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UNDERGRADUATE THESIS

EMERGENCE OF CHINESE ECONOMY


AND ITS IMPACT ON GLOBAL ECONOMY
Carolina POSTICA

Actuality of the researched topic


On the global level, China became once again the
worlds largest economy, overtaking the U.S. in 2014.
It is currently the worlds largest merchandise trading
economy, largest destination of foreign direct
investment (FDI), largest manufacturer and largest
holder of foreign exchange reserves.
On the national level, friendly relations between the
China and Republic of Moldova maintaining stable and
healthy development, pragmatic cooperation in
various fields has given fruitful results. Besides
development of trade relations, cooperation in the
form of low-interest loans and humanitarian aid also
plays a significant role in economic relations between
the two countries, helping Moldovan state to improve

The purpose of the thesis

The aim of this thesis is to


investigate the impact of Chinas
continued emergence and on this
basis to identify to what extent it has
affected the global economy, and
national economies.

Objectives
To understand the evolution of modern Chinese economy and to
define the incentives that lead to its re-emergence as global
power;
To determine the impact of Chinese economy upon key
international economic relations, and mainly its role on the
stages of world trade, investments and financial market;
To identify the Chinese contemporary contribution to the World
Economy, as well as to analyze the influence of Chinese
cooperation with biggest powers of world economy;
To identify Chinese impact upon the economy oh Republic of
Moldova by analyzing the development of Moldo-Chinese
relationship and presenting an outlook of its future cooperation;
To define the perspectives of Chinese economic development,
and to analyze the possible effects on related countries.

Content
I. THEORETICAL FRAMEWORK FOR THE ANALYSIS OF CHINESE
ECONOMY
1.1.General analysis of the evolution of Chinese economy
1.2.Chinas contemporary contribution to World Economy under
Globalization
1.3.Prospects for Future Development of Chinese Economy
II. THE IMPACT OF CHINESE ECONOMY UPON GLOBAL
ECONOMY
2.1.Impact of Chinas economy upon the key international economic
relations
2.2.Chinas cooperation with the biggest powers of the world
economy
III. COOPERATION OF CHINA WITH REPUBLIC OF MOLDOVA

CHAPTER I. THEORETICAL FRAMEWORK


FOR THE ANALYSIS OF CHINESE ECONOMY
The evolution of modern Chinese economy can
be divided into 2 periods:
-Period prior to economic reforms (1952-1978) and
-Period of introduction of the economic reforms and
their further implementation (1978- present).
ECONOMIC REFORMS INTRODUCING CAPITALIST MARKET
PRINCIPLES WERE CARRIED OUT IN FOUR STAGES:
1. The first stage, 1979-1983;
2.

The second stage, 1984-1991;

3.

The third stage, 1992-2005;

4.

The fourth stage, 2005-present.

Chinas Annual GDP and GDP


Growth (trillions US$)
The adoption of Open Door Policies in 1978 was the key changing
factor that led to a tremendous growth of GDP 9.24 trillion US$ in
2013.
20.00

10.00

18.00

9.00

9.24

8.23

16.00

7.32

14.00

7.00
5.93

12.00
4.99

10.00

4.52

8.00

3.49
2.71

6.00
4.00
2.00
0.00

8.00

0.36 0.38 0.42 0.44

0.56 0.73

0.86

1.20
0.95 1.02 1.08

1.64
1.32 1.45

1.93

2.26

5.00
4.00
3.00
2.00
1.00

199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013
GDP (current US$)

6.00

GDP growth (annual %)

0.00

CHAPTER II. THE IMPACT OF CHINESE


ECONOMY UPON GLOBAL ECONOMY
Chinas Merchandise Trade: 2000-2013
Chinas Net Oil Imports: 1997-2013
($ bln)
(mln of bpd)

China currently has free


trade agreements (FTAs) with
ASEAN, Pakistan, Chile, New
Zealand, Singapore, Peru, Costa
Rica, Hong Kong, Macau,
Iceland, and Switzerland.

Chinas Major Trading Partners in 2013


Country
European Union
United States
ASEAN
Hong Kong
Japan
South Korea
Taiwan
Total Chinese Trade

Total Trade
559
514
443
401
312
274
198
4,160

Chinese Exports
339
368
244
385
150
91
41
2,211

Chinese Imports
220
146
199
16
162
183
157
1,949

Chinas Trade Balance


119
222
45
369
-12
-92
-116
262

CHAPTER II. THE IMPACT OF CHINESE


ECONOMY UPON GLOBAL ECONOMY

140
120

108

128
124
124
121
115

95

100
84

80

7273
61
5354
47
4245454041
38
34
28

60
40
20
0

2 2 2 3 3 3 4

11

Annual FDI Flows to China: 19852014 ($ billions)

Chinas Annual FDI Outflows:


2000-2013 ($ billions)

CHAPTER II. THE IMPACT OF CHINESE


ECONOMY UPON GLOBAL ECONOMY
Average Annual RMB Exchange Rate with the Dollar: 20042014 (yuan per dollar)

SINO-EUROPEAN BILATERAL RELATIONS

Expor
ts
Impor
ts
Balan
ce
Expor
ts
Impor
ts
Balan
ce

EU28: trade in goods with China (in billion EUR)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

35.1

41.5

48.4

51.7

63.7

China
71.8

78.3

82.4

113.5

136.4

143.9

148.3

90.4

106.6

129.2

161.0

195.8

233.9

249.0

215.3

283.6

294.8

291.1

280.1

-55.3

-65.1

-80.8

-109.3

-132.1

-162.0

-162.0

-132.9

-170.1

-158.4

-147.2

-131,8

1049.
5
1183.
9
-134.4

Total
1152.
4
1364.
6
-212.2

extra-EU28
1234. 1309.
3
1
1446. 1585.
8
2
-212.5 -267.1

1094.
0
1235.
6
-141.7

1353.
2
1532.
1
-178.9

1554.
2
1727.
1
-172.9

1680.
3
1794.
0
-113.7

1737,
9
1682.
6
55.4

885.3

861.9

945.5

937.0

935.3

-51.7

-73.4

1027.
4
-82.2

EU27 FDI China/Total


flows with China

Expor 4.0%
4.8%
5.1%
ts
Impor 9.6% 11.4% 12.6%
ts EU27 FDI in China

Chinese FDI in the EU27

4.9%
13.6%

5.5%

5.8%

6.0%

7,5%

8.4%

2012

8.8%

8.6%

8.5%

14.3%

16.2%

15.7%

17.4%

18.5%

17.1%

16.2%

16.6%

2009

8 067
49

2010

10 468
384

2011
15 182
4 342

10 166
8 893

SINO-AMERICAN BILATERAL RELATIONS


Year
1980
1990
2000
2005
2006
2007
2008

U.S. Merchandise Trade with China: 1980U.S.


U.S.
U.S.
Year
U.S.
U.S.
2014
($
billions)
Exports
Imports
Trade
Exports
Imports
3.8
4.8
16.3
41.8
55.2
65.2
71.5

Balance
2.7
-10.4
-83.8
-201.6
-232.5
-256.3
-266.3

1.1
15.2
100.1
243.5
287.8
321.5
337.8

2009
2010
2011
2012
2013
2014

69.6
91.9
103.9
110.6
121.7
124.0

296.4
364.9
393.3
425.6
440.4
466.7

U.S.
Trade
Balance
-226.8
-273.1
-295.5
-315.0
-318.4
-342.3

Data on Annual U.S.China Bilateral FDI Flows: 2005-2013 and


Cumulative Value of FDI at Year-End 2013 (US$ millions)

BEA's Data on
U.S. FDI in China
BEA's Data on
China's FDI in
the United
States
Rhodium
Group's

2005

2006

2007

2008

2009

2010

2011

2012

2013

1,955

4,221

5,243

15,971

-7,512

5,420

-1,720

-1,726

7,230

Cumulati
ve
Value of
FDI
at 2013
Year-End
61,534

146

315

500

500

1,037

1,105

3,491

2,419

8,073

178

345

747

1,687

4,593

4,845

7,333

14,026

36,169

SINO-JAPANESE BILATERAL RELATIONS

Value of Japanese Exports and Imports by Area and Country (Billion


2014
Year on Year Balance
Share
Contribution
of US dollars, %)
%
Y on Y
rate

Country/ Area
Total
P.R. China

7000

U.S.A.

6000

European
5000

Union

(28)
4000
CIS countries

Change

IM

694,2
7
127,
11
129,4
4
72,08

817,10

-122,83

-3,5

-2,6

-3,15

100

100

-3,5

-2,6

182,07

-54,97

-2,1

-0,1

-2,63

18,3

22,3

-0,4

-0,0

71,75

57,69

-2,8

2,0

-5,19

18,6

8,8

-0,5

77,75

-5,67

-0,1

-1,6

1,15

10,4

9,5

-0,0

26,19

-14,87

4,6

-3,01

1,6

3,2

-0,3

11,32

Balance

Change
EX
IM

EX

-14

EX

IM

EX

IM

18

0,216
14

-0,2

12

0,110
8

3000

2000

1000
0

2
1979 1980 1985 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total
Amount of Japanese Direct Investments

Ratio of Japanese Direct Investments

Japanese Direct Investment in China (1979-2011) (US$

Chinas membership in BRICS

BRICS Economic Growth: 2000-2014 (%)


Brazil

Russia

India

China

Population (M)
202,8
143.9
1,223.2
1,357
GDP 2015 ($B, current
1,904
1,176
2,308
11,212
prices)
GDP per Capita 2015 ($ PPP)
15,941
8,184
6,266
13,801
Inflation 2012
5.8
6.6
11.2
2.5
BRIC
Country
Economy
and
Development
GDP Growth (Average 20023.5
4.7
7.2
10.3
2012)
Data

South
Africa
54
323
12,215
5.6
3.5

Chinas membership in ASEAN


Key Indicators on ASEAN-China Relations (2014): Trade and

Category
Contents
Investment
(Billion
US$, %)
ASEAN-China
480.39
billion US$
Trade
(ASEAN Importing 272.07 billion US$ /Exporting
208.32 billion US$)

Remarks
Increased by 8.3%
from 2013

China's Trade
with Malaysia

Increased by 3.8%
from 2013

China's Trade
with Vietnam
China's Trade
with Singapore
China's Trade
with Thailand
China's Trade
with Indonesia
China's Trade
with the
Philippines

Ranking
China is ASEAN's
largest trade partner,
and ASEAN is China's
3rd largest trade
partner.
102.02 billion US$
1st among ASEAN
(Malaysia Importing 46.36 billion US$ /Exporting Member States
55.66 billion US$)
83.64 billion US$
2nd
(Vietnam Importing 63.74 billion US$ /Exporting
19.9 billion US$)
79.74 billion US$
3rd
(Singapore Importing 48.91 billion US$ /Exporting
30.83 billion US$)
72.67 billion US$
4th
(Thailand Importing 34.29 billion US$ /Exporting
38.38 billion US$)
63.58 billion US$
5th
(Indonesia Importing 39.06 billion US$ /Exporting
24.52 billion US$)
44.45 billion US$
6th
(the Philippines Importing 23.47 billion US$
/Exporting 20.98 billion US$)

Increased by 27.7%
from 2013
Increased by 5% from
2013
Increased by 2% from
2013
Increased by 7% from
2013
Increased by 16.8%
from 2013

By December 2014, ASEAN-China Mutual Investment Total:126.95 billion US$


ASEAN's Investment to China Total: 91.74 billion US$
China's Investment to ASEAN Total: 35.21 billion US$
From January to December 2014, ASEAN-China Investment Total:12.18 billion US$
ASEAN's Investment to China Total in 2014: 6.3 billion
China's Investment to ASEAN Total in 2014: 5.88
US$
billion US$

III. COOPERATION OF CHINA WITH


REPUBLIC OF MOLDOVA

The main economic bilateral agreements signed between Moldov


Nr. and China Name of the agreement
Place
Entere

1.

and date d into


signed
force
at
Chiinu, 18.01.9
18.01.92
2

Economic agreement between the Moldovan


Government and the Government of the Republic of
China
2. Agreement between the Government of the Republic of
Beijing, 01.03.9
Moldova and the Government of the Republic of China
06.11.92
5
on the stimulation and mutual protection of investments
3. Agreement between the Government of the Republic of
Beijing, 26.05.0
Moldova and the Government of China for the avoidance 07.06.00
1
double taxationofand
prevention
of fiscal
evasionthe
withtwo countries is
Theofdevelopment
political
relations
between
respect to taxes on income

manifested primarily through two aspects of this relationship the


mutual support and cooperation based on bilateral
agreements between the two countries and the frequent
high-level visits.

Development trend of Moldo-Chinese


trade from 1997-2014
Imports China

Export China

Trade balance with China

600
478.88
399.76

400

325.48

320.19
246.52

202.91

200
1.59

1.58

1.15

2.97

8.41

11.84

21.47

37.7

-1.59

-1.58

-1.12

-1.97

-8.4

-10.52

-21.4

-37.62

73.89

-73.26

-200

481.17

415.75

116.86

-116.5
-201.92

-245.6
-317.88

-323.23

-400

-395.86 -407.45
-472.35 -472.94

-600
1997

1998

1999

Evoluion of
Moldo-Chinese
trade in the
period of 20132014 (US$

2000

2001

2002

Total Trade
Export
Import
Trade Balance

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2013

2014

Dynamics 2014/2013 (%)

485,41
6,53
478,88
-472,35

489,39
8,22
481,17
-472,94

100,82
125,93
100,48
100,12

List of contracted project with China from


2009-present (EUR/US$)
Project Title

Agreement for
technical and
economical
cooperation
between
Government of P.R.
of China and
Government of
Moldova
14/09/2010

Actual Start
Date
Actual
13/09/2012
Completion
Date
OECD/DAC
150-government
Sectors
and civil society
Financing
Grant
Instrument
Funding
2008
0
2009
0
2010
2,308,000
(3,019,843.25)
2011
0
2012
0
2013

2014

Agreement for
technical and
economical
cooperation between
Government of P.R. of
China and
Government of
Moldova

Traffic
monitoring
system in
Moldova

Procurement
of computers
in student
hostels

A gratis P.R. of
Chinas provision
of military aid to
Moldova

10/07/2013

27/10/2012

21/11/2012

13/09/2012

Agreement for
technical and
economical
cooperation
between
Government of
P.R. of China and
Government of
Moldova (2014)
04/12/2014

10/07/2018

27/10/2013

21/09/2013

13/09/2017

04/12/2017

150 - government 210-ransport


and civil society
and storage
Grant
Grant
0
0
0
0
0
8,000,000
(10,217,790.2)
0

110- education 150-overnment


and civil society
Grant
Grant

Actual Commitments
0
0
0
0
0
0

150-government
and civil society
Grant

0
0
0

0
0
0

0
3,754,914
(4,858,617)
0

0
984,110
(1,250,671)
0

0
967,211.529
(1,242,890.2)
0

0
0

2,640,194.318
(3,250,561,63)

The perspectives of Moldo-Chinese


relations
Cooperation in the field of trade
Cooperation in the field of mutual investment
and industry
Financial cooperation
Cooperation in the field of customs
Cooperation in the field of agriculture
Cooperation in the field of information technology
and communications
Cooperation in the field of transport and
infrastructure construction
Cooperation in field of technical assistance

CONCLUSIONS AND RECOMENDATIONS


The Open Door Policy reforms, as well as the changing vector of economic orientation toward
globalization, can be considered the main primary drivers of Chinas rapid economic growth;
The development of China's foreign trade has helped to increase the national welfare of China and its
trading partners and has provided a broad market for the latter party;
Participation in economic globalization according to the principles of independence and seeking
advantages while avoiding disadvantages helps to integrate Chinas development with regional
economic invigoration, with the interests of people of all countries and with the cause of peace and
development of humanity;
From the point of view of international FDI flow, in 2014, China ranked as the first FDI recipient of the
world, with estimated inflows of $128 billion that were highly used for development of its economy,
mainly in service sector, as the country confronted the problem of over manufacture. China promoted
high FDI outflow policy in order to deepen economic ties between its partners, obtain natural
energetic resources and develop globally competitive firms with their own brands in order to expand
its trade market and gain more influence over the world;
In terms of financial system development, Chinese government took measures to move more quickly
toward adopting a market-based exchange rate by implementing new monetary policy in 2014, in
order to stop the appreciation of remnimbi and straighten it on international market. The objective of
monetary policy is to maintain the stability of the value of the currency and thereby promote
economic growth;
Major risk for Chinese economy is the possibility to be locked in the "medium-income trap;
The globalization of Chinese economy will accelerate, due to implementation of one belt, one road
strategy (second Silk Road),
Even if growth moderates, China is likely to become a high-income economy and the worlds largest

CONCLUSIONS AND RECOMENDATIONS

The established relations between China and EU, knew a new wave of development
in 2014 when were opened negotiations for a comprehensive EU-China FTA and EUChina Investment Agreement that will pull the sides towards stronger cooperation.
The Sino-U.S. relationship is, without question, the most important bilateral
relationship in the international system today, and is likely to define the twenty-first
century. A major concern among some U.S. policy makers has been the size of the
U.S. trade deficit with China.
The present strained relations between China and Japan, have clearly resulted in a
situation which has been unfavorable for both countries.
Participation in multilateral cooperation gave China a possibility to enhance its
influence over the world economy and deepen the economic ties between the
partners.
For over 20 years of bilateral relationship development, China and Moldova have
respected the principles of mutual respect, equality, taking into account the interests
of each party and the sincere cooperation.
From a political point of view, high-level visits between the two states are frequent
and reach a substantial depth; from an economic point of view, the trade volume of
the two countries maintains a rising trend, China remaining to be a strategic partner
to import; furthermore, cooperation in the form of low-interest loans and
humanitarian aid also plays a significant role in economic relations between the two
countries.
Concluding with prospects for future development of Chinese economy, it is

THANK YOU FOR


ATTENTION!