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1. A stagnant China in 2040, briefly

Author:
Derek Scissors
Publication Date:
03-2020
Content Type:
Special Report
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
There is a considerable chance China will stagnate by 2040, with gross domestic product growth at 1–1.5 percent. The process has started, seen most clearly in stark trends for debt and aging, but better-quality data on productivity would clarify how far along stagnation is and whether it at some point reverses. China shows no sign of adopting pro-productivity reform. It will not spur growth by leveraging or bolster a shrinking labor force through current population and education policy. Innovation will help, but a large economy requires broad innovation, and the party dislikes competition. A twist comes from China’s global position, which will not deteriorate much. Outbound investment has retrenched, and the yuan’s rise was exaggerated. Consumption exports and commodities imports will stall. But China will easily be a top-two market in most sectors, and other countries are not acting to displace it. Instead, localization will occur. Commodities producers and some developing countries will lose, the latter as Chinese capital dries up. Countries that make difficult reforms will win. Consumer goods will see inflation, but innovation will be healthier with less Chinese influence. American firms will seek new pastures, and Chinese stagnation means production may relocate to the US.
Topic:
Foreign Policy, Defense Policy, GDP, and Economic growth
Political Geography:
China and Asia

2. How to evaluate China’s economy

Author:
Derek Scissors
Publication Date:
01-2019
Content Type:
Special Report
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Official Chinese economic data are often the only game in town, but they are untrust­worthy. Sometimes they prove inaccurate; during downturns they are falsified outright. Finding inconsistency in official statistics demonstrates the problem but offers no solution, since it is rarely clear which series is better. Examining 15 major indicators for importance and reliability shows that growth in gross domestic product (GDP) and GDP per capita should be deemphasized. To illustrate, China’s GDP per capita is twice as high as official per capita disposable income. The latter can be spent; the former is an accounting result. Another conclusion: Arguably the most valuable indicators are the worst measured. Debt is reasonably estimated at present, but factor productivity and human capital are vital to medium-term performance and receive far too little attention.
Topic:
Foreign Policy, Monetary Policy, GDP, and Economy
Political Geography:
China, Europe, and Beijing

3. Supply-side reform leads to economic resilience

Author:
Qiyuan Xu
Publication Date:
02-2019
Content Type:
Policy Brief
Abstract:
China's GDP grew 6.6 percent in 2018, according to National Bureau o ftatistics data. Despite the slight slowdown in the GDP growth rate, however, exports grew at a relatively high 9.9 percent year-on-year calculated in US dollars. And, not surprisingly, China's trade surplus with the United States expanded further. ...... Besides, the relative prosperity index of small and medium-sized enterprises has dropped to the second-lowest point in a decade, and the financial cost differentiation among various industries is growing. This may have a negative impact on not only short-term macroeconomic stability, but also the development space of relevant emerging industries and long-term growth momentum.
Topic:
Reform, GDP, Economy, Economic growth, and Resilience
Political Geography:
China and Asia

4. Beyond Manufacturing: Developing the Service Sector to Drive Growth in the PRC

Author:
Wei Wang, Gemma Estrada, Jurgen Conrad, Sang-Hyop Lee, and Donghyun Park
Publication Date:
05-2016
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
As demand from global markets declines, slowing exports of manufactured goods from the People's Republic of China means the country must increasingly rely on domestic markets for growth. Unlike manufactured goods, services—those "intangible" products that include everything from transportation to scientific research to real estate services—are geared more toward domestic markets. Services, then, will be key to the rebalancing process. However, while the service sector has grown rapidly in the PRC, it continues to lag behind other countries at similar stages of development. In addition, the sector is dominated by traditional low-end types of services, rather than knowledge-intensive services. Heavy regulatory burdens, barriers to trade in services, and an unfavorable policy environment have been major obstacles to upgrading the sector and improving its competitiveness. Policy reform should focus on strengthening competition to raise productivity, with the goal of increasing not only the number of jobs and contribution to GDP, but also of positioning the service sector to compete internationally and spur export growth.
Topic:
International Trade and Finance, Markets, Political Economy, Reform, and GDP
Political Geography:
China

5. Beyond Manufacturing: Developing the Service Sector to Drive Growth in the PRC

Author:
Wei Wang, Gemma Estrada, Jurgen Conrad, Sang-Hyo Lee, and Donghyun Park
Publication Date:
05-2016
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
As demand from global markets declines, slowing exports of manufactured goods from the People's Republic of China means the country must increasingly rely on domestic markets for growth. Unlike manufactured goods, services—those "intangible" products that include everything from transportation to scientific research to real estate services—are geared more toward domestic markets. Services, then, will be key to the rebalancing process. However, while the service sector has grown rapidly in the PRC, it continues to lag behind other countries at similar stages of development. In addition, the sector is dominated by traditional low-end types of services, rather than knowledge-intensive services. Heavy regulatory burdens, barriers to trade in services, and an unfavorable policy environment have been major obstacles to upgrading the sector and improving its competitiveness. Policy reform should focus on strengthening competition to raise productivity, with the goal of increasing not only the number of jobs and contribution to GDP, but also of positioning the service sector to compete internationally and spur export growth.
Topic:
Economics, Markets, Reform, and GDP
Political Geography:
China

6. Estimates of Fundamental Equilibrium Exchange Rates, November 2015

Author:
William R. Cline
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The latest semiannual fundamental equilibrium exchange rate (FEER) estimates find that the US dollar is now overvalued by about 10 percent, comparable to levels in 2008 through early 2010 and again in 2011. Unlike then, the current strong dollar does not reflect a weak renminbi kept undervalued by major exchange rate intervention by China. Instead, China's current account surplus has fallen sharply relative to GDP, and its recent intervention has been to prevent excessive depreciation rather than to prevent appreciation. Additionally, declines in the real effective exchange rates (REERs) for major emerging-market economies and resource-based advanced economies, driven by falling commodity prices in recent months, have strengthened the dollar. Recent increases in the REERs for the euro area and Japan have removed their modest undervaluation identified in the last FEERs estimates in May, and the Chinese renminbi remains consistent with its FEER. The dollar's rise by nearly 15 percent in real effective terms over the past two years could impose a drag of nearly one-half percent annually on US demand growth over the next five years. As the Federal Reserve moves to normalize US monetary policy, it may need to consider a gentler rise in interest rates than it might otherwise have pursued, both to temper possible further strengthening of the dollar in response to higher interest rates and to help offset the demand compression from falling net export
Topic:
Economics, International Trade and Finance, Monetary Policy, and GDP
Political Geography:
United States and China

7. Military Modernization in the PRC: Doctrinal Change and Practical Implementation

Author:
Thiago Malaria
Publication Date:
12-2015
Content Type:
Journal Article
Journal:
AUSTRAL: Brazilian Journal of Strategy International Relations
Institution:
Postgraduate Program in International Strategic Studies, Universidade Federal do Rio Grande do Sul
Abstract:
Chinese military modernization came with doctrinal changes, improvements in armament and operating personnel, and the import of hardware. It increased China's access denial capabilities to areas adjacent to its borders and to farther locations. High GDP growth, in the last years, has been indispensable to the process.
Topic:
Arms Control and Proliferation, Military Strategy, GDP, and Modernization
Political Geography:
China and Asia

8. From Preponderance of Power to Balance of Power? South Korea in Search of a New North Korea Policy

Author:
Jihwan Hwang
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
East Asia Institute (EAI)
Abstract:
The global and East Asian orders of power are now represented by China's economic, military, and diplomatic rise and America's decline. The result is often called Chimerica or G2, leading to U.S.-China competition in every aspect of the international agenda. After the Bush administration's foreign policy in the first years of the millennium, when many scholars and policy makers focused on U.S. unipolarity or at least its preponderance of power after the collapse of the Soviet Union and the end of the Cold War, the current state of affairs is a great change. While U.S.-China relations represent a set of the most important variables in world politics, the meaning of China’s rise is much greater in the East Asian regional order. The Korean Peninsula, of course, cannot escape from the influence of its neighbors. Although the world order of the 1990s saw the unprecedented economic prosperity and overwhelming military power of the United States, the recent order has been characterized by the relative decline of the United States and the fast and strong rise of China. The Chinese economy has grown more than 10 percent per year for the last thirty years and is now the world's second-largest economy. Although the Chinese GDP is still only one-third that of the United States, as TABLE 1 shows, it is not at all unheard of to say that China may economically catch up with the superpower by 2030. Moreover, China's trade with Northeast Asian countries is much larger than that of the United States. As TABLE 2 shows, China's exports and imports with South Korea, Japan, and Taiwan are almost twice as large when compared with those of the United States. Given America's economic recession and China's incessant growth, the gap between the two is likely to get much larger. China's increasing economic interdependence with regional powers will have a great effect on the changing balance of power in the region, and will have a much greater effect on the Korean Peninsula. On the other hand, China has also made every effort to build up its military capability. Supported by its strong economic growth, Chinese military spending has been hugely increased, more than 10 percent per year on average. China spent 40 billion U.S. dollars in 2001, but it spent 119 billion in 2010, an increase of almost three times in ten years. TABLE 3 indicates that Chinese military spending is still less than one sixth compared to the American figure, but one must recognize that while the United States plans to cut its military spending in the next decade due to its budget deficit, China is certain to keep increasing its, unless its economy falls into deep trouble in the near future.
Topic:
Foreign Policy, Economics, Military Strategy, and GDP
Political Geography:
China, Asia, South Korea, and North Korea