China's Economy

5/1/18

Overview

In the four decades since the death of Mao Zedong, China has moved rapidly from a stagnant communist economy to a bustling market-based one, albeit under single party rule. In 2010, China became the world’s largest exporter and in 2014 it became the world’s largest economy (based on GDP). Join Active Minds as we examine the rapid change in China’s economic stature and the effects it is having both domestically and internationally.

Key Lecture Points

  • Mao`s death in 1976 marked the end of a very difficult century in China`s history.  The country had lost tens of millions of lives in a long series of events including famine, invasions, world war, civil war, and ill-conceived social experiments orchestrated by Mao.  The nation was exhausted, mostly in dire poverty, and had fallen far behind its east Asian neighbors, and potential rivals.
  • Beginning in 1979, Deng Xiaoping transformed the country with an evolving economic plan which utilized a unique combination of authoritarian and capitalistic elements to create an unprecedented level of economic growth.  In 2010 China became the world’s largest exporter.  In 2014 it became the world’s largest economy based on GDP.    That growth has funded China`s ability to not only become one of the two most powerful economies in the world, but also to become one of the two most influential countries.
  • As the Chinese economy matures, its sustainable growth is dependent upon transitioning from an export base to a consumption-driven economy.  To raise its low domestic consumption rate, China will need to reduce its high domestic savings rate, facilitate higher wage opportunities for its growing middle class, and reduce corruption.  Furthermore, China is pushing for more domestic innovation via a controversial policy called “indigenous innovation” which the US criticizes as impinging upon its intellectual property.
  • China has also begun a new $1 trillion+ “One Belt One Road” program.   This ambitious program has the objective of tying many of the world`s developed and developing countries to China in mutually beneficial economic partnerships.   Coming at a point when the US is drawing back from its multilateral trade agreements (including the Trans Pacific Partnership), China is positioning itself to extend its global economic reach.
  • Since taking office, President Trump has increased pressure upon China in order to stem the flow of Chinese goods (particularly steel) into the US.  In March 2018, Trump slapped tariffs on steel and aluminum.  Thereafter China announced its own round of tariffs targeting US goods.  The escalating tariff conflict, while intended to garner better trade conditions for the US, has the potential of negatively affecting US job creation.

Exploration Questions

  • What socio-economic issues will China have to address to sustain its growth rate?
  • What are the major economic issues in the US/China relationship?

Reflective Questions

  • Do you have a family member or acquaintance who has spent time in China recently?  If so, what did they find noteworthy about the country?
  • Name the consumer goods you purchased in the last 30 days that were made in China.  Are you surprised at the number?

More to Explore

Books for Further Reading

  • Paulson, Jr., Henry M., Michael Carroll.  Dealing With China: An Insider Unmasks the New Economic Superpower.  Twelve, 2015. 448 pages.   Former Treasury Secretary Paulson discusses how China became a superpower so quickly, how business really gets done in China and what are the best ways for Western businesses and political leaders to work with and compete with China.  It is a definitive guide as to how to engage with China.
    Click here to order
  • Osnos, Evan.  Age of Ambition: Chasing Fortune, Truth, and Faith in the New China.  Farrar Straus Giroux, 2015. 416 pages.  The author served as the New Yorker correspondent to China.  In this book he describes contemporary China and the clash between the rise of the individual and the Communist Party’s struggle to retain control.
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  • Christensen, Thomas J. The China Challenge: Shaping the Choices of a Rising Power.  W. W. Norton & Company, 2015.  400 pages.  The author is the former Deputy Assistant Secretary of State for East Asian and Pacific Affairs.  In this book he assesses the current US/China relationship and describes the challenge of dissuading China from regional aggression while encouraging China to contribute to the world order.
    Click here to order