This modern Chinese economics survey covers the period from the founding of the People’s Republic in 1949 through the present day, reviewing the dramatic change from a centralized planning economy to a mixture of planning and free-market economy within a short period of 50 years. The course focuses on three major areas of the Chinese economy. First is the historical and theoretical background of the centralized economic model, as well as the reasons for the economic reform in the late 70’s and early 80’s into a free-market dominated system. During this section we will examine structural changes and GDP growth trends. Second is the post-reform manufacturing bases and financial institutions, and their role in China’s economy. Third is an inquiry on whether or how can China avoid the middle-income gap. Tied into all three sections of this course is a continuing discourse on the impact of globalization on China and China’s increasing economic role in the world economy, as well as one of China’s biggest challenges: maintaining sustainable growth given the environmental constraints on China’s fast development. The course provides an in-depth understanding of how China’s economy has evolved during the past 50 years and its impact on the global economy. Classroom learning experiences are integrated with field research through a mobile classroom. The seminar based course will be accompanied by field visits to sites to demonstrate the dynamism of the Chinese economy from both a micro-economic and macro-economic perspective. (3 credits)
Prerequisites:
Introduction to Economics required, prior coursework in Macro- and/or Micro-economics preferred.
Attendance policy:
There will be NO unexcused absence during the term. Any unexcused absence will result in your grade being lowered a half-grade (i.e. from a B+ to a B) Proper Documentation MUST be provided for all absences.
Method of presentation:
Lectures, seminar discussions, and field study
Required work and form of assessment:
Participation—20%
Week 2 quiz – 10%
Online currency discussion—15%
Group presentation—25%
Final exam—30%
Participation: This course is structured in a seminar/lecture format with field trips to relevant sites. Students must participate actively in all class discussions and field trips, and are encouraged to share their field research/observation with the rest of the class in the weekly class discussions.
Group Presentation: The class will divide into 2-3 groups and present on a topic relevant to the course which is agreed upon by the group and approved by the instructor. Presentations should be no more than 20 minutes and presenters should submit notes from their presentation to the instructor for review. Presentations will be graded on the depth and accuracy of information provided and discussion of relevance to the Chinese economy at large.
Final exam: Students will sit a 2 hour final exam comprised of completion and essay questions relevant to materials studied and topics discussed in the class.
content:
The Modern Chinese Economy [EC312] - Readings
Class 1 Overview of Chinese Economy, Geography, and present challenges
Naughton Chapter 1 17-31
“Vaunting the best, fearing the worst.” The Economist, October 27, 2012.
Class 2 The structure of Reform and Opening I: Deng Xiaoping
China's Economy: 60 Years of Progress, Wu Jinglian, Caijing Magazine Special Issue, 2009
Vogel, Ezra. Deng Xiaoping and the transformation of China. Pp 109-114, 217-248
Naughton Chapter 4 85-110
Class 3 The Structure of Reform and Opening II: Growth models
Key concepts: Special economic zones, Household responsibility system; eating in separate kitchens; Harrod-Domar Growth model; GDP structure; dynamics of the Great Leap Forward; One child policy.
Naughton. Chapter 6 137-158
Naughton. Chapter 7 161-177
Vogel, Ezra. Deng Xiaoping and the transformation of China. Pp 394-449
Class 4 The Structure of Reform and Opening III: Rural transition and controlling the macroeconomy
Key concepts: Solow growth model; Lewis Model
Vogel, Ezra. Deng Xiaoping and the transformation of China. Pp 450-476, 595-639
Lardy, Et al. “Sustaining Economic Growth in China” 105-136 in China Rising Challenges and Opportunities
Naughton Chapter 13 Industry: Ownership and Governance 297-325
Naughton, Barry. “The Dynamics of China’s Reform Era Economy” in China Rising in Historical Perspective, 129-147
Class 6 SOE’s 2012: A growing government encroaching on the private market?
Guest speaker: Wang Kan, Former Beijing SOE Union Chief
Naughton, Barry. "SASAC and Rising Corporate Power in China" China Leadership Monitor. 2009
MacGregor, Richard. The Party. Ch 2 “China Inc. The Party and Business” pp 34-69.
LIU Xiaoxuan, Chapter 6, “Main Conclusions and Policy Implications”, The Micro-foundation of China’s Market Economy (Singapore: Cengage Learning), 2010.
Class 7 Corruption in China and the developing world
Guest Speaker: Barry Naughton on SOE reform and industrialization policy
Corruption in China’s economic reform: a review of recent observations and explanations Olivia Yu, Crime Law Soc Change (2008) 50:161–176
Osnos, Evan. “Boss rail: How a railway disaster exposed the underside of a boom.” The New Yorker. October 22, 2012.
Schleifer and Vishny (pdf)
Optional: Lardy, Nicholas. Corruption in China: Crisis or Constant in China’s Rise: Challenges and Opportunities 91-104
Class 8 International Trade QUIZ 1
Naughton Chapter 16 377-399
Lee, Park, and Wang. “Different types of firms, products and directions of trade: the case of the People’s Republic of China.” Asian Development Bank, August 2012.
Class 9 International Trade and FDI; Trip to Tianjin TEDA SEZ
Naughton Chapter 17 401-423
China’s post-economic reform growth: The role of FDI and productivity progress, Chyau Tuan, Linda F.Y. Ng , Bo Zhao, Journal of Asian Economics 20 (2009) 280–293; SKIM
Field Trip to Tianjin:
6:00am Meet at BFSU West Gate – taxi to South train station
7:20am High speed rail to Tianjin TEDA (55min, 240km)
9:00am Tour Tianjin Economic and Development Area (TEDA)
10:30am Tour manufacturing site
1:05pm Return to Beijing via high speed rail. (grab quick lunch)
3:00pm Return to BFSU
Class 10 : International Trade & Foreign exchange
“China as a Global Manufacturing Powerhouse: Strategic Considerations and Structural Adjustment”, Huw McKay, Ligang Song, China & World Economy / 1 – 32, Vol. 18, No. 1, 2010
Past Successes and New Challenges: China’s Foreign Trade at a Turning Point, Françoise Lemoine, China & World Economy / 1 – 23, Vol. 18, No. 3, 2010
“Is China a Currency “Manipulator”?” Morris Goldstein, Peterson Institute for International Economics, 28 January 2009
Class 11 : Forex and Balance of payments: Currency debate round 1 Topics:
- The great imbalances
- China’s exchange rate policy
- The rise of offshore Renminbi finance
- Why is China suppressing its exchange rate?
Key concepts:
- Balance of payment mechanisms
- Current account sterilization
- Trade-weighted exchange rate
Adjustment in global imbalances and the future of trade growth in Rebalancing the Global Economy: A Primer for Policymaking, Freund 2009, CEPR
“Causes and Consequences of Global Imbalances: Perspective from Developing Asia” Charles Adams & Dongyun Park, 2009, Asian Development Review, vol. 26, no. 1
Testimony: Correcting the Chinese Exchange Rate. Bergsten, C Fred. 2010. U.S. Congressional Testimony. September 15.
Ahmed, Shaghil. 2009. “Are Chinese exports sensitive to changes in the exchange rate?.” Board of Governors of the Federal Reserve System International Finance Discussion Papers
Class 12 Inflation and Financial Repression Topics:
- Why is the Chinese government concerned with inflation?
- Why do SOEs and households save so much?
- The role of interest rates in the Chinese economy
- Can inflation be contained while exports and bank lending continue to grow?
- Is financial repression now costing more than it benefits China?
Key concepts:
- Inflation
- Velocity of money
- consumption smoothing over the life cycle
- Financial repression
Naughton Chapter 18 425-449
Why are savings rates of urban households in China rising?, Marcos Chamon Eswar Prasad, American Economic Journal, 2010 vol. 2 (1) pp. 93-130
China's Financial Repression, James A. Dorn, Washington Times May 21, 2008
Where is the Inflation? Michael Pettis, pettis.com, 15 June 2010
Class 13 How much debt is in the Chinese economy? In class currency debate.
Key topics
- Chinese banks, reform, regulation
- Where do all the loans go?
- Can excessive lending seriously slow/impair China’s economic growth?
“The Sustainability of China’s Recovery from the Global Recession, Nicholas Lardy, PB10-7, Peterson Institute for International Economics, March 2010
“Chinese Banks, Growth of Leverage Still Outpacing GDP Growth”, Fitch Ratings, 2011
Class 14 Passing the Middle Income Gap: Employment, Wages, and the Migrant Labor Force
Field trip to Migrant worker organization 4pm
Topics
- The countryside’s contribution to economic growth
- The urban-rural divide and the incentives to move to the city
- The role of migrant labour in the economic success of China
- The ‘new socialist countryside’
- Is the Chinese countryside where the ‘true’ Chinese private sector is to be found?
Murphy, Rachel. “Migration, Remittances, and Goals.” in How Migrant Labor is Changing China. Cambridge: Cambridge, 2002. Chapter 4, (pp88-123).
Toward a Harmonious Countryside: Rural Development Survey Results of the People’s Republic of China, Asian Development Bank Working Paper Series, No 214. (skim)
Class 15 The Housing bubble and Passing the Middle Income Gap: Housing and Urbanization
Guestspeaker: Steven McCord on China’s housing market
Bertaud, Alain. "Affordability of Housng in China: A Stock and Flow Approach." 2010. pp 1-20
Vandenberg and Zhang. "China and the Middle Income Trap." Asian Development Bank, 2011. (not for citation)
Jiang Shixue. "The Middle Income Trap is a meaningless question." pp 1-3. ChinaPolicy.
Reference: “Preparing for China’s Urban Billion”, McKinsey Global Institute, March 2008
Class 16 Passing the Middle Income Gap: Human Capital, Education, and Social programs
Li Shi. Excerpts from "Issues and Options of Social Welfare Reform in China." Beijing Normal University. pp 1-26.
Heckman and Ji. "Human Capital, Economic Growth, and Inequality in China." NBER Working papers series. May 2012. pp 1-11.
Constant, Amelie et al. "China's Latent Human Capital Investment: Achieving Milestones and Competing for the Top." 2011. pp 1-16
READ PPT: Rozelle, Scott. Rural Education Gap in China.
Class 17 Passing the Middle Income gap: Innovation, Urbanization and industrial policy
“Urbanization, Agglomeration, and EconomicDevelopment.” Quigley, John M. 2008. Commission for Growth and Development(April 18): 1–36.
"Unlocking Innovation in China." Economist Intelligence Unit. 2009. pp 1-21.
MacGregor, James. "China's Drive for Indigenous Innovation: A web of industrial policy." APCO, 2011. 1-45.
Class 18 : Afternoon final exam (discuss time)
Monday : Wrap up and final presentations
Required readings:
Chin, Gregory T. “The Politics of China’s Western Development Initiatives.” China's West Region
Development. William A. W. Neilson and Ding Lu (eds). Singapore: World Scientific, 2004. 137-174.
Cohen, David. “The Global Reverb of China and India.” Newsweek. February 9, 2006
Economy, Elizabeth. The River Runs Black. New York: Cornell University Press, 2004.
Kang, Ouyang and Li Yong. “Management and Utilization of Water Resources in the People’s
Republic of China.” Dhirendra Vajpeyi (ed). Water Resource Management. New York:Praeger/Greenwood, 1998. 33-50.
Lampton D. “A Plum for a Peach: Bargaining, Interest and Bureaucratic Politics in China”.
Bureaucracy, Politics and Decision making in Post-Mao China. Lieberthal, K. and D. Limpton (eds). Berkeley: University of California Press, 1992.
Lardy, Nicholas. “China Enters the World Trade Organization.” Integrating China into the World Economy. Washington, D.C.: Brookings, 2002. 4-28.
Loi Lei Lai. “Electric Industry Restructuring in China.” Power System Restructuring and Deregulation. New York: John Wiley and Sons, 2001. Chapter 7, 220-255.
Naughton, Barry. The Chinese Economy, From Transition to Development. 2006 (to be published).
Perkins, Dwight. “Designing a Regional Development Strategy for China.” China's West Region
Development. William A. W. Neilson and Ding Lu (eds). Singapore: World Scientific, 2004. 17-26.
Steinfeld, Edward S. Forging Reform in China: The Fate of State-Owned Industry. Cambridge
University Press, 2000.
This modern Chinese economics survey covers the period from the founding of the People’s Republic in 1949 through the present day, reviewing the dramatic change from a centralized planning economy to a mixture of planning and free-market economy within a short period of 50 years. The course focuses on three major areas of the Chinese economy. First is the historical and theoretical background of the centralized economic model, as well as the reasons for the economic reform in the late 70’s and early 80’s into a free-market dominated system. During this section we will examine structural changes and GDP growth trends. Second is the post-reform manufacturing bases and financial institutions, and their role in China’s economy. Third is an inquiry on whether or how can China avoid the middle-income gap. Tied into all three sections of this course is a continuing discourse on the impact of globalization on China and China’s increasing economic role in the world economy, as well as one of China’s biggest challenges: maintaining sustainable growth given the environmental constraints on China’s fast development. The course provides an in-depth understanding of how China’s economy has evolved during the past 50 years and its impact on the global economy. Classroom learning experiences are integrated with field research through a mobile classroom. The seminar based course will be accompanied by field visits to sites to demonstrate the dynamism of the Chinese economy from both a micro-economic and macro-economic perspective. (3 credits)
Introduction to Economics required, prior coursework in Macro- and/or Micro-economics preferred.
There will be NO unexcused absence during the term. Any unexcused absence will result in your grade being lowered a half-grade (i.e. from a B+ to a B) Proper Documentation MUST be provided for all absences.
Lectures, seminar discussions, and field study
Participation—20%
Week 2 quiz – 10%
Online currency discussion—15%
Group presentation—25%
Final exam—30%
Participation: This course is structured in a seminar/lecture format with field trips to relevant sites. Students must participate actively in all class discussions and field trips, and are encouraged to share their field research/observation with the rest of the class in the weekly class discussions.
Group Presentation: The class will divide into 2-3 groups and present on a topic relevant to the course which is agreed upon by the group and approved by the instructor. Presentations should be no more than 20 minutes and presenters should submit notes from their presentation to the instructor for review. Presentations will be graded on the depth and accuracy of information provided and discussion of relevance to the Chinese economy at large.
Final exam: Students will sit a 2 hour final exam comprised of completion and essay questions relevant to materials studied and topics discussed in the class.
The Modern Chinese Economy [EC312] - Readings
Class 1 Overview of Chinese Economy, Geography, and present challenges
Class 2 The structure of Reform and Opening I: Deng Xiaoping
Class 3 The Structure of Reform and Opening II: Growth models
Key concepts: Special economic zones, Household responsibility system; eating in separate kitchens; Harrod-Domar Growth model; GDP structure; dynamics of the Great Leap Forward; One child policy.
Class 4 The Structure of Reform and Opening III: Rural transition and controlling the macroeconomy
Key concepts: Solow growth model; Lewis Model
Class 5 Industrialization and growth arguments
Class 6 SOE’s 2012: A growing government encroaching on the private market?
Class 7 Corruption in China and the developing world
Class 8 International Trade QUIZ 1
Class 9 International Trade and FDI; Trip to Tianjin TEDA SEZ
Field Trip to Tianjin:
6:00am Meet at BFSU West Gate – taxi to South train station
7:20am High speed rail to Tianjin TEDA (55min, 240km)
9:00am Tour Tianjin Economic and Development Area (TEDA)
10:30am Tour manufacturing site
1:05pm Return to Beijing via high speed rail. (grab quick lunch)
3:00pm Return to BFSU
Class 10 : International Trade & Foreign exchange
Class 11 : Forex and Balance of payments: Currency debate round 1
Topics:
- The great imbalances
- China’s exchange rate policy
- The rise of offshore Renminbi finance
- Why is China suppressing its exchange rate?
Key concepts:
- Balance of payment mechanisms
- Current account sterilization
- Trade-weighted exchange rate
Class 12 Inflation and Financial Repression
Topics:
- Why is the Chinese government concerned with inflation?
- Why do SOEs and households save so much?
- The role of interest rates in the Chinese economy
- Can inflation be contained while exports and bank lending continue to grow?
- Is financial repression now costing more than it benefits China?
Key concepts:
- Inflation
- Velocity of money
- consumption smoothing over the life cycle
- Financial repression
Class 13 How much debt is in the Chinese economy? In class currency debate.
Key topics
- Chinese banks, reform, regulation
- Where do all the loans go?
- Can excessive lending seriously slow/impair China’s economic growth?
Key concepts
- Financial leverage and risk
- Off-balance sheet finance
- Financial crises
Class 14 Passing the Middle Income Gap: Employment, Wages, and the Migrant Labor Force
Field trip to Migrant worker organization 4pm
Topics
- The countryside’s contribution to economic growth
- The urban-rural divide and the incentives to move to the city
- The role of migrant labour in the economic success of China
- The ‘new socialist countryside’
- Is the Chinese countryside where the ‘true’ Chinese private sector is to be found?
Key concepts
- Structural change
- Inequality & development
- Gini coefficient
Class 15 The Housing bubble and Passing the Middle Income Gap: Housing and Urbanization
Guestspeaker: Steven McCord on China’s housing market
Reference: “Preparing for China’s Urban Billion”, McKinsey Global Institute, March 2008
Class 16 Passing the Middle Income Gap: Human Capital, Education, and Social programs
Class 17 Passing the Middle Income gap: Innovation, Urbanization and industrial policy
Class 18 : Afternoon final exam (discuss time)
Monday : Wrap up and final presentations
Chin, Gregory T. “The Politics of China’s Western Development Initiatives.” China's West Region
Development. William A. W. Neilson and Ding Lu (eds). Singapore: World Scientific, 2004. 137-174.
Cohen, David. “The Global Reverb of China and India.” Newsweek. February 9, 2006
Economy, Elizabeth. The River Runs Black. New York: Cornell University Press, 2004.
Kang, Ouyang and Li Yong. “Management and Utilization of Water Resources in the People’s
Republic of China.” Dhirendra Vajpeyi (ed). Water Resource Management. New York:Praeger/Greenwood, 1998. 33-50.
Lampton D. “A Plum for a Peach: Bargaining, Interest and Bureaucratic Politics in China”.
Bureaucracy, Politics and Decision making in Post-Mao China. Lieberthal, K. and D. Limpton (eds). Berkeley: University of California Press, 1992.
Lardy, Nicholas. “China Enters the World Trade Organization.” Integrating China into the World Economy. Washington, D.C.: Brookings, 2002. 4-28.
Loi Lei Lai. “Electric Industry Restructuring in China.” Power System Restructuring and Deregulation. New York: John Wiley and Sons, 2001. Chapter 7, 220-255.
Naughton, Barry. The Chinese Economy, From Transition to Development. 2006 (to be published).
Perkins, Dwight. “Designing a Regional Development Strategy for China.” China's West Region
Development. William A. W. Neilson and Ding Lu (eds). Singapore: World Scientific, 2004. 17-26.
Steinfeld, Edward S. Forging Reform in China: The Fate of State-Owned Industry. Cambridge
University Press, 2000.