China Macroeconomics

ECONOMICS FOR MANAGERS
NINGBO UNIVERSITY

ASSIGMENT 2
MARKET STRUCTURE

NAME: JORGE JAMY MARTINEZ SANZETENEA
INTAKE: 11 2011

Assignment 2
MACROECONOMIC ISSUES
CHINA ECONOMIC HISTORY
Introduction
In the modern era, China's influence in the world economy was minimal until the late 1980s. At that time, economic reforms initiated after 1978 began to generate significant and steadygrowth in investment, consumption and standards of living. China now participates extensively in the world market and mostly state owned but also some private sector companies play a major role in the economy. Since 1978 hundreds of millions have been lifted out of poverty - yet hundreds of millions of rural population as well as millions of migrant workers remain unattended: According to China'sofficial statistics, the poverty rate fell from 53% in 1981 to 2.5% in 2005. However, in 2009, as many as 150 million Chinese were living on less than $1.25 a day The infant mortality rate fell by 39.5% between 1990 and 2005, and maternal mortality by 41.1%. Access to telephones during the period rose more than 94-fold, to 57.1%.
GDP Growth
In all economies the expansion of output is the sum of thegrowth of consumption (both private and government) plus investment plus net exports of goods and services. Expanding investment has been a major and increasingly important driver of China’s growth. But since the beginning of the 1990s, China’s investment rate has trended up. In 1993 and again in both 2004 and 2005, investment as a share of GDP reached 43 percent, a level well above the historicexperience of China’s East Asian neighbors in their high-growth periods.3 Rising investment has been fueled by a rise in the national saving rate, which reached an unprecedented 50 percent of GDP in 2005.4 Rising investment was particularly important in 2001–2005, when it contributed just over half of China’s economic growth (National Bureau of Statistics of China 2006b, 70), an unusually highshare by international standards. In the year 2007 China had experimented their highest growth since 1984 reaching 14.199, but after that and in consequence of the economical crisis of the year 2008 Chinas gross domestic product decreased to 9.599. Economic growth showed "an obvious correction" this year, but the full-year performance was still better than other countries affected by the globalfinancial crisis. Overall, the economy maintained good momentum with fast growth, stable prices, optimized structures and improved living standards. China's performance was better than the average growth of 3.7 percent for the world economy last year, 1.4 percent for developed countries and 6.6 percent for developing and emerging economies.
After this in the year 2009 Chinas GDP decreased even more to9.2 percent. In the face of severe impact brought about by the global financial crisis in a century and the most complicated domestic and international situations, the government sized up the situation, made good decisions, and headed the whole nation united as one to surmount the difficulties of our time

Inflation

China inflation was triggered mainly due to increase in the price of foodproducts. This trend was observed in the month of February, 2007. This increase in China inflation compelled the Central Bank of China, to increase the rates of interest.
The consumer price index increased by 2.7% as compared to the CPI a year back. The statistical data was provided by National Bureau of Statistics. The cost of meat, alcohol and eggs increased. There was an increase in the cost ofrented premises as well.

Majority of the people, who had deposits in their bank accounts feared they would lose out on their money. It was feared that China inflation would eat up the interest income of money held in bank accounts. This tendency was seen in the month of March 2007. Over the months, things have looked up. As the standard of living in China is gradually on the rise, the cost...