system. Citizens who live in rural areas have a different kind of residency status than citizens in urban areas. Everyone has rights, but rights differ depending on where primary residence was originally listed. A Chinese citizen is only able to enjoy all of his or her rights where he or she is registered. So migrants tend to lose out as soon as they move away from their home locality. However, the central government has started to make changes to this system. For example, children of migrants now have access to public services such as primary education. Some localities have begun to implement a points-based system wherein families accumulate points over time and, after reaching a certain level, become eligible for citizenship in that place of residence. • Developing city clusters could have a positive impact on integrated urban and rural development. The key will be to create city clusters which strengthen transport links between cities, promoting the flows of people and goods between urban and rural areas. But the new program may also bring some new problems. - First, the focus on creating large city clusters means financial and human capital, technology, modern industry, infrastructure construction, and provision of public services will flow faster towards those areas. Although the new urbanisation program also proposes to simultaneously foster the development of city clusters in the central and western regions, it will be slower there and the gap in urban development between different regions in China will further expand. - Second, with the opening up of cities and towns to the rural population, more will move to cities and towns. However, among the rural migrants 70 per cent have only junior high school education while 70 per cent have not received any professional training. This makes finding work very difficult. - On top of that, the current overall employment situation in China is not promising. Already hall of the annual seven million university graduates cannot find jobs. If the rural migrants cannot find jobs it may worsen the already serious problem of the 'urban poverty'. This could lead to the formation of a new class of urban poor, with potentially serious social and even political consequences. - Third, even though it mentions sustainable development, the program does not pay enough attention on the role and significance of environmental protection in the process of urbanisation. Building the cities of tomorrow requires strong environmental protection and low- carbon development.

Precautionary household saving

Before that, urban residents' healthcare, pension, housing and education were all taken care of by either the state or their work units. By the mid-1990s, the government privatized a large number of small- and medium-sized lossmaking state-owned enterprises (SOEs), laying off tens of millions of workers. All these factors immediately boosted demand for precautionary saving — while the old state supported social welfare systems were immediately dismantled, the new market-based systems have, even now, yet to start operating fully. Therefore, for households, the best protection against future uncertainties is their own savings. The state and the working units gradually stopped the practice of allocating residential apartments to their employees. The total housing-related spending, including money spent on housing purchases, has increased from about 10% of household disposable income in the late 1990s to about 25% in recent years.

Potential costs (Risks) (Enterprises)

Beyond a certain point of urbanisation, external diseconomies will start to undermine city competitiveness Sharp increases in labour costs

Perspectives on Chinese government's rebalancing efforts (3)

CCP leaders spare no efforts in cautioning the public about challenges ahead and pliant Chinese media outlets have been quick to spread the word: buckle up for turbulence. There's nothing ambiguous in Premier Li Keqiang's warning that the country "may encounter larger downward pressure and a more complex situation," so "governments at all levels will face more difficult tasks and bigger responsibilities." President Xi Jinping himself identifies "three tough battles" ahead: targeted poverty reduction, effective financial risks, and general improvement in the environment. China's cumulative debt now tops 300 percent of GDP and IF experts warned as early as January 2018 of the dangerous trajectory of the country's credit growth. The biggest chunk of that is corporate debt, nearly twice the size of China's GDP, which highlights the risks of overleveraging. Outstanding household debt soared to $6.8 trillion in 2018 and accounted for 60.4 percent of GDP, according to the People's Bank of China. The level of government debt remains reasonable, at some 50 percent of GDP, but a mountain of risky payments has been placed on the shoulders of notoriously opaque local governments. Five regional banks have been bailed out due to management or liquidity problems in 2020 alone and the number of salvage operations is expected to keep growing. While the National Bureau of Statistics publishes an overall rate slightly below 4 percent, unemployment may well be underreported. Crunching numbers announced by Li Keqiang shows that some 3 million people joining the labour market in urban China every year are out of a job.

Examples of China's achievements and opportunities

China is shutting down or consolidating subscale, inefficient facilities in the steel, chemical, coal mining, and waste-management sectors, and has set energy-reduction targets for their largest enterprises, and is adopting global best practices in production. These and other government energy-saving efforts in the industrial sector could save 450 million tons of standard coal equivalent a year by 2030. China is the largest producer of solar energy in the world, hitting 77.42 gigawatts of solar power capacity by the end of 2016. Under China's 13th Five Year Plan covering the years 2016-2020, China aims to have 110 gigawatts of solar capacity installed by 2020. China is also the biggest producer of wind power, installing 23.3 gigawatts of wind power turbines in 2016 to reach a total capacity of 169 gigawatts. Globally, 54.6 gigawatts were newly installed in 2016. China targets to have 250 gigawatts of wind power capacity by 2020, and 495 gigawatts by 2030. China is the world's largest electric vehicle market, registering 352,000 new electric vehicles in 2016. China's auto market is also the world's largest, and electric vehicles now represent about 1.2 percent of the total market. Volkswagen and JAC have formed a joint venture to produce 100,000 electric vehicles a year in China, while General Motors has announced that it will produce hybrids in the country.

Corruption

China still faces the problem of local officials colluding with industries to evade environmental responsibilities. As the onus of enforcing environmental policies is on local governments, the success of Beijing's green efforts ultimately is dependent on how cooperative local officials are. Unfortunately, the reality is that local officials do not see the long term benefits of green development, as they cannot reap personal economic benefits. It is an open secret that local governments and industries enjoy strong patron-client relationships. This allows the former to gain illicit income and the latter to receive economic favors, many of which involve bypassing strict environmental laws to save costs. In Guangzhou, there have been 63 cases involving 118 people in the environment protection system involved in corruption since 2012. Such cases are also common in Guizhou and Sichuan. Many of these relationships have become so grounded that it is almost impossible to eradicate. The introduction of green development would potentially harm these interests, resulting in local governments paying lip service to central policies. Without full commitment from the local governments, it would be a herculean task for Beijing to push its green agenda nation-wide.

Green Industry

China's Ministry of Industry and Information Technology (MIIT) released the "Industrial Green Development Plan (2016-2020)" with the aim of implementing China's 13th Five-Year Plan for National Economic and Social Development, accelerating ecological progress and promoting industrial green development. The Plan also pointed-out that China's industry is still in the developing mode of high input, high consumption and high emission, with mass resource and energy consumption. In addition, China has a serious problem regarding its ecological environment. The Plan proposes 10 tasks for China's industrial green development includes cutting the emission of greehouse gases, implement the mode of "green manufacturing + Internet" and to push forward green and coordinated industrial development Green industrial sectors can play an important role in enhancing urban environmental conditions and present a promising source of growth. China enjoys crucial conditions to harness that growth, including abundant physical and human capital, a large domestic market, attractive conditions for foreign investment and a large potential for commercialisation and R&D. Beyond green sectors, green clusters have emerged in Chinese cities and could be an ideal target for promoting further development. These green clusters have been mainly developed from current industrial parks and development zones, which are the main levers that cities use to promote cluster development. Besides cluster development, green clusters could become important elements of larger urban development plans. The national policy frameworks play a crucial role for exploiting the potential of green sectors. Within these sectors the focus is on energy-efficient technologies and products, energy service companies (ESCOs), environmental protection industries, recycling and reuse, renewable energy and production, and clean energy vehicles.

Challenges facing China's consumption-based drive

China's decentralized fiscal system and the mismatch at the local government level between resource availability and social spending responsibilities have led to large differences in government expenditures per capita on social services—between rural and urban areas within provinces, and between coastal and interior provinces. Institutional arrangements and policies reinforce and, in some cases, accentuate inequalities; examples include the different rural and urban social entitlements created by the hukou system, and the fragmented institutional arrangements and delivery systems that limit portability of entitlements and impede labour mobility. Thus, notwithstanding recent local hukou reforms, there remain obstacles to migration from rural areas to cities, from interior to coastal provinces, or even from city to city, because most migrants are denied access to affordable health, education, housing. and pension coverage to which urban residents have access by right. Other factors also contribute. For example, high taxes on labour—to pay for social insurance—limit formal sector employment opportunities, lower remuneration for workers, and bias investment toward capital-intensive technologies. In addition, weak labour market institutions, in particular the wage determination system, do not provide an effective platform for balancing the interests of workers, employers, and sustained competitiveness to ensure the growth of labour earnings in line with increasing profits.

Overview of China's reconstructuring

China's high growth rate has largely rested on industrialisation and urbanisation. However, there are challenges caused by this development model that is dependent on export-oriented industries. In addition to a slower productivity growth rate and job creation rate, the global economic crisis has also shown that an over-reliance on exports may cause a protectionist backlash in important markets for Chinese exports and lead to trade frictions. This has led Chinese leaders to rebalance the sources of growth in 2004. In addition, the concurrent pressures of the increasing demand for energy and calls to limit environmental degradation suggest that China needs to moderate its export-oriented growth. In light of the need to address these pressing problems, China announced its twelfth Five-Year Plan (2011-2015), stating that it would accelerate the strategic readjustment of the country's economic structure. This economic restructuring entails rising domestic consumption; an acceleration of urbanisation; making greater efforts to obtain breakthroughs in emerging strategic industries; and promoting the service sector. These aims were further reinforced at the 13th Five Year Plan (2016-2020) the main themes of the FYP indicated a shift in the economic focus to compensate and - rebalance the economy. This shift will see an economy largely fired previously by heavy industry and I manufacturing towards more sustainable orientated economic forms through; innovation, service and retail, infrastructure and overseas expansion..

Perspectives on Chinese government's rebalancing efforts (2)

China's policymakers have been adjusting China's economic growth model so that it depends less on export manufacturing and more on services and domestic consumption. Escalating trade tensions with the US and other major trading partners are jeopardizing China's access to some of its largest export markets. Despite these headwinds, China's manufacturing future remains bright. While the country is losing its edge in some labour-intensive sectors, it remains globally competitive across a remarkable spectrum of industries — and is gaining strength in others. For example, China has become a global leader in "mid-tech" industries, such as cellular phones, optical instruments, and washing machines. China's competitive position has also improved in such capital-intensive industries such as paper products, fertilizers, organic chemicals, and electricity distribution equipment With a nominal per-capita income of around $8000, China is now at the stage at which efficiency and quality will increasingly drive competitiveness. In a number of industries, China is already beginning the transition to a stage similar to that of South Korea, Japan, and the US, at which innovation increasingly defines competitive advantage, The government's industrial development initiatives aim to dramatically increase the country's strength in such high-tech sectors as microelectronics, aerospace, computing, robotics and renewable energy

China's early stages of urbanisation

China's urbanisation in the first two decades of the reform era was mainly of the `Magnet phase. Workers moved from the countryside to urban factories, but for most part they did not bring kheit families. Income was still low and most lived in factory dormitories. But the rapid rise in productivity because of the shift from traditional agriculture to modern industry contributed significantly to China's economic growth. It accounted for almost one-fifth of the increase in China's GDP from 1979 to 1997 After 1998, urbanisation moved into the second phase of building binge because of several reasons. First, the relaxation of rules governing migrant labour accelerated the pace of rural-to-urban migration. Second, the urban housing market was privatised in the late 1990s, leading to one of the biggest housing boom in history. Last, government policy after 1998 increasingly supported the building of infrastructure such as highways and railroads which made it easier for people to move to cities in search of work. However, the building binge stage has reached a plateau. So China is not going to get any more growth by building houses and infrastructure. Currently, China needs to move into the 'Smart City' phase in which specialisation and innovation can become the main economic growth drivers.

BRI 6 International economic cooperation corridors

China-Mongolia-Russia economic corridor New Eurasian continental economic corridor China-Central Asia-Western Asia economic corridor China-Pakistan economic corridor Bangladesh-China-India-Myanmar economic corridor China-Indochina Peninsula economic corridor

Possible recommendation

Chinese urbanization will remain on the fast track for the next two decades, but it will gradually slow down. China's predicted urbanization rate will reach 60 percent by 2020, 68 percent by 2030, and 75 percent by 2040. By then, China will have over 1 billion urban residents. To prevent that urbanization will push China into the "middle-income trap" through industrial obsolesce, environmental degradation, natural resource depletion, and social tension. China needs to prioritize urban quallyo focusing on reforming these issues First, the reform of household registration and its affiliated regimes needs to be stepped up. This includes adherence to orderly and voluntary household registration, with the adoption of different residency policies for each city. By 2020, China will grant urban residency status to approximately 100 million urban migrant workers. By then, it will be able to count on a unified, people oriented, household registration system that is based on residence and occupation at a specific place of residence. To gradually abolish the social welfare regimes that are linked to household registration, ensuring that basic public services are also available to those rural migrants who do not hold a hukou (registration record) Second, the system of land reform has to be strengthened to tackle disorderly urban expansion In particular, the reform of the rural property rights system needs to be hastened to endow farmers the rights to tenure, use, revenue, ability to transfer land, and to mortgage and guarantee contracted land use Land should be able to be sold and demutualized in the first-tier market and be transferable and mortgageable in the second-tier market Policies relating to land supply/use need to be implemented to combine incremental supply with inventory and a solid system for land conservation should be established Third, the protection and conservation of the environment needs to be increased. The"five in one" concept from the 18th National Congress of the Communist Party of China will elevate the level of ecological progress to that of the economic, political, cultural, and social. There is a need to promote green, ecological, and low-carbon urbanization, and establish a national protection scheme of land. This could include payment for using resources, ecological compensation mechanisms, and strict environmental supervision

Combat reasons Chinese economy need to restructure

Combating CA and increasing vulnerabilities 1. High end/tech innovation 2. ecologically friendly 3. e-commerce/improve on services/entrepreneurial spirit/jobs Combat hostile international climate 1. Consumption-based economy 2. more openness 3. focus on developing countries (more willing to accept) New CA - Gov directed/incentivised market demand - gov driven innovation -> necessity to compensate vulnerabilities

Perspectives on Chinese government's rebalancing efforts (1)

Domestic consumption, especially in services catering to urban households, has become a much more powerful engine of growth. Even though China's services sector still accounts for only about half of GDP, its rapid transformation has turned it into a driving force behind job and income growth. China today leads the world in becoming a digital economy and is furthest along in becoming a cashless society. E-commerce transactions in China account for more than 40% of the global total; the value of mobile payments reached $8.6 trillion last year, dwarfing the $112 billion in the U.S. In 2017, 68% of China's internet users made mobile digital payments, compared with only 15% in the U.S Chinese consumers are keen to embrace new technology, spawning a wave of ambitious entrepreneurs and investors Even though the trade war is dampening business sentiment, consumer confidence rose in the second half of 2018. This divergence between business and consumer sentiment represents a major break from the past, signalling a new growth trajectory powered by consumer spending. This new growth trajectory could eliminate China's current account surplus as Chinese consumers spend more on imports. Overseas travel, a form of service import, is growing so fast that Chinese tourists are now the No. 1 visitors to many popular destinations.

Ecological civilisation

During the 17th Party Congress in 2007, the concept of 'Ecological civilisation' was set as one of the five major goals of a well-off and well-rounded society. At the 18th Party Congress, the construction of an ecological civilisation was incorporated into the overall planning for promoting economic, political, cultural, social and ecological progress, and written into the Party Constitution. In the 12th Five Year Plan, China outlined plans to transit towards green development by strongly focusing on areas such as environmental protection, energy efficiency and new energy. Technological innovation will be key for green growth, and green technologies will be a potential source of growth for China.

Examples of China's move towards Green Development

Eco-cities Ecological Parks Green enterprises Green GDP

New Urbanisation Plan

Economic Urbanisation: Industry-City Population urbanisation: Instititional reform (Hukuo) Land Urbanisation: New city districts Comprehensive: For example - environmentally friendly

Xi's speech at China's 19th Party Congress

Economic development - By 2035, China will achieve "socialist modernization" where it will be a leading innovator with strong rule of law and have a large-middle income population with reduced income disparity Foreign investment and market reform - push towards market-driven interest rates (banks can give loans and support private enterprises to support)and foreign exchange reform (devalue currency) Innovation and technology - emphasized the importance of strengthening China's innovative capabilities and encouraging the growth of emerging tech sectors - These remarks lend support to the "Made in China 2025" industrial policy which aims for China to move up the manufacturing and services value chain as well as plans to become a leading innovator by 3035 - The move towards a more tech and service-driven economy also contributes to efforts to combat pollution and climate change

Potential gains (Central and Local government)

Economies of scale for public services, more effective delIvery. Expansion of public facilities stimulates domestic demand Economic growth and efficiency gains on the basis of agglomeration increases government revenue Improved government capacity and efficiency

Redistributing income and wealth (examples)

Examples: 1. The plan reiterated the goal to double per capita income from 2010 to 2020. In 2017, six provinces have increased minimum wages, with Shanghai raising minimum wages by 5 percent year-on-year and Shanxi province has also announced a 3.7 percent increase in minimum wages. 2. The plan required all SOEs to increase the amount of their earnings they remit back to the state budget by 5 percentage points by 2015. Although central SOEs are required to pay between 5 percent and 15 percent in dividends, depending on their profits and strategic value, their contributions to the treasury have remained low: In 2011, central SOEs earned more than 1 trillion RMB (around $160 billion) in net profits, but paid out only 82.3 billion RMB (around $13 billion) in dividends. A 5 percentage point increase in dividends paid by state-owned firms could add about 50 billion RMB ($8 billion) annually to the government's coffers and more as profits for the firms rise. If that money is used for pensions and health insurance, it could help repair China's frayed social safety net and reduce Chinese households' precautionary savings.

Urbanisation Strategies

Granting Urban Residency Industry-city integration Urban clusters

Ecological Parks

Green GDP • Example: rianin Economic and Technological Development Area (TEDA Ecological Park) • The park has developed a waste water recycling system • The port oho sorts garbage for recycling, with hazardous waste sorted and recycled by qualified enterprises

"The CCP government has effectively managed the challenges arising from China's rapid urbanisation." How valid is this statement? (BP 3)

However these challenges while daunthing, were uncommon and have been managed and even preempted by far-sighted governemntal policies

Conclusion for China's low consumption rate

However, it is important to note that the rise in inequality does not always reflect a stagnation of incomes for the poorest households, but has instead been due to wealthier households seeing even stronger income growth. Rural incomes have grown strongly through most of the period since the 1990s, as have incomes of poorer households in urban areas. The wide urban-rural income gap is partly a consequence of the household registration (hukou) system, which has hindered the free movement of labour and limited the access of rural migrants to urban areas to certain employment opportunities, education for their children, healthcare and social security. The propensity for households to save varies across the income distribution, income inequality also has implications for the level of, and changes in, aggregate saving. Data suggests that wealthier rural households also save significantly more than their poorer rural counterparts. Despite these differences, there is still a high savings rate of 44% in 2019 to 45% in 2021 especially due to Covid-19

(E) Increasing domestic demand is the key to China's sustainable economic development. How far do you agree with this statement? (BP 3)

However, the promotion of domestic consumption cannot mitigate the other challenges to China's sustainable growth - China's increasing need for energy to fuel, its growth has resulted in geo-strategic vulnerabilities that can undermine its sustainability (increasing energy costs) - Environmental degradation which diminished living quality of the Chinese people, hence potentially leading to instability that could undermine sustainability (increase health costs - Regional disparity is another challenge to China's sutainability as it could be the primary cause for social dissatisfaction hence instability, sabotaging development in China (deprivation of inland populace) Domestic consumption on the other hand, could not have mitigated these issues and in fact, the promotion of which could be seriously undermined by the existence of these problems need many measures - but pivoted on whether domestic consumption can be successfuly promoted.

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (BP 3)

However, these measures have not succeeded at eradicating the root causes of the numerous challenges confronting China's economic development. Uneven geographical endowments remained a formidable hindrance to Beijing's measures at developing the poorer inland provinces. Even today, developmental gap between the coastal and inland provinces continues to widen as the economy advances. Disposable income of residents in eastern China far exceeds those of the other provinces by more than 13,000 yuan per annum. Policies like Hukou reforms and three-child policy were not successful. Few migrant workers qualified for residency in coastal cities; birthrate in China continued to drop. Coal-fired plants continued to be popular throughout China giving rise to more air pollution. Structural unemployment was commonplace in newly built urban centres. Governmental attempts simply could not overwrite socio-economic realities that breed China's problems.

Elements of promoting Green Growth

Improving cost effectiveness - Transforming the traditional sector by developing new technologies that are more energy efficient which can lead to greater cost-effectiveness and thus higher economic returns for the industries Emergence of Green industries - Emergence of green industries such as wind and solar energy supporting electric vehicles, and creation of green products that will appeal to consumers that are more environmentally aware Expansion of service sector - To complement the emergence of green product markets. In addition, the demand for more specialised services such as carbon trading and ecosystem services

Electric vehicles in China

In 2018, China accounted for 50 percent of gross EV sales around the world. In 2019, China's electric car sales by another 35 percent. By the end of 2019, all gas-powered buses in Beijing and Shanghai is replaced by EV. 60% of the total buses in China go electric.

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (Conclusion)

In conclusion, while progress has been made in the management of challenges confronting China's economic development, most of these issues are not satisfactorily resolved. Even national strategies touted as long term remedies to these problems have yet proven that they would be effective.

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (BP 5)

In fact, the effectiveness of major strategic responses to some of China's most intractable economic challenges remained uncertain as they are still work in progress. The Belt Road Initiative designed to open up hitherto untapped markets across the Eurasian continent, in order to provide outlets for expansion of Chinese SOEs and economic opportunities for China's western provinces, is not fully developed and continued to be fraught with major difficulties. The China-Pakistan Economic Corridor designed to secure energy supply route into the Middle Eastern region is under construction. The Regional Comprehensive Economic Partnership signed in 2020 has yet generated tangible benefits for China's development. The Evergrande crisis which broke out in 2021 showed that even the banking and housing reforms embarked upon by Beijing decades ago have not been entirely successful. It is therefore too early to conclude that high profile, much lauded policies targeted at managing economic challenges would succeed.

Urban clusters

In the New Urbanisation Programme, the Chinese leadership highlighted urban agglomerations as the main urban form as it has the most dynamic and promising cores areas for economic development today and in the future. This is because a new urbanization trajectory that enhances economic forces of agglomeration, specialization, and mobility is needed to support economic growth on both the supply and demand sides. While reallocations of labour across space and sectors in some parts of China will continue to drive some economic growth, productivity increases will have to come more from improvements and advances within industries and sectors. As China's industries advance closer to the production possibility frontier, growth's dividends will increasingly be associated with the ability to take advantage of higher economic concentration (agglomeration), increased economies of scale (specialization), and more efficient allocation of factors of production (mobility). On the supply side, greater economic concentration and specialization allow firms to benefit from economies of scale, thus facilitating industrial upgrading and technological labour matching, and ultimately growth of human capital and employment. On the demand side, a more inclusive urbanization will expand the urban middle class, which will demand better services and lifestyles, in turn boosting domestic demand. The three biggest urban agglomerates are Beijing—Tianjin—Hebei, the Yangtze Delta (Shanghai, Nanjing), and the Pearl River Delta. According to the "National New-type urbanization Plan, urban agglomerates it china will be developed as the main type of new-type urbanization in coming years. - Greater Bay Area covering nine cities around Southern Huangdong plus Hong Kong and Macau China is currently creating 19 supercity clusters by strengthening the links among cities. By 2030, those clusters will account for about 80% of the country's GDP

Increase personal consumption

Increase consumption through China's emerging middle class, set to double from now to 2025, which is using its increasing discretionary spending on imported, higher quality and luxury products. China's urbanization rate further boosts consumption levels by convening urban middle-class dwellers in densely populated cities with greater employment opportunities and accessible retail channels. Most notable, China's thriving e-commerce ecosystem, which has replaced retail shops with online shopping platforms. 11/11 sales in 2020 doubled 2019 sales, breaking records Deficiencies on the supply side of domestic consumption would also need to be tackled. Measures to make goods and services better and more easily available could encourage consumption much more than strengthening the social safety net. Given the largely underdeveloped consumer infrastructure in rural China, the development of large-scale consumer goods and services industrie could be a real boon to China's employment and social stability imperatives. This can only be achieved if the state invests more in the service sector and if public policy is more favourable to small and medium enterprises as well as to private-sector development.

Potential costs (Risks) (Central and Local government)

Increased complexities of city management Increasing cost of managing traffic congestion and environmental problems

Development Blueprint of the 13th Five Year Plan

Innovation Coordinated Development Green Growth Openness Inclusive growth

Coordinated Development

Local and central gov Inter-governmental (ministries To resolve the widening regional disparities, redundant construction and lack of public services through • Hukou reform • Urban planning through urbanisation • Better intergovernmental coordination of policies • Creation of the Beijing-Tianjin-Hebei megaregion and the Yangtze Economic Belt.

Why and what is re-balancing and re-structuring

Many Chinese policy makers and leading economists have realised that China's high growth rates are no longer sustainable and can be eventually disruptive without any changes made. The most notable feature of China's current structural problems is that the country's economic growth is heavily dependent on investment and trade, and the share of domestic consumption in the country's GDP is too low. The Chinese leaders acknowledged the problems and have begun reviewing the sources of growth and taken the steps to make structural changes as well as carry out macroeconomic rebalancing.

"The CCP government has effectively managed the challenges arising from China's rapid urbanisation." How valid is this statement? (BP 4)

Meanwhile, China's urbanisation drive has thus far been effectively carried out, as it was based largely on economic and social needs -> mainly development of suburbs around developed congested cities

(E) Increasing domestic demand is the key to China's sustainable economic development. How far do you agree with this statement? (BP 2)

Meanwhile, strong domestic consumption is designated as the "linchpin" of China's grand strategy to reinvent their developmental modern in order to sustain their economic growth. Huge consumption is the linchpin of China's grand plan to sustainability in the long term. - Dual Circulation 2020 - rebalancing the economy/restructure/reinvent recognise that unless the potential of their vast consumption base is harnessed (1.4 billion/largest middle class), China cannot continue to attract foreign business interests and generate revenue for its domestic enterprises -Dual: incentives and prioritises the development of a strong domestic consumption base through the promotion of tech-advancement and SMEs, the compensate for the diminishing CA of China in low cost export oriented manufacturing

Ongoing major economic plans

One Belt and One Road Made in China 2025

Benefits of Increased Urbanisation to development

Positive relation between urbanisation rate and per capita GDP growth among provinces. This is due to increase of labour productivity as the population concentrated in cities which further helps to create economies of scale and expand market size. It also leads to deepening divisions of labour and job creation, and improving living standards. • More inclusive urbanization will result in a broader middle class that will support consumption growth, as urban lifestyles tend to be associated with higher consumption of durables and services. • It is expected to bring about the transformation of industrial structure from a manufacturing-led economy to a service and consumption-centred economy. In a national study of the Chinese provinces, data show that provinces that reached a 50% urbanisation rate would typically experience as increase in the share of the tertiary industry as urbanisation progresses. • An increase in the urbanization rate will promote human capital accumulation and _ agglomeration economies that will increase productivity. By attracting concentrations of industries and populations, cities have been centers for knowledge spillover and technological innovation. • People living in cities have increased awareness of the environment and learn to support environmentally friendly development in China.

Potential gains and risks brought by Urbanisation

Potential gains Potential costs (Risks)

Reasons for China's low consumption rate

Precautionary household saving Household income share Unequal income distribution

Economic Goals set during the 19th Party Congress

President Xi's report to the 19th Party Congress in November 2017 stated that socialism with Chinese characteristics had entered a new era. He stated that China would work to become a "moderately prosperous society in all respects" by 2050. Major goals include boosting living standards for poor and rural people, addressing income disparities (eg. rich-poor and urban-rural), making private consumption the driver of the economy, boosting services, reducing pollution, promoting innovat.on and economic modernisation, and improving overall living standards. However, it is important to note that there are no plans for convergence with liberal capitalism in Xi's report. China will keep and strengthen its hybrid system that combines both extensive state intervention and markets to achieve a fully modern and globally powerful economy. Setting up medium-to-long term goals for national development In the policy report of Xi Jinping, the party presented goals for the national development plan in two stages. This is a new and epoch-making attempt. In the first stage of 15 years from 2020 to 2035, building on the foundation to be created by the completion of the "moderately prosperous society', the party aimed "basically to realize socialist modernization" and set out the goals to be achieved with hard work which included increased economic and technological strength, among others. In the second stage from 2035 to the middle of the 21st century, the party aims to, building on having basically achieved modernization, work hard for a further 15 years and develop China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful.

Granting Urban Residency

Promoting the 'citizenization' of migrants is a prominent feature of the new urbanization drive. Reforms are thus made to the hukuo system to encourage more rural migrants to settle in urban areas with their families and to enjoy the same public services and rights as other urban residents. In 2016, the State Council set a target to grant urban residency to 100 million rural migrants by 2020, about one-sixth of the total rural population, which would push up the country's urbanisation ratio by 1%. For example, China has decided to scrap residency restrictions in some smaller cities to encourage urbanisation and social mobility. According to the most recent policy guidelines issued in 2019, all restrictions on household registration will be removed in cities with an urban residential population of less than 3 million. Meanwhile, residency limits will be relaxed in larger cities with populations between 3 million and 5 million. For megacities with more than 5 million, household registration policies will be streamlined and public services systems will be improved to ensure equal access to all residents.

Inclusive growth

Pursue inclusive growth for all Chinese citizens by setting targets to alleviate poverty, raise standard of living, improve accessibility and affordability of healthcare and other social services, and promote education.

Openness

RCEP (regional comprehensive economic partnership) TPP To expand exports and select imports, increase outbound and inbound investment, promote the use of RMB, and enhance China's role in global economic governance. • Seek to expand trade through the One Belt One Road initiative • Loosen foreign investment restrictions in selected sectors such as elder care, banking and finance. • Encourage import of advanced technology and equipment

"The CCP government has effectively managed the challenges arising from China's rapid urbanisation." How valid is this statement? (BP 1)

Rapid urbanisation has resulted in serious environmental degradation due to increased energy usage and the destruction of countryside -> inevitable byproduct

"The CCP government has effectively managed the challenges arising from China's rapid urbanisation." How valid is this statement? (BP 2)

Rapid urbanisation if pursued recklessly has led to wastage of resources and dire economic circumstances for migrant residents -> found in many second and third tiered cities

Government strategies to boost consumption

Redistributing income and wealth Reduce savings rate by expanding social safety net Increase personal consumption

Why must the Chinese economy restructure?

Restructure: reinvent, makeover, overhaul - discard the "old" because the former model of growth has outlived its usefulness 1. export-oriented industries - need low cost of production -> poor, depreciate currency 2. investment driven growth - FDI, highly volatile 3. low cost/unskilled/semi-skilled labour intensive manufacturing - become high tech no cost

Potential costs (Risks) (Households)

Sharp increases in land and housing prices Social instability Pollution and environmental degradation Heavy congestion

Sustainable development vs sustainable growth strategic

Sustainable development: - qualitative -requires fundamental, holistic measures to enact structural/cultural changes -longer term/future - proof -> by challenging status quo/existing powers and interests -> restructuring the premises of China's success -> shift manufacturing gravity inland (2nd/3rd tiered cities) -> high tech low costs -> manufacture in developing countries -> welcome investments in more high tech industries (Tesla) Sustainable growth - quantitative - reforms/policies to ensure high growth can be ensured given the current structure and framework

Made in China 2025

The "Made in China 2025" initiative, announced in 2015, is one of several recently announced ambitious projects aimed at increasing the competitiveness of Chinese industries, fostering Chinese brands, boosting innovation, and reducing China's reliance on foreign technology by making China a major or dominant global manufacturer of various technologies. According to Chinese media, the initiative intends to "transform China from a manufacturing giant into a world manufacturing power" by 2049. Based on a document issued by the State Council, the plan has the following goals and focus: • Its guiding principles are to have manufacturing be innovation-driven. emphasize quai!ty over quantity. achieve green development, optimize the structure of Chinese industry and nurture human talent. • The goal is to comprehensively upgrade Chinese industry, making it more efficient and integrated so that it can occupy the highest parts of the global production chains. The plan identifies the goal of domestic content of core components and materials to 40% by 2020 and 70% by 2025 • In supporting the creation of manufacturing innovation centers, the plan also calls for relying more on market institutions, strengthening intellectual property rights protection for small and medium enterprises (SMEs) and the more effective use of intellectual property in business strategy, and allowing firms to self-declare their own technology standards and help them better participate in international standards setting. • The plan highlights 10 priority sectors for industrial upgrade such as New Advanced information technology, Aerospace and aeronautical equipment, New-energy vehicles and equipment and Agricultural equipment

Benefits of BRI

The BRI has the potential to yield considerable economic gains for China such as the expansion of China's export markets, the promotion of the RMB currency as an international currency, and the reduction of trade frictions like tariffs and transport costs. Developing and connecting hard infrastructure with neighbouring countries will also help to reduce transport time and costs. Establishing soft infrastructure with partner countries will allow for a broader range of goods to be traded with fewer regulatory hurdles. Raising capital for these infrastructure projects by issuing bonds in RMB will encourage its use in international financial centers. China will also boost growth in its lower-income western provinces by building overland economic connectivity with Central Asia. Overall, if successfully implemented, the BRI could re-orient a large part of the world economy towards China. Increasing the amount of trade, investment, and connectivity between China and countries throughout Eurasia can render these countries more dependent on the Chinese economy, increasing China's economic leverage over them. This may ultimately empower China to more readily shape the rules and norms that govern affairs of the region.

Function of One Belt One Road

The BRI is an umbrella initiative which covers a multitude of investment projects designed to promote the flow of goods, investment and people. In 2015, China's National Development and Reform Commission issued an action plan that fleshed out specific policy goals of the BRI. The goals are - Improving intergovernmental communication to better align high-level government policies like economic development strategies and plans for regional cooperation. -Strengthening the coordination of infrastructure plans to better connect hard infrastructure networks like transportation systems and power grids. - Encouraging the development of soft infrastructure such as the signing of trade deals, aligning of regulatory standards, and improving financial integration. - Bolstering people-to-people connections by cultivating student, expert, and cultural exchanges and tourism.

Reduce savings rate by expanding social safety net

The Chinese government aims to improve China's pension system and put in place a better, more effective health care system aimed at covering all of the Chinese people. These efforts are to put in place a social safety net that lessens income inequality and improves the livelihoods of well over a billion people. Examples: 1. New Rural Cooperative Medical Scheme (NRCMS), launched in 2003 in rural areas. Its enrolment rose to 97% of rural population in 2011. 2. Urban Resident Basic Medical Insurance (URBMI), launched in 2007 to target the unemployed, children, students, and the disabled in urban areas. It covered 93% of the target population in 2010. 3. Urban Employee Basic Medical Insurance (UEBMI), launched in 1998 as an employment-based insurance program. Its coverage reached 92% in 2010.

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (BP 1)

The Chinese government has to a large extent resolved the challenges of environmental degradation and energy security through the rapid advancement and expansion of the green economy. Environmental degradation can undermine socio-political stability, the foundation of China's economic development. Energy issues on the other hand has been a perennial sword hanging over the sustainability of China's growth. Policies undertaken by Beijing since 2017 succeeded at lowering the pollutive air of major cities by an average of 10%. With the assistance of NGOs and the implementation of harsher laws, major waterways like the Yangtze River and Yellow River were cleaned up from 2020. China's efforts at resolving its energy problems have been effective as well. By 2020, renewable energy supplied about a third of the fuel for China's electricity production. In fact, China is the world's largest user of renewable energy as well as the largest exporter of green products. Not only have these breakthroughs mitigated China's economic challenges, they created new niches for development and growth.

New Urbanisation and economic growth

The Chinese leadership has singled out urbanisation as the main driver of the economy in the coming years and introduced the 'New Urbanisation Programme' at the 18th National Congress of Communist Party of China in November 2012. The central government followed this up with the launch of a compendium to guide the New Urbanisation Programme in March 2014. According to the plan, by 2020, 60 percent of the population will be urban residents, while 45 percent of the total population will be residents with hukou, urban household registration The Plan specifically numerates the objectives of urbanisation by 2020, which is divided into 18 assessment indices with respect to urbanisation rate, basic public service, infrastructure, and resource and environment. The main contents of the Urbanisation Plan can be mainly summarised as such: • To help more migrants settle in cities • To ensure that rural migrant workers enjoy equal public services in cities • Unification or integration of rural and urban systems • Regional balance of urban and city cluster development • Constructing environment-friendly cities • Increasing the capability of city management. In short, this urbanisation plan can be regarded as a general economic development policy and an institutional reform programme, since the government is expecting to promote infrastructure construction and settlement of migrant workers, aiming to increase consumption and develop the service sector in cities. The government will devote greater efforts in removing obstacles that have constrained the previous urbanisation process by introducing institutional improvements in five domains, namely hukou, land, fiscal and taxation, housing and environment. The Plan affirms that future urbanisation will take a quality-focused and people-centred approach, rather than over-reliance on physical construction and spatial expansion as has been the case in the past. It stipulates that urbanisation will not be implemented as a single strategy, but in parallel with industrialisation, information and agricultural modernisation for a coordinated development.

Unequal income distribution

The Gini coefficient of household income distribution rose to 0.47 in recent years In 2010, China's Gini coefficient was well above the global average of 0.44, from below 0.3 in the 1980s, according to the World Bank. According to the 2020 data, the average disposable income in Chinese urban households was one third that of rural households. Regional differences in income are also quite common in China. Households in the eastern part of the country earn 30% more than households in central and western China.

Urbanisation interacts with economic growth in three ways,

The Magnet Phase: As an economy modernises and industrialises, factories spring up in and around cities. These factories offer wages higher than the incomes available to people working in subsistence agriculture. These wages pull people off from the farm and into the modern economy. Because a worker's productivity is much higher in a modern factory than in traditional agriculture, this transfer of population from the traditional to the modern economy is a major contributor to faster economic growth. The Building Phase: This is a phase where the urbanisation process itself becomes a direct contributor to economic growth. The workers that came to work in the factories need housing, roads, services, and so on. Construction of all this housing and infrastructure creates new employment opportunities, and it also stokes demand for basic materials like steel, cement, and aluminium. For a period of time, the construction binge can push up the rate of investment and hence GDP growth. However once the building binge is over, it does not necessarily boost productivity of workers living in the cities. The Smart City Phase: Endowed with modern infrastructure, cities can become hubs of economic vitality. Their density of skilled workers enables the creation of knowledge networks. For example, London and New York (Financial Hubs), and San-Francisco-San Jose (Silicon Valley — technological hub).

Green cities

The New Type Urbanization Plan for 2014-2020 requires green buildings to comprise 50 percent of new constructions by 2020, up from just two percent in 2012. The plan also specifies pilot programs for constructing and renovating energy efficient primary and secondary schools, community hospitals and public buildings. Green buildings — generally defined as capable of conserving resources, protecting the environment, and reducing pollution — enjoy preferential policies, such as bu subsidies. As the national Five Year Plan is cascaded to provincial and municipal jurisdictions, nearly 20 cities have set even more ambitious targets. For example, Changde, Zhenjiang, Zibo, Wuxi, and Suzhou, Shanghai, Beijing, Shenzhen, and Chongqing will require all new commercial buildings to be green buildings. In the pursuit of even more sustainable buildings, more than 90% of China's commercial building owners plan to have at least one net or near-zero energy building in the next ten years.

The Geographic coverage of the BRI are as such

The Silk Road Economic Belt (3 routes): China — Central Asia — Russia — Europe (the Baltic) China — Central Asia — West Asia — Persian Gulf — Mediterranean Sea China — Southeast Asia — South Asia — Indian Ocean

Green development

The concept of green development is a pattern of development that decouples growth from heavy dependency on resource use, carbon emissions and environmental damage. Instead, it promotes growth through the creation of new green product markets, technologies, investment, and changes in consumption and conservation behaviour. Green growth is the means by which green development is achieved. and this can also be an important source of growth In the process of green transformation, the upgrading of traditional industries and the emergence of new green industries, including green services, provide new drivers for economic progress. Moreover, it will consume fewer resources, emit less carbon, and become more environmentally friendly per unit of output. For example, according to estimates by McKinsey Company(2009), installing light- emitting diodes(LEDs) for lighting in buildings could generate US$25 billion in annual financial savings by 2030, compared to business as usual (measured in 2009 dollars). Improving passive heating through design modifications could provide another USS6 billion. Together, the potential for direct savings through efficiency gains in China could be as high as US$65 billion per year by 2030

Sustainable Development

The concept of sustainable development first appeared in China's official discourse when after the United Nations Conference on Environment and Development, the Chinese government issued "China's Agenda 21 — White Paper on China's Population, Environment and Development in the 21st Century " in March 1994 and then in 1996, incorporated sustainable development into national strategies and began its full implementation. Since the turn to a new century, China has further deepened its understanding of the concept of sustainable development. In 2003, China proposed the scientific outlook on development with people-oriented, comprehensive, coordinated and sustainable features. Since 2003. China has proposed advanced concepts such as a resource-saving and environment-friendly society, an innovation-oriented country, ecological civilization and green development. During the UN Sustainable Development Summit held in September 2015. President Xi Jinping endorsed the 2030 Agenda for Sustainable Development, which ushered in a new era for the global endeavour of sustainable development and charted the course for international development cooperation. The Chinese government thus integrated the 2030 Agenda into the 14th Five-Year Plan for Economic and Social Development and other mid- and long-term strategies. In September 2016, China released China's National Plan on Implementation of the 2030 Agenda for Sustainable Development. 17 Sustainable Development Foallls With the shift in focus towards sustainable development, the Chinese government has started to place priority on high quality growth. The focus is now on the development of the country's overall economy that is more broad-based and inclusive

(E) Increasing domestic demand is the key to China's sustainable economic development. How far do you agree with this statement? (Intro)

The increasing consumption power of the Chinese market to consume products and services through the increment of disposable income and the alleviation of poverty. The continuous attempt by CCP to prolong its high growth rate and to overcome challenges as well as to reform the economy so that development will not falter. The process of sustaining development though increasing domestic demands has been in place since 1990s and gained pace n recent years with China's uneasy relations with other global economies. The statement is valid to a large extent although domestic consumption has been inhibited by challenges and that its growth is also predicated upon the pursuit of other engines of growth

(E) Increasing domestic demand is the key to China's sustainable economic development. How far do you agree with this statement? (BP 1)

The increasing domestic demand will increase China's appeal as one of the world's largest markets to foreign investors thus mitigating the challenges that comes with increase trade tensions with the other economies. Despite 2008-2010 global financial crisis + trade disputes with USA 2017-2020 + Covid, China has remained an attractive destination for FDI and transnational collaboration (largest recipient of FDI in 2020) , given the vastness of its market. E.g. Tesla (Elon Musk), Japaese and South Korea conglomerates continued to manufacture/R&D in China -> services/luxurious goods sector expanded in China, Land of Opportunities

Household income share

The lower household income share in GNP can be attributed to the fact that profits were not distributed to households. This did not happen in China because of several reasons. In most countries, this has been a conduit of indirectly transferring corporate profit to households. State-owned enterprises (SOEs) pay dividends to the government, which uses the funds to provide goods such as education and health that are essentially private goods, and welfare payments. In China, SOEs do not pay dividends to the government, such that this conduit of profit transfer has been closed. Lastly, bank deposits are the main vehicle of savings of Chinese households. However, the interest rate on household deposits has been capped by the government. For these reasons and unlike in many other countries, the rise in corporate profits did not translate into higher household income in China.

China slimming down Belt and Road Initiative

The value of new projects spread across 61 countries involved in the plan fell 13 percent in 2018. Existing contracts also dropped 4.2 percent in 2019. This is due to the fall in the level of funds available to investment in other countries, according to IMF report, China's current account surplus has dropped to close to zero for the first time since 2012 China made 46 loans of over US$1 billion for overseas investment project in 2016 with that dropping to 28 in 2018.

Green Growth

To address the problem of environmental degradation and build the country's clean energy, green manufacturing, and environmental services sectors. Ambitious targets laid out to • Ensure clean city air quality • Cut carbon dioxide intensity • Reduce soil and water contamination

The CCP government has effectively addressed the challenges faced by the Chinese economy. Assess this view. (BP 2)

To manage problems relating to changing demographics and regional disparity, which are serious hindrances to the promotion of consumption-based economy and a more stable environment for economic growth, the Chinese government has implemented bold policies that are able to arrest the negative consequences of these issues. Programmes like the Go West Policy, New Urbanisation and Hukou reforms were allocated vast resources to ensure that economic opportunities and material affluences are spread more evenly throughout China. From 2010, inland regions have begun to grow faster than the more developed cities. Today more than half of China's population are living in urban centres. With ageing population, the economy is also gradually losing its comparative advantages in low cost production. This has been compensated with the abolition of the One Child Policy in 2015, and the move to more high-tech manufacturing (i.e. Made in China 2025) from the same year. From 2017, China has been the world's forerunner of new technology like the 5G networking. Other fields of innovative industries that placed China at the pinnacle of global competition include the production of electric vehicles and the proliferation of ecommerce platforms. More jobs are therefore created, especially in the cities, to wean the economy from dependence on low-cost, labour intensive production. These were tremendous success even by global standards.

Innovation

To move Chinese manufacturing up the value-added manufacturing chain and enhance China's global competiveness ad technological edge. Targets: - To increase China's global innovation ranking from 18 to 15 by 2020. (China met the target -> 14 - To increase share of R&D spending from 2.1% to 2.5% of its GDP. - To increase number of patents filed from 6.3 to 12 per 10000 people.

Investment in BRI

To support the BRI, Beijing has injected massive amount of capital into Chinese public financial -_ns, such as the Chinese Development Bank and the Export-Import Bank of China. These s enjoy very low borrowing costs and they have access to lending from the People's Bank of 7, - a, thus allowing them to lend cheaply to Chinese companies working on BRI projects. This easy -7, enables China's SOEs to offer highly competitive bids for projects against foreign at might be more financially constrained. For example, in 2015, Japanese construction .ost out to their Chinese counterparts in a bid to build a high-speed rail project in Indonesia. Est 2017, it has been reported that China had made 109 deals worth US$33 billion across 68 ,ntri.s surpassing the US$31 billion mark of 2016.

Obstacles to Green Development

While China has many advantages that would help it implement a green development strategy, many obstacles and difficulties also need to be overcome. Most important among these is the price of energy, water, raw materials, and natural resources, which remain distorted to different degrees and do not reflect either the negative externalities associated with their use or their true scarcity value. The result is high resource intensity in production and associated wastage and pollution. A second and related obstacle is excessive dependence on administrative mechanisms to deal with environmental and natural resource management issues. In the absence of market-based mechanisms, the government is forced to make decisions that appear arbitrary and occasionally even heavy-handed. At the same time, other fiscal and regulatory incentives for environmental protection are either weak or weakly enforced; as a result, pollution and greenhouse gas emissions remain high. A green development strategy will also face implementation and incentive constraints within government, and may face opposition from workers and enterprises that benefit from the current pattern of growth, exports, and investment. The strategy will require coordination across many government ministries and agencies, many of whom may oppose it because it reduces their discretionary power to make decisions. In addition, while a green development strategy will be of considerable long-run benefit, it will in the short run conflict with other economic objectives (for example, meeting employment and industrial targets for the five-year plan). Resolving these conflicting objectives will require job retraining, skill development, and similar policies to smooth the adjustment toward the new pattern of green development, and will need clear and strong leadership from the highest levels.

(E) Increasing domestic demand is the key to China's sustainable economic development. How far do you agree with this statement? (BP 4)

While China's sustainable development is to be predicated upon a set of comprehensive strategies, these in turn could not have succeeded without strong domestic consumption as their linchpin which helps to improve quality of life therefore leading to stability. It is the foundation of development where it stimulates private business enterprises as well as aids China in being an attractive FDI destination

Reasons for the Chinese economy to restructure (a)

a. loss of comparative advantages -> ageing population (changing demographics) -> unsustainable pollutive activities therefore green economy required ->changing expectations (minimum pay) -> increase in COP -> competition from other developing economies (Vietnam, Indonesia)

Reasons for the Chinese economy to restructure (b)

b. Hostile international limate -> Sino-US trade conflict -> distrust of Chinese hegemonism e.g. BRI/AIIB, neo-colonialist behavior in Africa, ban use of PRC 5G tech in Western countries

Reasons for the Chinese economy to restructure (c)

c. Increasing vulnerabilities -> Western distrust - energy security/tech embargo -> protectionism against PRC -> competing mega projects from West/Japan

China's green city - Xiong an

central gov is leading a project that aims to create a low-carbon and gree city close to Beijing with a strong investment from the State Grid Corp of China. This new special economic zone will be built on three countries including Xiong an. Baidu: the internet search company is working with the Hebei government to develop the smart city, with a research center focusing on artificial intelligence for cars, as well as smart public infrastructure. China Telecom is also part of the companies involved. Sinopec: created a new investment arm, Sinopec Capital with a 10-billion-yuan capital to Iii fund projects on green energy and artificial intelligence. The State Grid Corp of China has also positioned itself in Xiongan, which will be used as I an experimental ground for its "re-electrification" programme. The concept is to replace coal as a source of energy with more diverse sources such as wind, solar and other new energies.

China Enterprises - Green Growth

investment in the environmental sector surged 42 percent annualy. Sinopec Green Energy Geothermal Development Co. Ltd is expanding its services in the country's urban and rural areas. The company now provides geothermal heating for an area of around 50 square km and aims to increase by 100 square km by 2023. China has recycled 282 million toones of waste in 2017 an increase of 11 percent The push has created plentry of business opportunities. China's environmental industry maintained a growth of about 17 percent in 2017 and the growth of the environmental engineering reached up to 30 percent in 2018.

One Belt and One Road

overcapacity of SOEs to expand overseas diversification of overseas market maintainance of stability in the western region reduce regional disparity e.g. Yunnan/Guizhou, Xinjiang/Qinghai long term geostrategic advantages The Party Congress approved of OBOR in the Constitution as "following the principle of achieving shared growth through discussion and collaboration, and pursuing the Belt and Road Initiative (BRI)." OBOR or BRI, announced by President Xi in 2013, covers Chinese initiative to build hard and soft infrastructures from China to Africa and Europe, which will increase bilateral trade and economic influence. The inclusion of such an initiative in the Constitution has long-term implications.

Reasons for Re-balancing

sell>buy, regional disparity and quality of life Rising operating costs and increasing wages have weakened China's export competitiveness for labour-intensive exports. The gradual appreciation of the RMB also erodes China's comparative advantage. Over investment and under consumption. When there is a decline is external demand for the products, China doubled on investment to keep the GDP growth high by creating new infrastrucutre such as housing. But this means there must be an end-user (buyer). However, China's pro-growth development strategy, "grow first, distribute later" has led to regional and income inequalities affecting domestic consumption. So with high investment and consumption, these are the challenges created: - Investment outstrip demand: For example, commercial real estate in China has outstripped demand. Certain industries like shipyards have declared bankruptcy. - Debt: Many investments were financed by loans. When the investment projects fail, the loans are not repaid. Many banks land with the burden of bad debt. - In the long run, this pattern of investment and consumption is unsustainable because as China's population gets older, domestic saving rates will decline over time Expanding energy consumption and Environmental costs. Massive investment in energy-intensive industry has contributed to a dramatic rise in China's greenhouse gas emission and placed the country under immense environmental strain. The impact of China's industrial structure on its increasingly scarce water supplies is also a cause of concern. . A significant proportion of the rise in China's energy consumption — and hence emissions of greenhouse gases — reflects production for export. The call for a more sustainable economic growth model started since the 11th Five-Year plan where there was a shift toward rebalancing the economy away from infrastructure and export-led growth and toward a more consumption-led, higher-value-added growth. There was also a prioritisation of development towards the environment, health, education, and social welfare so as to improve the quality of life of Chinese citizens. In the 13th Five-Year Plan (2016-2020), the China government once again emphasised on the need for China to address the country's "unbalanced, uncoordinated, and unsustainable growth" and to create a "moderately prosperous society in all respects" through innovative, coordinated, green, open and inclusive growth. As such, the Chinese government has identified several key measures to restructure the country's economy, which mainly includes rapid urbanization, upgrading the manufacturing sector and developing strategic industries and promoting the service sector.

Urbanization

supporting and promoting economic restructuring - services - tertiary (professional services) - high tech/info tech -> e-commerce (transportation) -> telecommunication urbanization hence provide better services and more opportunities and stimulus for domestic consumption due to more jobs and better paid employment Urbanisation leads to the building of more cities and expansion of existing cities due to increase in population and this can cause problems From a demographic point of view, urbanization refers to the gradual increase in the proportion of people living in urban areas.

Green GDP

• In 2004. the Chinese leadership launched a highly publicised campaign to promote the concept of green GDP

China-Mongolia-Russia economic corridor

• In September 2014, the three countries' heads agreed to forge tripartite cooperation on the basis of China-Russia, China-Mongolia and Russia-Mongolia bilateral ties. The three countries agreed to bring together the building of China's Silk Road Economic Belt, the renovation of Russia's Eurasia Land Bridge and the proposed development of Mongolia's Prairie Road. This commitment will strengthen rail and highway connectivity and construction, advance customs clearance and transport facilitation, and promote cross-national cooperation in transportation • In 2015, the three countries agreed to coordinate their respective economic and trade departments to promote trilateral trade that include the expansion of local currency in reciprocal trading, coordinate customs procedures to facilitate trade and explore the possibility of establishing a joint company for China-Russia-Mongolia rail transport and logistics, as well as investing in infrastructure construction projects. • The US$50 billion projects include a network of 997km new expressway linking China and Russia, 1100km electrified railway, expansion of the pan-Mongolia railway system, new oil and gas pipelines linking Russia and China.

Eco-cities

• Promoting recycling and reuse of waste from urban production and households • Examples: Beijing, Shanghai. Shanghai's 2019 scheme is strict: residents can only throw out their trash between certain hours, in public bins without bags, and food waste must be disposed of without packaging.

New Eurasian continental economic corridor

• The New Eurasia Land Bridge is a group of railway routes originating from various parts of China running through Xinjiang to various parts of Europe.

China-Indochina Peninsula economic corridor

• The corridor covers five countries (Cambodia, Laos, Myanmar, Thailand and Vietnam). • China is engaged with the countries along the Greater Mekong Delta in the building of cross-national highways, connecting east and west and linking north to south.

Bangladesh-China-India-Myanmar economic corridor

• The four countries reached a consensus on cooperation in areas such as transportation infrastructure investment and commercial circulation and people-to-people connectivity.

China-Pakistan economic corridor

• The idea is to build a 3000km economic corridor running from Kashgar, Xinjiang, in the north, to Pakistan's Gwadar Port in the South. In April 2015, China made a commitment to invest in projects and lend a total of US$46 billion to jumpstart the programme.

China-Central Asia-Western Asia economic corridor

• This corridor mainly covers five countries in Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and Turkmenistan) as well as Iran and Turkey in West Asia. • The third China-Central-Asia Cooperation Forum in 2015 committed to jointly build the Silk Road Economic Belt. The two governments mapped out a long-term plan for building of highways, railways, oil and gas pipelines and optical fiber networks stretching from Kashgar to Gwardar Port.

Green enterprises

•Example: inon Iron and Steel Group • Jinan Steel has managed to turn waste into valuable resources by reforming the industrial chain, efficiently utilising energy and making production cleaner. The group has developed more than 120 technologies for energy saving and cleaner production