ECO CASE STUDY - China

Key Definitions

DEVELOPING ECONOMY: one which is undergoing rapid growth and industrialisation

DEVELOPED ECONOMY: one which has undergone industrialisation

Measures of Performance

-         Balance of payments

-         GDP

-         Inflation

-         Unemployment

Evidence for/problems with rising income inequality 

• Gini index risen from 0.3 in the 1980s to 0.53 in 2013 (the UK stands at 0.35)
  
  
• Hukou system makes it difficult for people to migrate from rural to urban areas – means rural areas are stuck in poverty
  
  
• More strain on the government to support less well-off people

• Large amounts of exports - $2.3 billion in 2014
  
  
• Large government spending on infrastructure - spends more than any other country in the world (8.6% of GDP)
  
  
• Low cost labour means companies have relocated to China
  
  
• High literacy rate means lots of people are able to work (was 66% in 1982, now 95%)

Yes it is beneficial:

• Brought 500 million people out of poverty
• Income per capita risen by $13 000 dollars in the last 25 years
• Increased demand for goods both within and outside of the economy
• Investment increases - more employment
• More inward investment from other countries
• More choice of good Sub-Sahara

No, it isn't beneficial:

• 1.6 million deaths per year due to pollution
• Increased inequality - Gini index risen from 0.3 in the 1980s to 0.53 in 2013 (UK 0.35)
• Reliance on credit in order to invest - less productive investments (credit intensity doubled)
• Sub-Sahara flooded with cheap imports so unable to invest in infrastructure
• Poor air quality - equivalent to smoking 40 cigarettes per day in Beijing
• Water pollution - 30% of rivers and 40% of lakes polluted
• 42% of water not potable

Yes, it is beneficial:

• Cheap labour for firms
• Cheap imprts and a greater choice
• Competition increases productivity

No, it isn't beneficial:

• Increase in demand for raw materials (China accounted for 33% of the recent increase in oil demand)
• China's steel is unfairly cheap (in 2014 it was 300 euros per tonne cheaper than European steel)
• UK workers move abroad where skils are needed 

Yes, it is fair:

• People at the bottom are better off than they were previously (500 million people taken out of poverty)
• Rich deserve to be rich as they have worked harder
• Fair is a subjective term
• The rich can invest and create more jobs

No, it isn't fair:

• The money isn't being distributed equally - Gini coefficient of 0.53
  

Yes, they should have to pay:

• They are the biggest economy in the world so they have the money to pay for it 
• They are the world's biggest polluter so they have to take responsibility for their actions

No, they shouldn't have to pay:

• They have been developing rapidly over the last 20 years and other countries who have been polluting longer also have to take responsibility
• China may be the biggest polluter, but the USA has more CO2 emisisons per capita (16.1 compared to China's 7.7)