AS and A2 Macro Revision: The China Effect

This is a new eight-page revision briefing note for students taking AS and A2 macroeconomics courses on developments in the Chinese economy and their impact on the UK and the wider global economy. Fans on our Facebook page voted for it and we will be adding some more revision briefings in the next week based on the votes and preferences on the page! What is happening in China and in China’s changing economic relationships around the world is and will continue to have a profound impact on the UK and European Economy - this revision briefing looks at some of these connections. Download it here in pdf format

Revision_China_Effect_2011.pdf

“I don’t think of Brazil, Russia, India and China, (BRIC) as emerging markets. It is an insult and inopportune. And in any case, they are different markets. The BRIC economies are increasingly the major story for the world economy; they have lifted the world economy’s growth trend from 3.7 percent to 4.5 percent.”
Source: Jim O’Neill, Goldman Sachs, March 2011

“China is rife with overinvestment in physical capital, infrastructure and property… Eventually, most likely after 2013, China will suffer a hard landing. All historical episodes of excessive investment – including East Asia in the 1990s – have ended with a financial crisis and/or a long period of slow growth.”
Source: Professor Nouriel Roubini, April 2011

“The balance of global growth has shifted substantially. Not so long ago, the picture was fairly clear – two-thirds of world economic growth came from advanced economies and one-third came from emerging and developing economies. Now and for the foreseeable future it will be the other way around. Two-thirds of global growth will be from the emerging world; they are the engines of the world economy; its locomotives.”
David Smith, Sunday Times, 2010

“The growth of the stock of Chinese FDI to low income countries (LICs) is striking; it increased 20-fold in just seven years from 2003 to 2009. In African countries such as Nigeria and Zambia, amounts from China of over US$100 million per year have been the norm over the past few years. In Zambia, for instance, this has represented 1–1½ percent of GDP.”
Source: IMF Report, February 2011

Some of the concepts covered by the revision note include the following:

Emerging market
Physical capital
Infrastructure
Trade balance
FDI
Commodities
Comparative advantage
External shocks
Real GDP
Fiscal balance
Current account balance
GDP value added
GDP per capita PPP
Economic growth
Re-balancing of growth
Entrepreneurial activity
Higher-value, high-knowledge manufactured products
Service sector industries
Exporting inflation
Lewis turning point
Wage inflation
Minimum wage
Fiscal stimulus
Export-led growth
BRICS
Economic cycle
Domestic consumption
De-coupling
Endogenous growth
sustainable growth
sovereign wealth funds
remittance income
agflation
wage inflation
demand-pull inflation
cost-push inflation
price controls
exchange rate appreciation
import tariffs
currency peg
managed floating exchange rate