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The results of Chinese economy following the 2014

The results of Chinese economy following the 2014

Chinese economy

The Chinese economy is the world’s second largest economy by nominal GDP (after the USA). According to the preliminary data of the World Bank, in the first half of 2014 the Chinese economy became the world’s largest economy by purchasing-power parity overcoming the USA. The Chinese GDP grew by 7.6% in 2013 and is going to grow by 7.5% in 2014. 30% of the world’s middle class live in China.

In the last 30 years the average growth of GDP amounted to 10% sometimes reaching 15%. By the end of 2014, the share of China in the world GDP amounted to 16.48%. China is the world’s largest exporter and the world’s second importer after the USA. China holds the 80th place globally by per capita GDP. The economic well-being is not uniform, the coastal provinces are richer while continental ones are less developed, which provides a considerable growth potential.

 The rapid economic development in China started after 1978 when liberal economic reforms were introduced. The emphasis was put on the creation of special economic zones with favorable tax and administrative climate, attraction of foreign investment, and export orientation of production. The companies operating in the strategic sectors, e.g., air and space and defense industry are state owned.

The influence of the state is also strong in other sectors, e.g., purchase of agricultural products. Chinese yuan, the official name of the Chinese currency, is renminbi (people’s money); however the name yuan is widely known all over the world. The subsidiary coins are chiao (1 yuan = 10 chiaos) and fen (1 chiao = 10 fens), while fens are practically not used. The symbol of yuan is Latin letter Y with two crosses - ¥, while Japanese yen has the same symbol. The exchange rate of yuan to the currency basket is determined by the People’s Bank of China. Yuan is partially convertible. The People’s Bank of China allows the price of yuan to float within fairly narrow limits around the determined value.

According to the international experts, the rate of yuan is undervalued by 30-40% to increase the competitiveness of Chinese export. The developed countries, primarily the USA, require the Chinese government to deregulate the yuan price and make it fully convertible. China gradually liberalises its currency policy but is in no haste with reforms keeping the stability of currency rate and controllability of economy.

SECTORS OF ECONOMY

Agriculture

China is the world’s largest producer of agricultural products and the world’s largest consumer of them. About 300 million people are employed in agriculture. Almost all plough lands in the country are used for growing agricultural crops. However, only 10-15% of the country’s area is fit for cultivation.

In the last 10 years (2008) the area of plough lands in the country has decreased by 123 million mu/1 ha = 15 mu. China faces a severe shortage of water, first of all, in agriculture. Ecological problems, such as droughts, floods, and soil erosion constitute great danger to agriculture. Mass deforestation in the recent past is now changed to large-scale forest recreation programs.

Less than a half of country inhabitants are employed in agricultural sector now because of the development of industry in rural settlements. Many country inhabitants move to industrially developed coastal provinces in search of high earnings. Agriculture accounts only for 13% of the Chinese GDP.

EXTRACTIVE INDUSTRY 

China possesses about 37% of the world’s reserves of rare earth metals (molybdenum, vanadium, stibium). The considerable investment in extraction of these minerals made in 1980-s resulted in China’s 95% share in their worldwide extraction nowadays. Despite of the huge reserves of minerals and their intensive extraction, the country’s rapid industrialisation determines the necessity of raw materials’ import. China is becoming more and more active in the purchase of minerals from the USA and Australia, and actively increases the extraction in African countries. Minerals are also imported from Russia and Kazakhstan. The Chinese government’s policy implies the diversification of raw materials’ supply. 

POWER INDUSTRY 

In China there is a growth of both power generation and power consumption. More than 80% of power is generated by thermal power plants, 17% - by hydraulic power plants, and about 2% - by nuclear power plants. Most part of the Chinese power generation potential remains unrealised. The main problem of power industry is the remoteness of basic energy products, which are located on the north and west of the country, from the consumers, which are accumulated on the coast. Another problem is the ecological performance of power industry. The main energy product is coal providing up to 75% of energy; however, this share is constantly decreasing. Coal is gradually substituted with oil and gas, the extraction of which is growing. Coal-fired power plants cause severe damage to ecology, which forces the Chinese government to implement a reform of power industry. The reform is primarily aimed to the increase of a share of renewable power sources in the total production and conduction of power saving campaigns. The renewable power sources, except for hydraulic power, are unlikely to account for 5% of the total production volume, although the government targets to reach the level of 10% by 2020.

In 2010, China overcame the USA and became the world’s leader in the installed capacity of wind power generators exceeding the level of 40 GW. In the course of the 11th five-year period China was going to build about 30 big wind power plants with the capacity of 100 MW and more. 

According to the national development plan, the overall Chinese installed wind power generation capacity was to grow up to 30 GW until 2020. However, the rapid development of wind power generation enabled the country to pass that milestone already in 2010.

INDUSTRY

The sectors of Chinese industry include the production of almost all goods available worldwide from initial processing of raw materials to high-tech production including electronics, nuclear power industry’s equipment, and air and space industry. State-owned enterprises account for 30% of the manufactured products. The state owns the biggest heavy industry enterprises and strategic sectors such as defense industry and space industry.

In 2010 China became the world’s largest car manufacturer and consumer and in 2011 the country became the world’s largest consumer of personal computers. 

China is also the world’s largest producer and exporter of steel; 45% of world’ steel is manufactured in China. There is a rapid development of car manufacturing, air and space industry, and electronic industry.

In the sector of consumer goods an important role is played by the production of textiles and clothes, which account for a considerable part of the Chinese export.

CONSTRUCTION 

The production of cement, which is mostly used in domestic construction, exceeds the one in the USA by 80 times. China has taken the world’s leading position in the number of scyscrapers already built and under construction, which used to be held by the USA.

In Changsha, the world’s tallest 838 meter 220-storeyed skyscraper Sky City is being built under a fast construction technology mastered. Sky City — 838 meter skyscraper being built in the Chinese city of Changsha According to the owner and developer Broad Sustainable Building, the construction is to take only 90 days excluding 120 days of preparation works and the total duration of construction is 210 days. If the construction is completed successfully, Sky City will become the tallest building in the world.

Broad Sustainable Building specialising in fast construction of energy-efficient, environment-friendly, and economical buildings planned to construct a 666 meter skyscraper but local government is interested in the construction of a world’s tallest building. BSB has already constructed 20 buildings in China and has a number of franchise-partners worldwide. BSB used to specialise in industrial air conditioners and used to be the world’s leader in the field of solar air conditioners before it changed its line of business for construction. All the company’s employees must observe the power saving guidelines made by the president of the company Zhang Yue. In 2011, he was granted the UN Champions of the Earth award for his contribution in the preservation of environment.

SERVICE SECTOR

In 2010, the service sector accounted for 43% of the Chinese GDP, being the second largest branch of economy after production. Still, it is less than in the developed countries. Wholesale and retail business is rapidly developing and many trade centers, stores, restaurants, and hotels are opened. Tourism is also an important sector of economy.

TRANSPORT

China has the world’s second longest railway network after the USA (91 thousand kilometers). Railway is the most popular means of transport in China. China has railway communication with Russia, Mongolia, and Kazakhstan, where the rail track is 1,520 mm, and Vietnam. It is planned to construct railways to Laos and Birma and from there to India. China has no railway communication with its other neighbours. A network of high speed railways is being constructed actively enabling the trains to go as fast as 350 km/h. Presently, 15 Chinese cities have subways, in another 18 it is being built, and in 20 it is planned. The largest subway systems are located in Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen, and Hong Kong.

China has become the world’s leader in the sale of cars and more and more Chinese people use this means of transport, although the number of cars per capita is still much less than in the developed countries. Bicycle is popular among the Chinese. Though bicycles are used less often because more expensive and prestigious means of transport come into general use, the number of bicyclists in the country is still high. In most cities motorways have special bike lanes. 

Electric scooters and bikes are becoming more and more popular and China is the world’s biggest manufacturer of them: every year more than 20 million electric scooters are sold in the country and another 3 million are exported. The scooters are charged for about eight hours and are able to go as far as 45 km at the speed of 20 km/h.

China has more than 2,000 ports, 130 of which are international. The total annual capacity of Chinese ports is more than 2,890 million tons. China accounts for more than 35% of the world’s sea cargo turnover.

Sixteen main Chinese ports have a total capacity of more than 50 million tons per year. The Chinese trade fleet has more than 3,500 vessels, 1,700 of which have displacement of more than 1,000 tons. China holds the first place in the world in the length of navigable rivers and canals (110,000 kilometers). Since ancient times, rivers and canals have been the country’s main transport arteries. More than 5,100 internal ports are situated on the rivers and the annual cargo turnover of river transport is 1.6 billion tons. Vessels with displacement of up to 10,000 tons can enter the Yangtze river. Another important route is the Grand Canal connecting five big rivers including the Yangtze river and the Huang He river.

COMMUNICATION AND INTERNET

As of 2010, the number of Internet users in China amounted to 420 million of people, which is more than the entire population of the USA. However, Internet coverage of population is still quite low amounting to 32%. The most popular messaging system is QQ, an analog of ICQ, and the most popular search system is baidu.com.

MASS MEDIA

In China there are more than 25,000 printing houses and more than 2,200 newspapers and 7,000 magazines are published. The country’s top newspaper is Renmin Ribao (People’s Newspaper), which is an official printed media of the Communist Party of China. Other popular newspapers are Beijing Ribao and Guanming Ribao. The biggest news agency is the state-owned Xinhua agency.

More than 3,000 radio stations broadcast in China. The biggest broadcaster is the Central People’s Broadcasting Station having eight channels. Each province or municipality has its own radio stations. China Radio International (CRI) broadcast in all countries of the world in 38 languages including four dialects of the Chinese language. The biggest television company is China Central Television (CCTV) broadcasting in a number of channels including international channels in the Russian and English languages.

FOREIGN TRADE

Foreign trade is one of the most important sectors of economy. A significant part of production is export oriented, though production is gradually re-oriented to the domestic market. In 2008, the volume of foreign trade amounted to USD 2.4 trillion. Since 1991 China has been a member of Asia-Pacific Economic Cooperation (APEC); in 2001, after 16 years of negotiations, China entered WTO.

Military industrial complex and space industry

The Chinese military industrial complex produces all types of weapons, including thermonuclear weapon, submarines with ballistic missiles, and intercontinental ballistic missiles. China has finished the construction of a Soviet aircraft carrier bought from Ukraine and started construction of several other aircraft carriers.

In 2003, China became the world’s third space superstate independently performing manned missions. Since 2010, every year China has been making more space launches than the USA lagging behind only Russia. China became the third country in the world to send a lunar vehicle to the Moon (2013) and to return a space vehicle to the Earth from the Moon (2014). 

  • 30.12.2014
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