China as a Leader of the World Economy

The following sections are included:

• Preface

• Contents

The following sections are included:

• How did China Manage to Grow so Rapidly?

• China's Economic Strength

• Comparing China's Market Institutions with the US

• China's Short-Term Economic Policies

• China's Long-Term Economic Policies

• The Role of China as a Leader in the World Economy

• References

The following sections are included:

• The Chinese Government

• The Entrepreneurs

• Workers and Ordinary Citizens

• References

The following sections are included:

• The Chinese Government is Different
  • The Chinese government plays a more important role in regulating the economic behavior of the entrepreneurs
  • The Chinese government plays a different role in setting up economic institutions

• The Chinese Legal Institutions are Different

• The Chinese Culture is Different

• The Chinese Workers are Different

The following sections are included:

• Role of Planning in the Chinese Economy

• Scope of Planning

• Numerical Targets and the Degree to Which They are Met

• Organization of the NDRC

• How is the Planning Carried Out?

• Effects of Planning on China's Economic Development

The following sections are included:

• Role in the Government

• Role in Academic and Research Institutions

• Role in Business Enterprises

• Role of the Chinese Economists Society

The following sections are included:

• Economic Freedom in the Last Half Century

• Relation of Economic Freedom and Political Freedom

• The Role of Government

• Social Welfare

• Education

• Consumer Protection

• Macroeconomic Policy

• The Tide is Turning

• Notes

• References

Both China and the US practice market economy but their market institutions are different. Institutional differences may help explain the recent economic downturn in the US and the relative economic stability in China. In this essay I attempt to trace the institutional differences to cultural differences in the two countries…

China's integration into the world economy can be discussed from the economic viewpoint or the political viewpoint. This article will emphasize the political and diplomatic aspects. In addition, it will discuss the position of the US for comparison…

China, India and Brazil are the three most rapidly developing countries that people mention when discussing the emerging market economies. China's economic development has been propelled by its exports. Foreign investment has also provided capital and technological knowhow to promote China's economic development. It is interesting to observe how Brazil's export to China and China's investment in Brazil are helping promote Brazil economic development. I had an opportunity to observe the economic relations between Brazil and China in a recent conference on “China and the World Economy” in Rio de Janeiro on March 17 and 18, 2011…

India's model of rapid economic development is illustrated in a recent article in the New York Times dated June 9, 2011 (p. A1). The article reported on the rapid development of the city Gurgaon, located about 15 miles south of the national capital New Delhi. The city barely existed two decades ago, but now it has a population of 1.5 million. There are 26 shopping malls, seven golf courses, numerous luxury shops, and automobile showrooms selling Mercedes-Benzes and BMWs. Apartment towers are sprouting like concrete weeds, and a futuristic commercial hub called Cyber City houses many of the world's most respected corporations. Other similar cities have been developed as well. Such developments have occurred despite a malfunctioning government in the area, because the functions ordinarily provided by the government have been provided by the private sector as described below…

In previous chapters I have discussed three of the four emerging market economies known as BRICs: Brazil, India and China of course. This article will briefly discuss the growth of the Russian economy. I will present some statistics about the growth rates of GDP since economic reform started in 1990 and explain what is behind the growth rates. Then I will answer the question at what rate the Russian economy can be expected to grow in the next 15 years or so…

The following sections are included:

• Similarities

• Differences

The following sections are included:

• Corruption

• Income Disparity and Rural Poverty

• Education

• Healthcare

• Energy and Environment

• Conclusion

• References

The following sections are included:

• Importing Economics Knowledge from Abroad

• Exploring the Frontier of Economic Knowledge in China

The following sections are included:

• On Economic Science
  • The basic theories of microeconomics, macroeconomics and financial economics apply to China
  • Market economy can work under different institutional arrangements
  • Economic development can occur under different forms of government
  • Importance of human capital in economic development
  • Economic forecast possible because of validity of econometric models and parameter stability
  • Forecasting institutional changes possible by using a similar methodology

• On Economic Policy and Economic Advice
  • A gap between academic knowledge and ability to apply it for solving practical problems
  • A gap between choosing the right economic knowledge for application and making a sound policy recommendation
  • Important points in giving economic advice
  • Using the framework of dynamic optimization to provide economic policy advice
  • Implementation of government policies
  • Making social change without going through the government

• The Characteristics of China's Economy

• China's Economic Transformation Process
  • Gradualism works
  • Allowing both state sector and non-state sector to co-exist and compete
  • Use of dual price system
  • Economic liberation through the open-door policy

• References

The current economic downturn in the US has lasted longer than many people expected. There is little hope for the unemployment rate to reduce from the present 9.6% to below 8% within a year. The economic downturn started with a housing bubble. Housing prices first increased because financial institutions were able to make profits by packaging mortgages as securities for sale and the consumers were lured to buy houses with no down payment. When the prices of the securities and the houses went down, financial institutions incurred great losses and were unable to provide liquid funds for the producers and consumers to make their necessary purchases. Because of the collapse of financial institutions a serious economic recession followed. People became unemployed and could not afford to purchase consumer goods. Many home-owners cannot afford to continue their monthly payment to the bank which holds their mortgage loan…

After the world economic downturn and the slowdown in the growth of Chinese exports, there has been concern in China that the steady growth of the economy will be affected. One proposed solution is for the government to encourage the increase in domestic consumption expenditures to make up for some of the loss in exports. In this article I would like to present some evidence to suggest that there may be a rapid increase in domestic consumption simply because the consumers themselves decide to do so…

Having grown up in Guangzhou and returning to visit frequently in the last thirty years, I was excited to read an article in the New York Times dated July 6 about the newly-built Guangzhou Opera House the among buildings that are less distinguished. That building alone improves the look of the city center tremendously. The article praises it as the “most alluring opera house built anywhere in the world in decades”…

The current American recession started four years ago with unemployment rate over 9% for over 27 months. Economists do not know when the economy will return to normal. There is much that we don't know about this recession. Hence there is much that we don't understand about the functioning of a market economy. However there are important lessons that we have already learned…

The development of university education has been rapid in recent years. The number of graduates from institutions of higher learning increased from 848 thousand in 1999 to 5.31 million in 2009. The quality of higher education has also improved. Can the quality improve even faster in the future? What can be done to improve higher education?…

In the last chapter I discussed how to improve Chinese universities by providing them with sufficient autonomy. In this chapter I would like to discuss how to manage a university well…

It is well-known that during the period of central planning, state-owned enterprises were inefficient and their employees provided poor services to customers. There was no incentive to serve the customers well in retail stores, restaurants, hotels, banks and ticket counters for theatres and bus and railroad stations. Some public officials even derived satisfaction from creating inconvenience to the people they served because when they needed the services of other officials they were similarly treated. If productive efficiency is defined as the ratio of output to input and if the quantity of output of a service is adjusted for the quality of the service, then improving the quality of service mentioned above amounts to improving the efficiency of state enterprises. This essay will suggest possible actions by the National Development and Reform Commission and by the National People's Congress to solve the problem…

To carry out the open door policy further is an important objective of the Chinese government. Recently I was impressed by an example of this policy in Southwest University of Finance and Economics (SWUFE) which appointed a distinguished American professor Phil Dybvig as Dean of Institute of Finance. There are examples on deans of schools of economics or finance who are full time professors of American universities but they are all Chinese. The above is the first example of a non-Chinese being appointed dean of a major Chinese university that I know of. I was very impressed by this example and wondered what the vast pool of talents would be if other universities follow this example…

Today China is having inflation. Most recently the State Council sent orders to provincial and city governments to control prices. Generally speaking, the use of price control is not an effective way to control inflation. Recall that in 1961, during the period of central planning, China had price control but the retail price index went up by 16.2% according to China Statistical Yearbook. The main reason for inflation is the rapid increase in money supply relative to real GDP. In 1961, real GDP was reduced by 30%. To slow down inflation the basic solution is to reduce the rate of increase in money supply…

In Chapter 24 I suggested raising the exchange rate of the RMB to solve the problem of inflation in China. In Chapter 16, I explained the American problem of housing bubble and economic recession. In this chapter I suggest a way to help solve both problems…

The aging population of China is an obvious phenomenon, as can be seen by the chart on the change of China's population by age groups. The ratio of population aged 50 or over to population 20–49 was 148/400 = 0.37 in 1980, increased to 350/670 = 0.52 in 2010 and is expected to increase to 526/600 = 0.88 in 2025. The reason for the increase is the decline of the number of young children aged 4 and below after 1980. We need more young people to grow up to become productive members of the society…

The following sections are included:

• Laws and Basic Policies

• Two Kinds of Policy: Regulation and Control vs. Economic Incentives

• Problem of Enforcement

• Recent Successes in Promoting Alternative Energy and in Controlling Pollution

• Proposals for Regulating China's Industrial Air Pollution and for Controlling World Carbon Emission

• Appendix

A macroeconomic model of Chow (1985) explaining aggregate consumption by the permanent income hypothesis of Robert Hall and aggregate investment by the accelerations principle was found to fit Chinese annual data from 1952 to 1982 well. This note shows that the same model can successfully explain Chinese annual data from 1978 to 2006…

In Chow (1985 and 2010) I found that aggregate consumption in China can be explained well by the permanent income hypothesis of Robert Hall and aggregate investment by the accelerations principle, using annual data from 1952 to 1982 and from 1978 to 2006 respectively. Updating Chow (2010) by including data from 2007 to 2009, this note finds (1) while the consumption equation continues to hold, the investment equation fails badly; (2) the investment equation continues to hold if data on investment for 2008 and 2009 is revised downward to reflect government expenditures as a part of the stimulus package during the world economic downturn; (3) small errors in one or two observations can reverse the sign of a significant regression coefficient in econometric practice…

In this chapter I present one aspect of China's globalization in terms of its capital market by observing the movements of prices of stocks traded in the Shanghai stock market…

The following sections are included:

• Introduction

• Co-Movement of Prices of Stocks Traded in the Shanghai and New York Stock Exchanges in Two Sample Periods

• Specification of Time-Varying Coefficient Regressions for the Co-Movement between Stock Returns in Shanghai and New York

• Estimation Results

• Conclusion

• Reference

The following sections are included:

• Index