2009-7-26 1
China and the Global
Economy
Sir Nicholas Stern
22 March 2005
Overview
1,Globalisation,A Historical
Overview
2,China’s Role In
Globalisation
3,Policy Challenges For China
4,China In The Global Economy
Three Phases of
Globalisation
Source,Globalization,Growth and Poverty,Building an Inclusive World Economy; World Bank (2002)
Demography
1820
1950
x8
2001 x7
Global GDP Growth
Source,Maddison (2001)
Something Different About This
Wave Of Globalisation?
Re-engagement of China,India & FSU
ICT revolution
Transport and Communication Costs
Source,Baldwin and Martin (1999)
Increasing Capital Flows
Source,Miles and Feretti,IMF,2003
Something Different About This
Wave?
Re-engagement of China,India &
FSU
ICT revolution
Transnational Corporations
Increased tradability in
services;
Increased ‘publicness’ of
information
Demographics
Demography
Effect on Global Economic Structure
(1)
Effect on Global Economic Structure
(2)
China’s Role in
Globalisation
China Throughout History
World’s largest economy for much of
history
Important trading partner (e.g,Silk
Road)
Origin of many of the world’s
greatest ideas and inventions
Three Phases of Recent Development
Late 1970s and early 1980s,
agricultural reforms
1980s,TVEs and opening up of internal
markets plus beginning of opening up to
external markets
1990s onwards,ongoing opening up to
external markets and rapid growth of
private sector
China’s GDP Growth
C h i n a,A v e r a g e R e a l G D P G r o w t h R a t e s ( % )
0
2
4
6
8
10
12
1950s 1960s 1970s 1980s 1990s 2 0 0 0 -2 0 0 4
China’s Trade Growth
I m p o r t s a n d E x p o r t s ( F O B )
0
100
200
300
400
500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
S o u r c e,I M F
N
o
m
i
n
a
l
U
S
$
b
i
l
l
i
o
n
E x p o r t s I m p o r t s
China Driving World Growth
C o n tr i b u ti o n s to G l o b a l G r o w th,A v e r a g e 2 0 0 1 -0 3
G7
21%
C h i n a
34%
I n d i a
9%
O t h e r
36%
( W e i g h t e d b y P u r c h a s i n g P o w e r P a r i t i e s )
S o u r c e,I M F W E O ( 2 0 0 4 )
Policy Challenges For
China
Building a market economy,
sustaining growth and tackling
inequality in a period of rapid
change.
Extended Periods Of Rapid
Growth
Unusual for countries to grow rapidly
for periods of 25 years or more.
South Korea and Japan only examples of
countries growing rapidly for over 30
years.
Annual growth in China has averaged 9.4%
since 1978 – when will this end?
Policy Challenge 1,Reorienting
Growth
New domestic sources of growth – less
dependence on export-led growth
Demand side,Rebalance towards
consumption
Supply side,Improving productivity and
the supply side,thus reducing ICOR as
the saving rate begins to fall
Limits to export led growth
0
5
10
15
20
25
30
35
40
1980 1985 1990 1995 2000 2003
C h i n a W o r l d
P e r c e n t a g e G r o w t h i n W o r l d a n d C h i n e s e E x p o r t s
Some Simple Algebra On
Growth Theory
Integration of internal
markets (1)
Domestic integration will boost growth as the
opportunities for export-led growth diminish.
Same argument about gains from external trade
apply to internal trade (i.e,trade among
provinces in China.)
EU economic integration during between 1958
and 1973 led to a,Golden Age” of Growth in
Europe.
Integration of internal
markets (2)
Policy Challenge 2,Demographics
Policy Challenge 2,
Demographics
Policy Challenge 2,
Pensions
Population ageing and growth
declining
People living longer and retiring
too early
Need to raise pensionable age
Implement appropriate pension
scheme
Policy Challenge 3,Poverty
Reduction
1978 1 2001 2
Population on <$1 per day
(%)
80 16
Net primary school
enrolment rate (%)
84 93
Illiteracy (% of population) 33 14
Infant mortality rate (per
1000 births)
65 30
Sources,1 World Bank and 2 2001 World Bank Indicators,2003
Policy Challenge 3,Regional
DisparitiesP r o v i n c e H D I r a n k i n g i n 1 9 9 9 1 P e r c a p i t a G D P
( R M B ) i n 1 9 9 9
2
L i f e e x p e c t a n c y
i n 1 9 9 5
1
A d u l t l i t e r a c y i n
1997
3
S h a n g h a i 0,8 5 3 ( C z e c h R e p ) 3 0,8 0 5 ( S l o v a k i a ) 7 5,5 8 9,8 0 %
G u a n g d o n g 0,7 7 1 ( T h a i l a n d ) 1 1,7 3 9 ( E g y p t ) 7 4,2 9 0,4 0 %
S i c h u a n 0,6 7 1 ( H o n d u r a s ) 4,3 5 6 ( H a i t i ) 6 8,9 82%
G a n s u 0,6 3 2 ( N a m i b i a ) 3,5 9 5 ( I n d i a ) 6 7,6 7 3,2 0 %
C h i n a 0,7 1 8 ( E l Sa l v a d o r ) 7,9 3 6 ( B o l i v i a ) 7 0,2 8 2,3 0 %
Source,1 UNDP China Human Development Report ‘Making Green Development A Choice’,The
Human Development Index (HDI) is a composite measure of development encompassing indicators of
health,education and income etc,2 OECD Synthesis Report ‘China in the World Economy,The
Domestic Policy Challenges’ (2002) and 3 UNDP China Human Development Report ‘Transition and the
State’ (1999)
Policy Challenge 3,High
Levels Of Inequality
Policy Challenge 4,Social
Services And Public Finances
Responsibility of Individual and
State,Housing,
Pensions,Education,Health
Social service provision and
public investment in a market
economy requires building up the
public finances
Policy Challenge 5,Energy and
Environment
Potential resource
constraints:
Fuels – oil,coal,nuclear,
renewable energy
Construction – steel,wood
Food and Water
Pollution and congestion
China In The
Global Economy
Policy Challenges For The Rich
World To Keep Global Economy
Growing
Maintaining open markets – no retreat
policy
Promoting flexibility in labour,
product and capital markets.
Increasing skill levels – moving up
the value chain.
Promoting innovation.
Global Poverty Reduction
N o o f p e o p l e l i v i n g o n < $ 1 p e r d a y ( m i l l i o n s ) 1990 2000 2015
C h i n a 361 204 41
S o u t h A si a 466 432 268
S u b - S a h a r a n A f r i ca 241 323 366
T o t a l 1237 1100 734
$ 1 p e r d a y h e a d c o u n t i n d e x ( p e r c e n t ) 1990 2000 2015
C h i n a 3 1,5 1 6,1 3
S o u t h A si a 4 1,5 3 1,9 1 6,4
S u b - S a h a r a n A f r i ca 4 7,4 49 4 2,3
T o t a l 2 8,3 2 1,6 1 2,5
S o u r ce,W o r l d B a n k,G l o b a l E co n o m i c P r o sp e ct s 2 0 0 4
International Poverty
Reduction
Transition To Net Donor
International Finance
Facility
Millennium Development
Goals
Current Crisis Of Poverty
in Africa
CFA reported on March 11th (Ji
Peiding)
Highlighted importance of
trade with Africa
Recent rapid trade growth
between China and Africa –
but a long way to go.
China and Africa (1)
More than just trade
though:
Investment
Knowledge
Standards
China and Africa (2)
China’s Coming Role In The
World Economy
Internally integrated
Stringer role of knowledge and services
Mature market economy
Champion of trade
Leadership for developing world
Net aid donor
Strong voice in world’s councils
China and the Global
Economy
Sir Nicholas Stern
22 March 2005
Overview
1,Globalisation,A Historical
Overview
2,China’s Role In
Globalisation
3,Policy Challenges For China
4,China In The Global Economy
Three Phases of
Globalisation
Source,Globalization,Growth and Poverty,Building an Inclusive World Economy; World Bank (2002)
Demography
1820
1950
x8
2001 x7
Global GDP Growth
Source,Maddison (2001)
Something Different About This
Wave Of Globalisation?
Re-engagement of China,India & FSU
ICT revolution
Transport and Communication Costs
Source,Baldwin and Martin (1999)
Increasing Capital Flows
Source,Miles and Feretti,IMF,2003
Something Different About This
Wave?
Re-engagement of China,India &
FSU
ICT revolution
Transnational Corporations
Increased tradability in
services;
Increased ‘publicness’ of
information
Demographics
Demography
Effect on Global Economic Structure
(1)
Effect on Global Economic Structure
(2)
China’s Role in
Globalisation
China Throughout History
World’s largest economy for much of
history
Important trading partner (e.g,Silk
Road)
Origin of many of the world’s
greatest ideas and inventions
Three Phases of Recent Development
Late 1970s and early 1980s,
agricultural reforms
1980s,TVEs and opening up of internal
markets plus beginning of opening up to
external markets
1990s onwards,ongoing opening up to
external markets and rapid growth of
private sector
China’s GDP Growth
C h i n a,A v e r a g e R e a l G D P G r o w t h R a t e s ( % )
0
2
4
6
8
10
12
1950s 1960s 1970s 1980s 1990s 2 0 0 0 -2 0 0 4
China’s Trade Growth
I m p o r t s a n d E x p o r t s ( F O B )
0
100
200
300
400
500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
S o u r c e,I M F
N
o
m
i
n
a
l
U
S
$
b
i
l
l
i
o
n
E x p o r t s I m p o r t s
China Driving World Growth
C o n tr i b u ti o n s to G l o b a l G r o w th,A v e r a g e 2 0 0 1 -0 3
G7
21%
C h i n a
34%
I n d i a
9%
O t h e r
36%
( W e i g h t e d b y P u r c h a s i n g P o w e r P a r i t i e s )
S o u r c e,I M F W E O ( 2 0 0 4 )
Policy Challenges For
China
Building a market economy,
sustaining growth and tackling
inequality in a period of rapid
change.
Extended Periods Of Rapid
Growth
Unusual for countries to grow rapidly
for periods of 25 years or more.
South Korea and Japan only examples of
countries growing rapidly for over 30
years.
Annual growth in China has averaged 9.4%
since 1978 – when will this end?
Policy Challenge 1,Reorienting
Growth
New domestic sources of growth – less
dependence on export-led growth
Demand side,Rebalance towards
consumption
Supply side,Improving productivity and
the supply side,thus reducing ICOR as
the saving rate begins to fall
Limits to export led growth
0
5
10
15
20
25
30
35
40
1980 1985 1990 1995 2000 2003
C h i n a W o r l d
P e r c e n t a g e G r o w t h i n W o r l d a n d C h i n e s e E x p o r t s
Some Simple Algebra On
Growth Theory
Integration of internal
markets (1)
Domestic integration will boost growth as the
opportunities for export-led growth diminish.
Same argument about gains from external trade
apply to internal trade (i.e,trade among
provinces in China.)
EU economic integration during between 1958
and 1973 led to a,Golden Age” of Growth in
Europe.
Integration of internal
markets (2)
Policy Challenge 2,Demographics
Policy Challenge 2,
Demographics
Policy Challenge 2,
Pensions
Population ageing and growth
declining
People living longer and retiring
too early
Need to raise pensionable age
Implement appropriate pension
scheme
Policy Challenge 3,Poverty
Reduction
1978 1 2001 2
Population on <$1 per day
(%)
80 16
Net primary school
enrolment rate (%)
84 93
Illiteracy (% of population) 33 14
Infant mortality rate (per
1000 births)
65 30
Sources,1 World Bank and 2 2001 World Bank Indicators,2003
Policy Challenge 3,Regional
DisparitiesP r o v i n c e H D I r a n k i n g i n 1 9 9 9 1 P e r c a p i t a G D P
( R M B ) i n 1 9 9 9
2
L i f e e x p e c t a n c y
i n 1 9 9 5
1
A d u l t l i t e r a c y i n
1997
3
S h a n g h a i 0,8 5 3 ( C z e c h R e p ) 3 0,8 0 5 ( S l o v a k i a ) 7 5,5 8 9,8 0 %
G u a n g d o n g 0,7 7 1 ( T h a i l a n d ) 1 1,7 3 9 ( E g y p t ) 7 4,2 9 0,4 0 %
S i c h u a n 0,6 7 1 ( H o n d u r a s ) 4,3 5 6 ( H a i t i ) 6 8,9 82%
G a n s u 0,6 3 2 ( N a m i b i a ) 3,5 9 5 ( I n d i a ) 6 7,6 7 3,2 0 %
C h i n a 0,7 1 8 ( E l Sa l v a d o r ) 7,9 3 6 ( B o l i v i a ) 7 0,2 8 2,3 0 %
Source,1 UNDP China Human Development Report ‘Making Green Development A Choice’,The
Human Development Index (HDI) is a composite measure of development encompassing indicators of
health,education and income etc,2 OECD Synthesis Report ‘China in the World Economy,The
Domestic Policy Challenges’ (2002) and 3 UNDP China Human Development Report ‘Transition and the
State’ (1999)
Policy Challenge 3,High
Levels Of Inequality
Policy Challenge 4,Social
Services And Public Finances
Responsibility of Individual and
State,Housing,
Pensions,Education,Health
Social service provision and
public investment in a market
economy requires building up the
public finances
Policy Challenge 5,Energy and
Environment
Potential resource
constraints:
Fuels – oil,coal,nuclear,
renewable energy
Construction – steel,wood
Food and Water
Pollution and congestion
China In The
Global Economy
Policy Challenges For The Rich
World To Keep Global Economy
Growing
Maintaining open markets – no retreat
policy
Promoting flexibility in labour,
product and capital markets.
Increasing skill levels – moving up
the value chain.
Promoting innovation.
Global Poverty Reduction
N o o f p e o p l e l i v i n g o n < $ 1 p e r d a y ( m i l l i o n s ) 1990 2000 2015
C h i n a 361 204 41
S o u t h A si a 466 432 268
S u b - S a h a r a n A f r i ca 241 323 366
T o t a l 1237 1100 734
$ 1 p e r d a y h e a d c o u n t i n d e x ( p e r c e n t ) 1990 2000 2015
C h i n a 3 1,5 1 6,1 3
S o u t h A si a 4 1,5 3 1,9 1 6,4
S u b - S a h a r a n A f r i ca 4 7,4 49 4 2,3
T o t a l 2 8,3 2 1,6 1 2,5
S o u r ce,W o r l d B a n k,G l o b a l E co n o m i c P r o sp e ct s 2 0 0 4
International Poverty
Reduction
Transition To Net Donor
International Finance
Facility
Millennium Development
Goals
Current Crisis Of Poverty
in Africa
CFA reported on March 11th (Ji
Peiding)
Highlighted importance of
trade with Africa
Recent rapid trade growth
between China and Africa –
but a long way to go.
China and Africa (1)
More than just trade
though:
Investment
Knowledge
Standards
China and Africa (2)
China’s Coming Role In The
World Economy
Internally integrated
Stringer role of knowledge and services
Mature market economy
Champion of trade
Leadership for developing world
Net aid donor
Strong voice in world’s councils
