China's Decline

I------ .-----.…-- CHINA'S DECLINE China's economy is second in size only to that of the United States, and despite impressive growth over the last few years, it is'becoming increasingly more evident that their fnarkets are struggling to maintain this growth, and slowly their GDP (Gross Domestic Product) is dropping I--------I--- II-----I-----II--- II------I---- II--- -.------- I------ SLOWING ECONOMIC GROWTH 7.7% 2013Q1 7.5% 2013Q2 7.0 Having seen substantial growth in their markets over the last few years, China only saw an annual economic growth of 7.5% this last quarter. Additionally, this is the 5th quarter in a row during which expansion had remained below 8% - a clear sign that they are struggling to maintain previous records. This is also their weakest expansion since 1991. 5-6% 3% China's expansion is expected to eventually taper off to about 3% growth – a figure typical of other OEDC countries. Experts expect the figure to drop to 5-6% growth to be seen by the end of the decade. GROWING SECTORS STRUGGLING SECTORS RETAIL INDUSTRIAL The sector has had a dwindling growth this last quarter of only 7.6% Consumers stimulated this sector by 12% in 2012 MINING REAL ESTATE Was able to push the FTSE 100 index to a 6-week high in early Should account for 10% of China's GDP trading of 6,602.19 SERVICE AUTOMOTIVE This sector accounted for 44.6% of China's GDP in 2012 Growth practically halted in this sector in 2011-2012, with expansion of only 1% HOW CHINA GREW SO QUICKLY INVESTING IN EDUCATION In 1998, President Jiang Zemin, issued a massive reform to the education system - specifically driving the number of students enrolling for higher education At that point, there were 3.4 million tertiary enrolled students. within 4 years... 164% 152% increase in the number increase in the number of of enrolled students Chinese students studying abroad RURAL SECTOR Growth in the agriculture, services and industry sectors has averaged 6% between 1978 and 2003 55% of China's population still lives in rural areas and these laborers have played a major role in the country's growth With China pushing to become an exporter of foodstuffs, the rural sector and its agriculture became increasingly more important HOUSEHOLD RESPONSIBILITY SYSTEM First initiated in 1981, this system was used in the agriculture sector to ensure that local managers were responsible for their own losses and profits 2.7% Expansion rate during the pre-reform period 8.2% Agricultural output after the reform As a result, food prices fell by nearly 50% REDUCTION OF TRADE TARIFFS With the belief that globalization greatly benefits Chinese investments, the Chinese government needed to find new ways to stimulate international interest TARIFF TARIFF TARIFF By 2001, fewer than 40% of imports were subject to trade tariffs TARIFF TARIFF Trade tariffs steadily fell during the reform period, dropping from 56% to 15% Trade has gone from being only 10% of China's GDP to constituting 64% of their GDP CONSEQUENCES OF RAPID GROWTH SURPLUS WORK FORCE there have been 50 to 100 million surplus workers in rural areas, many forced to subsist via low-pay jobs URBAN UNEMPLOΥΜΕNT the number of registered urban unemployed people exceed 8 million annually WILL WORK FOR FOOD since 2003 FINANCIAL DISPARITY the income gap between the wealthy and the poor also continues to expand ENVIRONMENTAL DAMAGE rapid expansion has led to vast levels of mass industrialization POLLUTION PROBLEM 16 out of 20 of the most polluted cities in the world are in China INFLATION ISSUES peaking at 8.7% in February 2008 and causing food prices to skyrocket by 11.7% in 2010 BAD DEBT China loaned $1.3 trillion to its local governments in 2010 THE FUTURE OF THE CHINESE MARKETS THE RISING MIDDLE CLASS Currently, one of the biggest demographic shifts in China is the rise in the number of middle class, working citizens Presently, the middle class makes up 10% of China's population By 2020, this number is expected to rise to up to 40% There will also be a substantial amount of inflation in the real estate With increased urbanization, the government will continue to struggle with expanding the infrastructure necessary to support the number of people living in cities sector, with experts predicting a bubble REDUCTION IN CHEAP MANUFACTURING Previously, much of China's growth depended on cheap manufacturing With greater demands in laborer wages, much of this industry has been lured away by other Southeast Asian countries In 2011, Cambodia drew $850 million in this sector, greatly draining China's expansion possibilities It has been estimated that wages will grow at a rate of up to 15-20% per year, making it increasingly more difficult for China to continue with the type of cheap manufacturing which once drove their economy CAMBODIA THE AGING CRISIS China has had a long-standing one child per couple birth rate policy, and it seems like the effects of this are Estimates predict an imminent shortage of 100 million laborers, as many of the current working population reaches retirement age finally making themselves known By 2040, the elderly could account for up to 40% of China's population Having to support more and more people who will be unable to work, China's economy will struggle under this burden CONCLUSION Ultimately, China's amazing economic growth has been 30 years in the making, but even while they are still continuing to see some expansion, their economy is slowly beginning to taper off from this ascent – and the real effects are clearly making themselves visible. I-------I--- I--- I-----I-----II----I---- I----II----I--- SOURCES TIM TIMOTHYSYKES.COM http://www.forbes.com/sites/russellflannery/2013/08/11/china-faces-years-of-slowing-gdp-growth-top-strategist-says/ http://www.telegraph.co.uk/finance/china-business/10179288/China-GDP-growth-slows-to-7.5pc-in-second-quarter.html http://www.bloomberg.com/news/2013-09-03/xi-says-china-s-slower-economic-growth-is-result-of-adjustment.html http://www.ft.com/cms/s/0/66ladf50-ecf1-1le2-a0a4-00144feabdc0.html#axzz2eOz9Ne8V http://www.project-syndicate.org/commentary/china-s-struggle-to-slow http://www.foreignpolicy.com/articles/2010/01/04/123000000000000 http://en.wikipedia.org/wiki/Economy_of_China# http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/1 10801/china-economy-crash-inflation-debt-growth http://www.china.org.cn/opinion/2012-06/16/content_25658927.htm http://en.wikipedia.org/wiki/Chinese_economic_reform#Reforms_in_specific_sectors http://en.wikipedia.org/wiki/Household_responsibility_system http://www.fool.com/investing/general/2013/05/15/why-chinas-surging-economy-is-in-trouble.aspx I--------I--------I------- ----- I-------II----- I-------I------I------- I-------I-------I------