CHINA

21.    What is the difference between extensive and intensive development? Describe the nature and results of China’s extensive development.
An extensive development is a large-scale development that is very broad. An intensive development is short-time focused development.

EXTENSIVE DEVELOPMENT
= 'endless' cheap labour from countryside
= (foreign) investment: 1978 - 2010 10 times Japan's 1945-2000
= resource-intensive
= manufacturing-focused (secondary sector)
Also good human capital, strong growth in labour productivity
Export-orientation, trading nation (like Germany unlike the US), participation GVC's
Controversial policies for population control:
"one child policy"
"hukou" registration system on rural-urban mobility
both ending currently

RESULTS
= 2010 GDP is 20 times the GDP of 1978, a 10% average rate of growth
= GDP per Capita is still low
= People who live in poverty in 1981 are 84% of the population (840 million) and in 2011 only 84 million, 6%
= urbanization and infrastructural development
* 600 million people have moved to cities in the last 40 years
* infrastructure lot of growth a lot in 30 years
= environmental degradation (5 to 10% of GDP loss per year, 358 000 deaths per year)


22.    Explain the nature of the current economic problems in China and of the “new normal” towards which the country is striving.
THE PROBLEM :
fast economic growth with unsustainable imbalances :
= excessive dependence fr demand on investment and export (extensive development)
= extraordinarily low rate of household consumption
= relatively weak services
= heavy reliance on natural resources
= 2008 stimulus prgram
* overcapacity in industry and infrastructure construction
= end of cheap labour : high-end production shifts to developed,
low-end to cheaper developing countries.

NEW NORMAL
= slower growth rate : 6/7 % instead of 10
= extensive to intensive development (innovation)
= manufacturing to services
= investment to consumption
= exports to domestic spending
= larger role for the market (credit-allocation, companies)
= moving up the value-chain
= attracting human capital
= internationally recognizable brand names

23.    Explain the nature of China’s political and economic reforms from the death of Mao to 1989.
1978: Deng Xiaoping launches the reform and opening policy: transformation towards export-oriented market economy (Japanese example and often capital)
= incremental steps: 'crossing the river by feeling the stones"
= move towards private ownership:
*first: private ownership of land = liberates workforce for urban indsutrialization
= export-oriented industrialization (global value chains)
* 1980s special economic zones : capitalist, open zones of experimentation linking china to the world
= liberalization comes with social costs (e.g unemployment)
* tiananmen massacre, 1989
* Deng decision : continue economic liberalization, stopping political liberalization

24.    Discuss the reasons why we might or might not expect China to overtake the United States as the world’s dominant economic power. Compare their respective strengths and weaknesses.
The United States has had the world’s largest economy for about 140 years, and it roughly accounts for 22% of global GDP. However, in recent times China has overtaken the US by at least one measure of total economic strength, which is GDP based on purchasing power parity (PPP).

Either way you slice it, the economies are the two strongest globally in absolute terms.

That’s where the similarities end. While comparable in total size, the makeup of each economy is totally different. United States is a sophisticated and highly diversified economy that is based on services, finance, and consumption from the middle class. China has similar aspirations in the future, but right now it is resource-intensive growth engine making the transition from a manufacturing hub to a consumer-driven economy.

China's most prominent feature, its vast population base, is both its strength and weakness, which will determine its position in the coming century.

China has leveraged solely on its population to expand its economy in the past 30 years. There are many other topics that dwell on this background so I won't take up anymore space than I have to.

China is now at a turning point, it needs to transform from a manufacturing and export based economy into a consumption based service oriented one.

Making its 1.5 billion workers into 1.5 billion consumers will have profound impact on how the world economy works in the next 50, if not 100 years.

The CCP has a monumental task ahead, while the promise of glory is certainly over the horizon, it also cannot ignore the potential disaster that could follow if it messes up with China's transformation.

China is threatening to strip the title of world hegemon away from the US, but not by taking the title for itself. China is more interested in being the dominant power in its region, and is not concerned with dominating the world the way the US has in the past decades. There are several key aspects of China’s behavior that illustrate its desire to be the East Asian regional superpower.

Superpower as the WEALTHIEST NATION

Estimates differ greatly, but economists presume that by 2026, China will be the largest economy in the world. US may even fall behind India in 2050. [1] [2] So, strictly economically speaking, US will lose its economic supremacy quite soon. Or, some may say that it has already lost it by not having a huge head start today.

It is not one among equals. It is the most important ally of many countries. It does not regard any country as a dominant ally.

The US is certainly still a superpower, for the reasons David Rishel mentions.

But the basis of that power, exceptionally high GDP per capita, is at risk, due to the current slow-growth pattern the US is in. If we don't reform our economy in a more free-market direction, productivity of labor is likely to stagnate as it has been doing.

The US spends a higher percentage of GDP on the military than most of its allies, and has growing public debts and looming public obligations due to its welfare state. This is unsustainable without exceptional growth or deep-rooted reform.

The US is no longer the freest economy in the world and has become a less welcoming place to do business in recent decades. To outshine the world, it should be one of the freest and one of the best places to do business (i.e., produce and create).