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The Third Plenum has finished in China and with it has come some potentially significant reforms designed to rebalance the Chinese economy and shape future growth and development. The BBC's Linda Yueh has been prominent in reporting on this crucial stage of Chinese development and we have linked below to some of her recent output broadcast on the BBC.read more...»
This revision presentation highlights the key opportunities and threats faced by firms outside China looking to do business in and with China. It also provides examples of businesses that have succeeded in China and those that have struggled!
A fully editable and printable version of this presentation is included in our AQA BUSS4 2014 Toolkit on China which is being published on 8 November 2013.read more...»
This looks like being a great resource for students wanting to deepen their awareness and understanding of the Chinese economy. Here is the BBC's new China Blog. All the BBC's China journalists will be blogging here
China’s government wants its economy to grow more sustainably. Currently, the Chinese economy is growing at a rate of 7.8% in the period July to September, compared to 7.5% in the previous quarter. However, this is significantly lower than the high and unsustainable rates of growth that the Chinese economy experienced over the last decade. The Chinese government have set a target growth rate of 7.5% over the next year and analysts believe that this will be achieved.read more...»
In a recent assignment, A2 students were asked to write a 500 word profile on each of two development economists of their choice and to capture their key ideas and connect to one or more current issues in development. I will be adding some of their responses to the economics blog. Here Ben Evans focuses on the work of Daron Acemogluread more...»
In the second part of his conversation with Professor Richard Hausmann, John Authers from the FT asks which countries are well set for growth in the years ahead. Hausmann argues that there are three factors that explain growth - firstly how well natural resources are used, second how many productive capabilities a country currently has. And thirdly, how easy can a nation can acquire new productive capabilities. He claims that Mexico is better placed than Brazil on account of improved diversification into more sophisticated products. Hausmann forecasts that China will grow at a rate of around 5% between now and 2020, well below the growth target set by the Chinese government.read more...»
Growth elasticity of poverty is a measure of elasticity (responsiveness) that calculates how much poverty falls for each percentage point in economic growth. According to a recent estimate from World Bank development economists Luc Christiaensen, Punam Chuhan-Pole and Aly Sanoh, that elasticity was about 2.0 in the developing world as a whole (excluding China) during the 2000s, but only 0.7 in Africa. In other words, the rapid growth achieved in many African countries over the last decade or more has not had as much impact on inequality as in other regions.read more...»
The nature of A2 economics specifications is that they lag interesting and important developments in the subject much of which are directly relevant to what students are taught in the classroom. The role of complexity in understanding how and why countries grow is one such example and I have blogged before about the work of Cesar Hidalgo and Richard Hausmann through the Observatory of Economic Complexity - see "Teaching Trade in a Different Way"
It is a joy to find the Financial Times covering some of their ideas in a brace of short videos as part of the John Authers Daily Note. You can always find these clips on the FT's You Tube Channel and I strongly recommend this for ambitious and enthusiastic students.read more...»
Where would you expect a Starbucks latte to be cheaper - in a coffee store in downtown New York or in a Starbucks store in China? Keep in mind that per capita incomes in China are around one tenth of those in the United States.
The answer may come as something of a surprise!
In a report on coffee prices that has caused something of a stir across social media platforms, the state-owned broadcaster CCTV reported that a medium-sized latte cost Rmb27 ($4.43) in China compared with Rmb19.98 in Chicago, Rmb14.6 in Mumbai and Rmb24.25 in London.
Starbucks responded that its pricing strategy was based on local market costs, including infrastructure investment, real estate and labour costs. It also added that its Asia-Pacific profit margin was for 14 countries, not just China. They added that each Starbucks market is unique and has different operating costs and that it would be inaccurate to draw conclusions about one market based on the prices in a different market.
The prices of imported goods in China are often raised because of the effects of import taxes (tariffs) - in this case the customs duty on roasted coffee beans is 15%. Add to that a sales tax of 17%.read more...»
A huge reminder about the shifts in economic power arrived with the news about the development of Hinkley C nuclear power station.read more...»
It was a pleasure to visit the LSE earlier on this week to hear a lecture from the distinguished economist Professor Angus Deaton from Princeton University in the United States. His new book "The great escape from inequality" is on my must-read list for the half term holiday and brings into focus over 250 years of changes in health and income inequalities across the world economy.
I will blog about his book a little later on but for now this Financial Times interview provides an introduction to some of the main themes of his book. Incidentally, Professor Deaton has strong views on the efficacy of foreign aid and this chapter of his book has provoked some strong responses from the pro-aid lobby active on twitter. Click below for the full video of his lecture at the LSE.read more...»
On the World Bank twitter account, President Jim Kim is quoted as saying that "Properly managed, new minerals wealth could transform Africa’s development." Back in June 2013, a new report from the African Progress Panel looked at this important issue and set out an agenda for maximising Africa’s natural resource wealth and using it to improve well-being.
My own students have been researching the economics of natural resources and whether they can be a blessing and/or a curse to countries seeking sustained growth and development. I just wanted to share one or two of these essays with you because I was delighted with the depth of the independent research on show and the quality of evaluation in their arguments.read more...»
Workers in Peru say they are suffering because of competition from cheaper imports. Chinese imports are stifling what was one of the largest clothing manufacturers in South America and a free trade agreement could make matters worse. A short video clip on this issue/read more...»
A revision presentation on aspects of the links between investment and economic growth. Plus some slides on the causes of the so-called Middle Income Trapread more...»
Here are some video resources on Shanghai's new tree trade zone. The Financial Times reports that "The Chinese government has declared that it wants to use the zone – a small 28 sq km sliver of Shanghai – as a test bed for policies from interest rate liberalisation to capital account opening - There are no residents in the zone – only offices, factories and hotels" There is much debate about whether the creation of a new free trade zone will bring about greater digital freedom in China - allowing for example, freer access to social networks such as Facebook and Twitterread more...»
More than half of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the U.S. from China or are actively considering it, according to a new survey by The Boston Consulting Group.
The share of executives who are planning to "onshore" or “reshore” or are considering it rose to 54 percent, compared with 37 percent of executives who responded to a similar BCG survey in February 2012.read more...»
Here at Tutor2u we are really looking forward to the launch of a new programme on BBC - Talking Business with Linda Yueh. Linda has spoken at several of our Tutor2u events in recent years and her ability to communicate important and often complex ideas to a wider public has been clearly evident in her presentations. This is a programme well worth tuning into and sharing with your students. Click here for details. See also: China's Transformation - The Long View (Linda Yueh at the Tutor2u Conference)
Today in class we were discussing the forces of globalisation, and some of the discussion took us down the following route:
Globalisation is defined in many different ways – there is no textbook definition - but economic globalisation is usually characterised by some of the following features:
- An increasing interdependence between economies and an erosion of national boundaries
- Increased cross-border activity from MNCs
- Increased cross-border flow of trade in goods and services, movement of people, flows of financial assets, hot money, and FDI flows
- The growth of labour migration and outsourcing and global supply chains
The OECD’s definition is: “The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets”
One index that attempts to quantify and measure globalisation is called the KOF index.
-The KOF Index of Globalization measures the three main dimensions of globalization:
Economic, Social and Political.
In the whole of the 20th century, only a few countries managed to transform themselves and join the club of rich economies. Japan is the most prominent example. The key question for the first half of the 21st century is whether or not China will manage to do the same. It is a difficult and elusive feat, and the number of failures, of countries who nearly made it but then fell back, is as great as the successes.read more...»
China’s track record on using its currency as a tool for manipulating its international competitiveness has been well documented, especially during the period of 1995-2005, where it was pegged at 8.28 RMB to the USD.
However, adopting such strict policies on the exchange rate, leads to the Impossible Trinity / Trilemma - that is, that it is not possible for a country to have all three of the following at the same time:
- A fixed exchange rate
- Free movement of capital
- An independent monetary policy
Economist Anthony Beaumont considers how the deeper economic integration within the ASEAN single market can act as a stimulant to economic growth and development for member nationsread more...»
Few places come close to matching the revenues from gambling generated by casino-led Macau as this Economist graphic illustrates! Macau is a special administrative region of China on the other side of the Pearl River Delta from Hong Kong. Jobs in casinos are easy to come by and unemployment is said to be little more than 2% of the labour force. But what are the economic risks and social costs of having a local economy chronically dependent on gambling for the bulk of jobs and incomes?read more...»
ASEAN is a trade bloc of 10 nations with an aggregate economic size of $2.3 trillion. Their aim is to establish a fully-fledged economic community (AEC) by the end of 2015. The trading bloc’s diversity – ranging from advanced economies like Singapore to developing countries like Myanmar is an interesting feature – who will be the winners and losers from deeper economic integration in the region?read more...»
Here are some summary notes from a discussion between Danny Quah and Ha Joon Chang at a recent LSE panel discussion on the question "Is there a future for market-led development?"read more...»
There has been renewed focus in recent weeks on the slowing growth rates in the BRIC countries - Brazil, Russia, India and China. It is inevitable that the pace and sources of growth will change as these countries develop and experience continued structural adjustments. How successful will they be in responding the the challenges and opportunities of the next stage of development? In this blog we link to some recent articles on the BRIC countries for students wanting to deepen their understanding of this important area of the A2 macro course.read more...»
Here is another good resource for students who are looking at prospects for the Chinese economy as part of their macro economic studies. While the Chinese economy continues to slowdown, policymakers in Beijing are faced with the dilemma of how to rebalance an economy that till now has relied heavily on investment. The FT's Simon Rabinovitch reports from Guiyang. A re-balancing China will have to be a slower-growing China.
Follow the tags at the bottom of this blog for connections to all of our recent Unit 4 macro blog entries on China.read more...»
What effects does the rapid growth and development of the Chinese economy have on the prices we pay in the UK for different goods and services. This short video from the Bank of England looks at some research into the impact of China on our own consumer price index. It is good for deepening your understanding of the inter-connections between the two economies.read more...»
The pace of growth of the Chinese economy is weakening with new data showing an annual growth of real GDP dipping to just over 7%. China's economy is re-balancing away from investment and exports towards consumption. But at present there is a squeeze in household spending. Consumption in China contributed 60.4% to GDP growth in first half of 2012, only 45.2% in the first six months of 2013.
We link here to some resources on the issues surrounding the reduction in growth rates for the Chinese economy.read more...»
If this research is accurate the results are truly shocking. Coal related air pollutants have been shown to reduce lifespans in China by over five years, according to a new study conducted by researchers at Massachusetts Institute of Technology and three other universities.
It is a compelling example of the human consequences of the externalities created by intense air pollution in one of the world's fastest-growing countries. Almost half of the world's coal is burnt in China - rapid development in the north of the country has increased the incidence of strokes and lung cancer, in part connected to the distribution of free coal for burning in millions of homes.
The Chinese government has announced plans for a new carbon emissions trading scheme as part of a strategy to lower pollution and achieve more sustainable development. It has ordered firms in heavy-polluting industries to cut emissions by 30% by 2017read more...»
Changing tastes and preferences drive resource allocation in a market economy. Coffee consumption in China has been growing steadily as the country's middle class tries new drinks and the result is that new coffee cash crops are being grown China to help satisfy growing demand from the domestic market. The Chinese Coffee Federation is also hoping that Chinese coffee will establish itself as a major coffee exporting nation.
Dr Linda Yueh gave a fantastic talk at the ETNC on the growth and development challenges facing China in the years ahead. Here is a shortened version of a recent talk given by her at the RSA in London in April 2013. We have also streamed the contents of the presentation for those who want to follow the talk in more detail.read more...»
CK Prahalad once wrote of the "fortune at the bottom of the pyramid" - reflecting the commercial opportunities for businesses that can successfully connect and bring products to markets inhabited by low income consumers whose living standards are on the rise. China's fast-growing economy provides an enormous opportunity, but how can companies win sales in the Chinese interior, hundreds of miles away from the coastal centres of commerce?
As wealth and consumerism reach China's most remote cities, foreign brands are venturing far from Shanghai and Beijing hoping to win over millions of new consumers. The FT's Patti Waldmeir visits two lower tier cities in central China and looks at how Adidas is expanding in the far outposts of the Middle Kingdom.
Hundreds of millions of people around the world are escaping poverty and becoming middle class. The explosion of new consumers in China, India and other economic powerhouses is changing the global balance of power. The BBC website has a new series on exploring the effects of this shift in global economic power and influence - click here for further research and watch the video below
The BBC's Chief Business Correspondent Linda Yueh @lindayueh has new page on developments in global economy http://www.bbc.co.uk/news/correspondents/lindayueh/ - definitely one for students and teachers to follow. The opening article focuses on a concept that we have been pushing in our own macro coverage in recent times, namely the emergence of a multi-polar world economy with growth coming from a bigger number of countries / regions and less dependent on the advanced western economies. Read the article here
Here are some notes taken from a talk given by Linda Yueh on the Chinese economy at the RSA in London on the 18th April, 2013read more...»
The latest edition of African Pulse published by the World Bank focuses on growth and development prospects in Sub-Saharan Africa and the overall sentiment is that the region is set to continue with a strong growth performance.read more...»
A brief overview of economic developments in Angola, one of the fastest growing countries in the world - contains updated links to study resources on Angola.
Revision blog on the economics of foreign direct investment in Africa with a special focus on investment from China and other BRIC countriesread more...»
This is great for understanding key shifts in global trade and investment. The Economist offers this short video on the rising prominence of Chinese money in property and currency markets and FDI from Chinese businesses within the EU.read more...»
The Middle-Income Trap has become a popular and much quoted concept in development economics. Much discussion on the policies and strategies to lower the risks of growth slowdowns before a country has achieved high income status. But how relevant is the middle income trap? The absence of a clear definition of the idea makes it difficult to measure, this article from the Economist has a go and is highly relevant for students taking courses in development economics, especially EdExcel Unit 4.
Peter Mandelson famously said that he was ‘intensely relaxed about people getting filthy rich’. As was the case with many aspects of New Labour, he was working firmly in the Leninist intellectual tradition. Some 20 years earlier, the then leader of the Chinese Communist Party, Deng Xiaoping, stated that ‘to get rich is glorious’.
The Chinese have certainly put the philosophy into practice. An intriguing article in the Wall Street Journal at the end of last year by James Areddy and James Grimaldi, described the deep intermingling of China’s richest men with the Communist Party. For example, Liang Wengen, who owns a major construction equipment making firm and whose personal wealth is estimated at $7.3 billion – billion! – is a member of the key political body, the Communist Party Congress. Overall, the elite political institutions in China have no fewer than 160 individual billionaires as members.read more...»
This is a quite remarkable short video looking at the largest human migration on earth as up to 1bn Chinese people each year go home to their roots. The FT's Patti Waldmeir reports on the phenomenal combined buying power of China's 260m migrant workers and looks at the type of gifts they are buying this year. Consider this in the context of Chinese growth and development, the deep and persistent gaps in living standards between urban and rural areas and the challenges facing Chinese policy-makers as they seek greater regional balance in their development process. What opportunities are there for Western businesses in the Chinese countryside?read more...»
It has suddenly become fashionable to be concerned about China’s growth rate slowing down. This is not a matter of a short-run cyclical downturn, with normal service being resumed shortly as the economy roars ahead once more. It is a worry that there will be a permanent slowdown by the end of this decade. Instead of annual growth rates around 10 per cent and even more, the Chinese economy will settle down to the much more sedate rates seen in the West in the 1950s and 1960s in the range 3 to 5 per cent.
There are several research organisations out there producing regularly updated forecasts on what is likely to happen to the relative shares of global GDP and income per capita over the long run. Typically the forecast stretches out to 2050 and necessarily involves plenty of uncertainty. But these over the horizon studies are quite interesting in their own right because they remind us of the changing drivers of growth in the world economy.
Here is one of these reports - World in 2050 The BRICs and beyond: prospects, challenges and opportunities - produced by economists at PriceWaterhouseCoopersread more...»
Do you need to keep informed on China for your exams? If so, I recommend you follow @MoTanweer on twitter and in particular his new scoop.it board on China desgined as a study resource for Pre-U students. You can find it here http://www.scoop.it/t/china-pre-u
The latest edition of Counting the Cost has this useful analysis of the prospects for the global economy in 2013 - and in particular the state of the Chinese economy and whether the growth numbers and forecasts for China can be trusted.read more...»
This has to be my new favourite story, and it will work particularly well for A2 but for AS too, with elements of micro as well as macro.......
Did you know that China produces 80% of the world's supply of garlic?
Did you know that police in Britain, Ireland, Austria and Poland arrested smugglers for illegally importing at least €3m worth of garlic into the EU last year alone?
Land Grabs have become an important and controversial issue in development economics in recent years.read more...»
The middle income trap exists for some countries that make significant progress in reducing extreme poverty and experience structural change and growth but then find it difficult to make the climb from being a middle-income country to achieve high-income fully-developed status. GDP growth rates often slow down and a country can struggle to build and maintain international competitiveness. Research from the World Bank finds that only 13 of the 101 countries deemed to be middle-income countries in 1960 had achieved high-income levels in 2011. Different studies find different thresholds for where growth tapers off, ranging from $8,500 to $18,500 at 2010 prices, adjusted for purchasing power parity.
The economist Robert Solow (pictured) developed the neo-classical theory of economic growth. Solow won the Nobel Prize in Economics in 1987.read more...»