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China’s Economy in the “New Normal”: Current Economic Situation and Future
Development
Peking University HSBC Business School (PHBS)
Professor Wen Hai
2016.10.3
1
2
Economic Growth of China and the World 1978-2015
数据来源：世界银行WDI数据库
（单位：%）
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
世界 中国
15.21%
6.9%
2.47%
-2.07%
3
China in the Global Economy
source：2014 Chinese government working paper
1. Second Largest Economy
US$11.4 trillion, 15% of Global Economy
2. Largest Economy in International Trade
US$ 3.96 trillion, 12% of Global Trade
3. Second Largest FDI Country
US$ 145.7 billion，9.9% of world FDI
4. RMB Internationalization
10.92% of IMF SDR
4
China in the Global Economy
source：2014 Chinese government working paper
5. Trade with EU
US$ 564.8 billion, 15% of EU total trade
the 2nd trade partner
the 1st importing country
6. Trade with Italy
US$ 44.7 billion, 4.9% of Italy total trade
the 9th exporting country
the 3rd importing country
5
China’s Economy in the “New Normal”
source：2014 Chinese government working paper
1. NEW SPEED of development：
high rate medium high rate
2. NEW STRUCTURE of economy：
labor intensive manufacture
service and high quality manufacture
3. NEW ENGINE of growth：
resources input
reforms, innovation, and “one belt on road”
6
9,2
7,8
6,9
0
2
4
6
8
10
12
14
16
0
10000
20000
30000
40000
50000
60000
70000
80000
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
GDP groth rate
Billion yuan
China’s GDP and growth rate (1978-2015)
7
China's Current Economic Situation
• GDP growth rate：
Less than 8% for five consecutive years
Less than 7% for the first time since 1991
Continuing to decrease
first half year of 2016: 6.7%
1. New Speed of Development
8
Main reasons for the Slowdown
Long run trend： Increasing costs and diminishing returns
Business cycle
Middle-income (Trap) Chanllenge Industrial structure adjustment
(unbalanced growth：industry vs. regions)
9 source：2014 Chinese government working paper
Long Term Trend: Increasing costs
and diminishing returns labor cost
land cost
environment cost
capital returns
10
Average Wage of Labor (Yuan/Year)
0
5
10
15
20
25
30
35
40
0,00
10.000,00
20.000,00
30.000,00
40.000,00
50.000,00
60.000,00
70.000,00 1
97
8
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
wage growth rate
11
0,00
1.000,00
2.000,00
3.000,00
4.000,00
5.000,00
6.000,00
7.000,00
8.000,00
20
00
-03
20
00
-09
20
01
-03
20
01
-09
20
02
-03
20
02
-09
20
03
-03
20
03
-09
20
04
-03
20
04
-09
20
05
-03
20
05
-09
20
06
-03
20
06
-09
20
07
-03
20
07
-09
20
08
-03
20
08
-09
20
09
-03
20
09
-09
20
10
-03
20
10
-09
20
11
-03
20
11
-09
20
12
-03
20
12
-09
20
13
-03
20
13
-09
20
14
-03
20
14
-09
20
15
-03
20
15
-09
20
16
-03
average land price ndustrial use Residential use commercial use
yuan
Prices of Land (Yuan/m2)
12
5,40 5,70
5,50
6,80
7,30 7,00
6,50 6,20
6,00
5,50
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
Returns to Capital in Manufactures
13 source：2014 Chinese government working paper
“Middle Income Challenge”:
Economic Structure Adjustment
slowdown of manufacture
lack of high-tech manufactures and
services
Growth Rate in Different Sectors （Quarterly）
Manufactural Sector Slowdown
15
2013-2015 Growth Rate in Each Sector
Industrial proportion growth rate
compared to the same period last year
2013 2014 2015 2013 2014 2015
GDP 7.7 7.4 6.9
1ST industry 9.4% 9.2% 9.0% 4.0 3.9 3.9
Agriculture & Farming 4.0 3.9 4.0
2nd industry 43.7% 42.6% 40.5% 7.8 7.4 6.0
manufacture 7.6 7.2 5.9
construction industry 9.5 9.2 6.8
3rd industry 46.9% 48.2% 50.5% 8.3 8.0 8.3
Transportation, warehousing and postal service
7.2 6.8 4.6
Wholesale and Retail Trade 10.3 9.8 12.1
Hotels and Catering Services 5.3 6.2 6.2
Finance 10.1 9.7 15.9
Real estate 6.6 2.5 3.8 Others 7.7 8.9 9.2
Data source：NBS of China
16 source：2014 Chinese government working paper
Two special factors:
China is still at the stage of taking-off
Industrialization and Urbanization
China is still in the transition from a planed
economy to a market economy:
Role of Government
Will China’s economy have a hard-landing
take-off stage: industrialization and urbanization
quality of life
Traditional economy
Economic growth
time
Stages of Economic Growth
Modern economy
Mass consumption
1950－2011
Japan：50%－2.0%。
Korea：63%－4.2%。
Taiwan：56%－5.2%
China (Mainland)：（2012）
Rural population still accounts for 47.4%
18
Urbanization is Still a Long Way to Go
Infrastructures
(roads, bridges, railway, electricity…)
Urban Housing
(apartments, furniture, durable goods,…)
Consumptions
(goods and service, including clothing,
restaurant, healthcare, education,…)
19
Urbanization is an Engine of Growth
20
2. New Structure of Economy
Decrease： low quality manufactures overcapacity manufactures small-medium size manufactures
Increases： high quality manufactures manufactures with economy of scales service industry
agricultural economy → industrial economy → service economy
Change of Economic Structure
income
Consumptions
agricultural products
manufactured goods
service product
21
Service Sector as Percentage of GDP
Data source：MacroChina Database
（unit：%）
33
47
55
58
67
71
71
72
72
79
93
0 20 40 60 80 100
苏丹
中国
印度
韩国
南非
世界
日本
欧元区
新加坡
美国
香港 HK USA Sin EU Jap World SA Korea India China Sudan
23
50,5
0
10
20
30
40
50
60
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
primary industry secondary industry tertiary-industry
Change of Industrial Structure in China
Role of Service Promote Consumption Shopping, Real Estate, Culture, Entertainment, Leisure, Education, Healthcare etc.）
Increase value-added of Manufacture Goods
Finance, Telecommunication, Logistics, Design, Consultation, Marketing, Branding, IPO protection, etc.）
3. New Engine of Growth
25
Reforms
Innovations
New international strategy:
One Belt One Road
Key Reforms
（1） Reforms to Promote Market Economy The Government Function Reforms
State-owned-enterprises (SOE) Reforms
Tax System Reforms
Financial Reforms
Supply-side Reforms
（2） Reforms to Promote Urbanization and Agricultural Modernization
Reforms of Urban Resident Registration and Related System ；
Reforms of Rural Land System
（3） Reforms to Promote Service Industries Education；Health care； Culture; etc.
One Belt One Road: New International Development Strategy
“Silk Road Economic Belt, 21st Century Maritime Silk Road”
One Belt One Road strategic diagram
Countries status along the road
Countries and regions along the road: 26 Affected countries: more than 60
Potential for the Economic Cooperation and Development
47%53%
Share of Population
27%
73%
Share of the Global Economy
One belt, one road Other regions
24%76%
Share of Trade
