Is China’s appreciating Yuan a good thing?

27 Mar

China is under significant international pressure to appreciate its currency because it is believed that it is having a substantial negative impact on foreign economies (Zhang and Fung, 2006, Yang et al, 2013). This article will weigh up the pros and cons of allowing the Yuan to appreciate.

Many believe that the Yuan is undervalued compared to other currencies such as the US dollar, although by how much is contested; estimates range from 5%-25% (Tung and Baker, 2004). In contrast some studies find little evidence that the Yuan is undervalued (Cheung, Chinn and Fujii, 2007). Since 2005 China has had a managed exchange rate system, wherein the value of the Yuan is weighted to a basket of foreign currencies (a managing float regime). However a limit is set on how much the value can change.

The benefit of such as system is it has helped create a stable macroeconomic environment which helped facilitate china’s extraordinary growth (Tung and Baker, 2004). This has also helped stabilised the regional and global economy.

Figure 1 shows that the Yuan has steadily appreciated since 2005; among other things, this is because China’s growth has been consistently high which has increased purchasing power. China has been limiting the appreciation of the Yuan because it reduces the cost of exports making them more competitive in the global market, fuelling China’s rapid growth (Tilford, 2009).



Benefits of an appreciating Yuan:


As the Yuan appreciates there are benefits which are expected to follow for the economy and for the nation as a whole. It has helped to control inflation, which in a developing nation like China is very important (Davies, 2014). High inflation puts a squeeze on consumers, which in a country where 27% of the population live on less than $2 a day (World Bank, 2009), can have dire consequences; rising food prices risks triggering unrest.  

One of the main reasons allowing the currency to appreciate is it may help with vital efforts to reduce the trade surplus and rebalance the economy. There are several reasons for this and for why it will be beneficial.

China is over reliant on exports, (See figure 2) a situation which is not helped by high global demand. Appreciation would increase the price of its exports, reducing the surplus and the demand which will help prevent overheating in the economy which jeopardises growth (Yang et al, 2013). At present in the population, consumption is too low and saving is too high. A stronger Yuan means citizens have more spending power which will help increase consumption, raising living standards (Tilford, 2009). It will also help rebalance the economy, reducing reliance on exports making the economy more stable.


An undervalued currency also exerts a negative impact on the development of a service sector (Ozyurt, 2013). This is significant because development of services is crucial to rebalancing and modernising the economy; because it will lead to higher incomes (Tilford, 2009). Moving away from manufacturing towards service industries will ease the environmental costs of economic growth that China has experienced (Tilford, 2009). However, to boost services, and consumption, china will also need to invest in social security and reform domestic financial markets (Ozyurt, 2013)

Another key benefit of allowing the Yuan to appreciate is it eases tensions with other nations, particularly the USA, reducing the danger of policy confrontations. At one point popular discourse in America labelled China a “currency manipulator”, because it was giving its exports an unfair advantage which was hurting U.S businesses (BBC, 2012). This is controversial because China’s purchasing of huge quantities of US dollars in bonds kept the Yuan low, but also helped the US stay solvent (Amadeo, 2014). As the Yuan has appreciated this criticism has died down. Another widely held belief is that a stronger Yuan will reduce the US’s trade deficit with China (Cline and Williamson, 2009). Modelling by Yang et al (2013) and others find that China’s trade balances improve, but not with the US.



Disadvantages of letting the Yuan appreciate


Concerns with an appreciating Yuan centre around the effects it will have on the continuation of China’s economic growth. In an ex ante study, Yang et al (2013) warn that the economy would shrink significantly and would suffer decreasing exports leading to a reduction in output. Tung and Baker (2004) contest this prediction, believing cheaper import costs will make up for it. A reduction in output, particularly labour intensive industries, will lead to job loses which may threaten social stability. The employed population would benefit from higher real wages while the hardship for the unemployed would be compounded (Zhang and Fung, 2006). Influences on real GDP would affect welfare and living standards which will hinder efforts to increase consumption (Yang et al, 2013).  From a global perspective there are concerns a stronger Yuan will lead to a global welfare loss as the purchasing power of other currencies falls (Zhang and Fung, 2006).


Concluding thoughts


The cost-benefit analysis of an appreciating Yuan is a highly complex and contested issue. There are prospects for many benefits to come, however the CCP is wise to be concerned. A weak Yuan has served China well, however in order to complete the transition to a developed economy it needs to take this step. The most pressing economic hurdle is the rebalancing of the economy and imports need to be boosted. Economic models such as those employed by Zhang and Fung and Yang et al warn that appreciation will hinder rebalancing, however there are limitations with these models, they only look at short term effects and they do not provide an alternative currency policy to solve the imbalance.

It is quite likely that there will be short term pain, as many predict, however if it means china can wean itself off exports, allowing it to develop a strong service industry and enjoy more of the fruits of its labour by increasing consumption, it may be worth it in the long term. The Yuan is going to appreciate no matter what the CCP does, what is important is the how the appreciation is managed and the policies which are put in place to mitigate negative effects.





Amadeo, K., 2014, China’s Economy: Facts About China and Its Economy, Available at  Last accessed 27/03/2014.

Cheung, Y., Chinn, M. D., & Fujii, E. 2007, “The overvaluation of Renminbi undervaluation”, Journal of International Money and Finance, 26, 762–785.

Cline, W. and Willamson, J. 2009, “2009 estimates of fundamental equilibrium exchange rates”, Peterson Institute for International Economics, In Policy brief. PB09-10

Davies, G. 2014, Watch China’s exchange rate policy, The Financial Times Last accessed 26/03/2014

Ozyurt, S. 2013, “Currency Undervaluation and Economic Rebalancing towards Services: Is China an Exception?”, China & World Economy, Vol. 21, pp 47-63.

The BBC, 2012, US says China not a currency manipulator. Available at Last accessed 27/03/2014

Tilford, S., 2009, “Rebalancing the Chinese Economy”, Centre for European Policy Reform

Tung, C-Y. and Baker, S. 2004, “RMB revaluation will serve China’s self-interest”, China Economic Review, Vol. 15, pp 331-335.

World Bank, 2009, Last accessed 24/03/2014

Yang, J., Zhang, W. and Tokgoz, S. 2013, “Macroeconomic impacts of Chinese currency appreciation on China and the Rest of World: A global CGE analysis”, Journal of Policy Modelling, Vol. 35, pp 1029-1042.

Zhang, J. and Fung, H-G. 2006 “Winners and losers: Assessing the impact of Chinese Yuan Appreciation”, Journal of Policy Modelling, Vol. 28, pp 995–1009



Chinese industrialization and growth driven by the highest levels of internal migration in human history

27 Mar



If you purchased one of the 1.8 billion mobile phones that were shipped around the world in 2011, there is a 50% chance that the phone was put together in the eastern Chinese province of Guangdong. Furthermore, there is also a very high chance that it was not assembled by person native to Guangdong, but by one of the vast amounts of migrants who have relocated to the eastern coast in search of work (Economist, 2012). In the last quarter of a century, the success story of ‘Made in China’ is undoubtedly entwined with the story of migrants toiling for minimal wages to produce for exports. The total stock of rural migrant labour was estimated in 2010 to be around 155 million (Cai, et al, 2011) and this has been the main driver of the Chinese export industry since the mid 1990’s. In export based eastern coastal cities such as Shenzhen and Dongguan, migrant labour has accounted for the large majority (around 70 to 80%) of the labour force at the turn of the century (Chan, 2007). Additionally, China’s rural to urban migration has been pivotal in contributing to China’s recent unprecedented levels of urbanization. In the 30 years from 1979 to 2009, China’s urban population has exploded, increasing by around 440 million, reaching 622 million. Of the 440 million increase, around 340 million can be attributed to both urban reclassification and net migration. If only half of this increase was caused by migration, these levels of rural to urban migration in such a short time period is most likely to be the largest in human history (Chan, 2013).

This internal migration is characterized by two main features: Firstly, most migrants leave their farmlands for urban areas or for non-agricultural activities. Secondly, these labour flows are largely directed from the interior to coastal areas, mainly from central or western areas to the prosperous cities which are predominantly concentrated along the eastern coast (International Labour Organization, 2013). These astonishing rates of migration and urbanization are in turn causing large-scale unemployment problems, especially in cities (Kumar, 2012).

In 1978, rural incomes were less than 40% of urban ones. The economic reforms that began in 1978 meant that China had opened its doors economically to the rest of the world, and large scale factories began to appear in coastal towns. Within these establishments, Chinese farmers could earn more money in a month than they would in an entire year growing rice. Migrants began to move from the poorest inland provinces such as Anhui, Sichuan and Guizhou, where in 1980 farmers lived on less than $2 a day (Washington, 2012). Between 1990 and 1995, more than ten million workers migrated away from their home provinces. A further 2 million migrated between 1995 and 2000, and yet another staggering 38 million over the next five years from 2000 to 2005 (Chan, 2013). Between 2001 and 2010, it can be noted that this migration contributed to 20% of China’s economic growth. These high levels of migration have however, come at high personal cost, with many migrants spending years away from their families. Furthermore, rapid industrialization has also caused large-scale pollution problems in China’s industry driven megacities (Kumar, 2012).

In the late 1990’s, the wealth gap between rural and urban China began to increase substantially, with the rural to urban income ratio increasing drastically from 2.5% in 1997, peaking at 3.3% in 2009 before beginning to decline again to 3.1% in 2011. This has created a huge social issue, with tens of thousands of cases of social unrest in rural areas each year (Economist, 2012).

Recently however, as the costs of coastal land and labour have risen, combined with a flood of government investment (Chongquing and Jintang, 2012), manufacturing is beginning to move inland and fewer migrants are travelling to the coastal cities. As a result, as more jobs are created in the inland cities and provinces, more wealth is slowly beginning to trickle down to rural areas (Washington, 2012).

Inequalities between rural and urban areas are slowly decreasing; however, urbanization in general is forecast to drastically rise. It has been estimated that Chinese cities will face an influx of around 243 million migrants by 2025, taking the total urban population of China to nearly 1 billion (Dyer, 2008). This population of migrants would subsequently account for around 40% of China’s urban population, almost three times the current level (Woetzel et al. 2009).

These forecasts underline the enormous challenges that face China if they are to meet pledges to include the country’s vast migrant labour force to urban social welfare programmes which they are generally denied access to at the moment (Dyer, 2008). China has been predicted to have over 221 cities with a population of over 1 million by 2025. This growth will place huge pressure on many of these, including, securing enough public funding for the provision of social services, dealing with the demand and supply issues of land, energy, the environment and water that will undoubtedly rise as China’s urban population increases further. How China handles their internal migration over the next 25 years if of pivotal if they are to maintain the rapid economic growth that has been seen over the last three decades (Woetzel, 2009).


By Harrison Dunn

Word Count: 930

Reference List:

Cai, F. et al. (eds.) (2011), Zhongguo renkou yu laodong wenti baogao No.12 (Report on China’s Population and Labour), Beijing: Shehui kexue wenxian chubanshe.

Chan, K. W. (2007). Misconceptions and complexities In the study Of China’s cities: definitions, statistics, and implications. Eurasian Geography and Economics. [Online].  Vol. 48, No. 4, pp. 382-412.

Chan, K. W. (2013). China, Internal Migration. Washington: Blackwell Publishing. p.1-17.

Dyer, G. (2008). China braced for wave of urban migrants. Financial Times. [Online]. 23rd March. Available: [Accessed: 23rd March 2014].

Jing, F. (2010). Urban-rural income gap widest since reform. Available: Last accessed 21st March 2014.

International Labour Organization (2014). Labour Migration. [Online]. Available:–en/index.htm. [Accessed: 20th March 2014].

Jing, F. (2014). Urban-rural income gap widest since reform. Available: Last accessed 15th March 2014.

Kumar, A. (2012). New Security Concept of China. IPCS Special Report. 1 (125), p.1-12.

Poncet, S. and Zhu, N. (2005) Country People Moving to the Cities: The Migratory Dynamic. China Perspectives. [Online]. 62 (1). P.1-13. Available: file:///C:/Users/Harry/Downloads/chinaperspectives-547-62-country-people-moving-to-the-cities-the-migratory-dynamic.pdf. [Accessed: 23rd March 2014].

The Economist (2012). The largest migration in history. [Online]. Available: [Accessed: 22nd March 2014].

The Economist. (2012). After three decades of migrating to the coast, the inland population is increasingly working closer to its roots. [Online]. Available: [Accessed: 24th March 2014].

Washington, R. A. (2012). The largest migration in history. Available: Last accessed 24th March 2014.

Woetzel, J. et al. (2009). Preparing for China’s urban billion. Available: Last accessed 19th March 2014.

Sino-African relations: A timeline from historical cooperation to today’s co-dependence

27 Mar

The relationship between both Africa and China was one that developed on the basis of ‘equal treatment, respect for sovereignty and common development’ (Ministry of Foreign Affairs for the PRC, 2006). China’s presence in Africa has been noted by the international community for over thirty years, lying dormant, waiting for real action to occur. In January 2006, China’s Africa Policy, a white paper that the Chinese government promulgated forged the path to a new, and previously unseen, diplomacy between China and the African continent. The documents content entrenching a process of enhanced cooperation in Sino-African relations, it became the first of its kind for the Chinese nation, and subject to suspicion from the West (Li Anshan, 2007).


The premise of the white paper, however, has become lost in a Chinese shift towards exploitative action of the African continent to gain short-term economic gains. Consider the attitudes of China towards the African continent under Premier Zhou Enlai (in the 1960s), it was central to their relationship that China was fit to export revolution, provide aid that was ‘free and unconditional’ (Ogunsanwo, Alaba, 2000). Proven, of course, in their willingness to build great stadiums, statues, and many other embodiments of African decolonisation (Beijing: World Affairs Press, 2000) that truly contributed to the ‘formation of African nationhood’ (Li Anshan, 2007).


Historically, the relationship between the Chinese nation and the African continent was founded on a desire enabling mutual benefits to be received by both parties. China’s forthright stance on the backing of anti-colonisation meant that in the 1980s Africa had a state partner focused on aiding them through the struggles for independence. Likewise, Africa was keen to support political action, and recognise political achievement in China (Li Anshan, 2007). The reorientation of focus becoming more about China’s need to meet a higher energy demand domestically, meant that, economically, the relationship had to transform to a more position where Chinese interests dominated future action; primarily, increasing Africa’s exports of raw materials. Making note of China’s willingness to ignore African troubles, such as that of the Darfur ‘genocide’, it figures that Africa’s appropriate reaction is to meet the needs of their ally in the international realm. This obviously remains a contentious issue within the international community, whether the term ‘genocide’ is accurate is still undecided, yet, China backed the African response that it is unfair to measure, what was considered, a process of development in Africa – a developing continent – to the industrialised, democratised West (US Department of State, 2007).


Thus, bringing the whole situation regarding the Sino-African relations to a more contemporary context, the shift in direction is a co-requisite to challenge and risk both actors must face. Expansive interaction in terms of labour practices and markets strategies has become an aspect important to the Chinese in their relationship with Africa to best approach a solution (Li Anshan, 2007). Flooding Africa is a great deal of Chinese businesses and manufactured products, with interest in establishing similar business in Africa, the Chinese have been confronted with local labour laws. Tensions building between the African locals and the Chinese nationals, what with an increasing competitiveness for employment, is a result of China’s wish to be free from entanglement in such law set by the state where the franchise, or factory, has been established. In another respect, in order to maintain efficiency in the factory’s operations, by importing Chinese employees, communication between management – who are all Chinese nationals – and the average worker is easy and will not be blocked by language barriers. Tensions being exasperated further by the recognition that these Chinese industries are not contributing adequately, in fact, nowhere near adequately, to the local economy.


With an increase in Chinese industry, producing better-quality products than their African counterparts, at a more efficient and quicker rate also contributes to the tension. By driving down native businesses, understandably, something was bound to give. An example of which, would be the protests that took place in Dakar, and similar ones in South Africa (D.Z. Osborn, 2007). In the interests of maintaining their relationship, however, both actors were keen to come to a solution. The blinkered actors, though, both concerned with their own national interests, led to a difficult process of discussion. Realising co-dependence was necessary at this point in time; both agreed multilateral talks were needed between the China and the particular African nation with a concern. This action to allow the African nation the opportunity to become a more competitive member of the market does show a level of appeasement, not often seen in the international market, from China.


To conclude, it is important that China retains the notion at the forefront of all future action that it, as a nation, is just as dependent on the African nation, as Africa is on it. There is no doubt that further ventures will be pursued on African soil by China, but in order for these future links to run harmoniously, keeping both actors interests at the heart of the matter, there needs to be a more frequent and comprehensive dialogue generated between both actors. There is always going to be suspicion from the West in the international community about the Sino-African relationship – and so there should be. The links forged between the two actors are complex, susceptible to corruption and further tensions, and ultimately present the world with a picture of China’s ever-expanding influence.





  1.      Anshan, L. ‘China and Africa: Policy and Challenges’, China Security, Vol. 3, No. 3, 2007, pp.67-93. World Security Institute.
  2.      Anshan, L., Studies on African Nationalism. (Beijing: China International Radio Press, 2004), pp. 291-300; Li Anshan, “Africa in the Perspective of Globalization: development, aid and cooperation,” West Asia and Africa, Issue 7, (2007).
  3.      D.Z. Osborn, and a conversation with Togo journalist Adama Gaye in the seminar “China in Africa: Geopolitical and Geoeconomic Considerations” held by Harvard University, from May 31 -June 2. Discussion attended by Li Anshan, published 2007.
  4.      In the seminar “China-Africa Link” held by The Hong Kong University of Science and Technology on Nov 11-12, 2006, a South African scholar stated that it is certain South Africa could benefit from the Chinese government’s decision to reduce its textile exports to South Africa, but it still had to deal with the challenges posed by textiles from Malaysia and Vietnam. The key to the textile problem for South Africa is not to cut the import of Chinese textiles, but to strengthen the competitive age of South African textiles. Attended by Li Anshan, published works, 2007.
  5.      Ogunsanwo, Alaba, China’s Policy in Africa (Cambridge University Press, 1974) pp.180-240; Barnouin B. and Y. Changgen, Chinese Foreign Policy during the Cultural Revolution, (London, 1998) pp.75-78; Wang Qinmei, “The Up and Downs in Sino-African Relations;” Long Xiangyang, “The Preliminary Probe to the Sino-Africa Relations from 1966 to 1969,” in China and Africa ed. by Center for African Studies, Peking University, (2000) pp59-71, 72-86.
  6.      Fifty Years of Friendly Relations between China and Africa. (Beijing: World Affairs Press, 2000).




Malaysian plane crash MH370

26 Mar

The recent plane crash that occurred over the South-Indian ocean on its way to Malaysia had many passengers on board, many of which were Chinese. The plane crashed only a few weeks ago and since a huge enquiry into where it actually went down has begun. Using complicated remote sensing methods, experts were able to narrow the crash down to a small section over the South-Indian ocean and have since been searching it for any wreckage or evidence of the plane. The Chinese government have reacted angrily to the way Malaysian authorities dealt with the crash, saying that more could have been done in a shorter space of time to identify exactly what happened. Whilst this has been happened, family members of the passengers have been accusing Malaysian officials of withholding information relating to the crash which is very serious in itself. The current situation is that we are waiting for news of recovered wreckage of the plans and families of the passengers have been told by Malaysian authorities to assume that there were no survivors, which has once again prompted more uproar

                                                      By Joss Woodhead




Deep thought-China’s inequality

26 Mar

A poverty trap is defined as any “self-reinforcing mechanism which causes poverty to persist.” (Wikipedia 2014)

Income inequality is defined as “the unequal distribution of household or individual income across the various participants in an economy. Income inequality is often presented as the percentage of income to a percentage of population.”(Investopedia 2014)

Following the implementation of China’s “Open door policy” by Deng Xiaoping in 1978 (Wikipedia 2014) China’s economy underwent a huge surge in economic growth. This is made very evident when we examine some facts and figures. Firstly let us compare China’s gross domestic product (GDP) in two periods; 1980, where the reforms had only just been implemented and 2011, where China is widely recognised as the world’s second largest economy. In 1980 China had a GDP of 202.46bn (USD) and in 2011 China had a GDP of 6988.47bn (USD) a value that is more than thirty four times that of China’s GDP in 1980 and tells us that on average China experienced an average growth rate of approximately 12 per cent per annum in the period between 1980 and 2011. (Guardian 2012). While this rapid economic growth brings with it a large number of benefits, for example; improvements in current living standards and higher employment, it can also lead to a large number of problems, for instance; increase environmental degradation, as is evident in the pollution problems and increases in inequality. This week’s blog will focus on the increasing disparity between China’s rich and poor, and factors that may worsen the inequality.
In order to measure wealth/income inequality in a country we will use the Gini coefficient, which shows us the statistical dispersion of income among a country’s residents. For example a Gini value of 0 represents perfect equality, whereby income is the same throughout the country. On the other hand a value of 1 represents total inequality in that one person controls all of the income and everyone else has nothing. (Wikipedia 2014).

Number one


The image above shows the Gini coefficient of national income around the world. (Wikipedia 2014). The lighter colours represent countries with a value closer to zero and therefore have less inequality.

As of 2011 China was reported to have a Gini coefficient of 0.477 (China daily 2012) on its own this value is worthless, however when we compare it to the UK’s figure in 2011 of 0.34 (BBC 2012) we can now get a better perspective of the size of inequality. Combine this comparison with the estimate that inequality in the UK results in a cost of 39bn (GBP) per annum (the Guardian 2014) we can now see that China’s inequality is indeed a real problem. Bear in mind that many experts believe that China’s Gini coefficient value is vastly understated. Inequality is problematic because it threatens to lead to an underclass of labourers with low skill sets and education; this harms the economy in that it prevents the economy from functioning at its full potential. (Harvard business review 2012). In other words resources are wasted, in this instance I am referring to the waste of human capital. This underclass of workers could result in political instability, for instance a workers rebellion; in turn this instability deters foreign investment, which in China is a major component of GDP. Inequality also brings with it a large number of social problems. A large gulf between incomes can lead to higher rates of crime, as those on low incomes become desperate and disgruntled at the income differences.

Number 2

The image above (Wikipedia 2004) helps to visually display the levels of income inequality, with the general trend being an East-West divide with those areas with access to the sea having a higher income.
However many argue that inequality is not a problem and that a Gini coefficient value of 0 is unrealistic and possibly undesirable. It is arguable that inequality can benefit the economy by acting as an incentive for low income earners to work harder, causing productivity to increase. Another argument is that inequality allows for better allocation of resources, wherein resources are placed under control of people with higher skill sets and are therefore utilised better. Finally, it can be said that inequality occurs naturally, as certain people suit different careers. Put differently in an ideal world everyone would be equal, however in reality this is not the case. For example some people have a higher intellect. This means that wages will be different thereby resulting in inequality. While this counter argument is valid, this mostly applies to small amounts of inequality. Having said this it is quite clear that inequality in China is clearly a significant problem.
If China wants to reduce its inequality there are a number of solutions it can utilise a number of responses; Firstly the government could implement a more progressive tax rate, this is where the more you earn the higher a percentage you are taxed. This method can be considered a double sided approach as the increased tax revenue received from the high income earners can be redistributed to those on low incomes. This means fewer extremes in incomes and therefor a higher level of inequality. However getting such a change implemented would be incredibly difficult, as those on high income levels would without a doubt oppose the change. In addition to that the higher tax rates for the rich may result in lower tax revenues as it causes the rich to move their wealth and businesses abroad, thereby damaging the economy.
Another possible solution is the implementation of an education that focuses more on equity, this allows a more equal opportunity for people, and moves the emphasis away from what quality of education your parents can afford. This therefore helps to break the link between the parent’s income and their child’s future income. In addition to this, a policy that focuses on education is very likely to boost an economy’s potential and productivity. However, there are a number of flaws with this proposed solution. Firstly, it is likely to be very expensive and secondly, any benefits from it will take time to come into play.
The most effective solution however would be a combination of the two mentioned earlier, whereby a gradual increase in a progressive tax rate helps to raise revenue and fund the education reform, while the increase in the tax rate is gradual enough to not deter too many of the rich.
While inequality is problematic China has started to address the problem, this is evident when we look at the Gini values from 2008-2011, with the values descending as the years progress; 0.491, 0.49, 0.481 and 0.477 respectively. (China Daily 2013). However as was stated earlier such values should always be seen sceptically. (The Economist 2013). However if accurate it can be said that China is dealing with the problem, however it can also be said that its approach is too gradual, in that any value over 0.40 means that inequality is considered to be a cause of social unrest. (Wikipedia 2014).

Word count including Harvard referencing 1154

The Guardian 2012, China GDP: how it has changed since 1980
Investopedia 2014, definition of income inequality
Wikipedia 2014, Poverty trap
Wikipedia 2014, Gini coefficient
Harvard Business review 2012, How much inequality is necessary for growth?
China daily 2012, China Gini coefficient
BBC 2012, Britain’s recession: Harsh but fair
The Guardian 2014, Inequality ‘costs Britain £39bn a year’
The economist 2013, Gini out of the bottle

China’s Ageing Population

26 Mar

Declining fertility rates and increasing life expectancies has led to a world in which ageing populations have become ever more prevalent (Wolfgang et al., 2008). The median age of the world’s population is expected to increase from 26.6 years in 2000, to 37.3 in 2050 and shockingly 45.6 in 2100 (Wolfgang et al., 2008). Cai et al. (2012) state that by international standards, a population is ageing when it conforms to these 2 criteria: more than 10% of the population is over 60 years of age and more than 7% of the population is over 65. Importantly, population ageing is not simply about there being more old people within a society, it centres more closely on people living longer lives and the subsequent implications of this increased longevity (Wolfgang et al., 2008). Although ageing is occurring globally, nowhere throughout the World is this phenomenon occurring as rapidly as it is in China. A process which has taken over 100 years in countries such as the UK, has taken a mere 40 years within Chinese society (Cai et al., 2012). This has presented not only the government, but smaller societies alike, with a multitude of social and economic problems that are threatening the prosperous development that China has been experiencing since the reform in 1978 (England, 2005).

                When the People’s Republic of China was established in 1949, the life expectancy for men was 42 and for women 45 (England, 2005). Now the WHO (2011) estimates these values to be 74 for men and 77 for women. This rapid ageing of the population has resulted in an upside down population pyramid whereby the increased proportion of people aged over 60 has had a profound effect on the demographic structure of the country (England, 2005). During the 1970s, it was common place for Chinese women to be having as many as 6 children (England, 2005) and since that time there has been a strong focus on implementing population control policies such as the One Child Policy. As a result, population growth in China is very slow. Since 1990, China’s fertility rate is said to have reached that of developed nations (Cai et al., 2012) and if this low fertility rate continues, China will begin to experience negative growth rates and by the end of the 21st Century, its population is estimated to fall to 940 million. Between the years of 2000 and 2010, Chinese population only increased by 73.9 million, an annual rate of 0.57% compared to 1.07% the previous decade (OECD, 2013). However, the growth of the world’s population occurred at more than twice that speed (CDRF, 2012) rendering it is easy to see why an ageing population is occurring so rapidly.

                There are many social implications resulting from this ageing. Firstly, due to the fact that the elderly population over 60 rose from 7.6% to 13.3% between 1982 and 2010 (OECD, 2013), China is getting old before it is getting rich. This population ageing increases the level of family burden, that is to say that the younger generation are having to look after an increasing amount of elderly. This is made worse by the notion of the 4-2-1 effect created by the implementation of the One Child Policy (OECD, 2013). It is now common place for one single child to have to look after 2 parents and 4 grandparents. This creates a shift in intergenerational relations whereby instead of complete family care, there is weakened family support and a reliance on social support, which is less personal (Bloom et al., 2010).

                Cai et al. (2012) highlights the issue of “hollowing” out of villages. This means that the young professional population migrate to the cities in search of employment and leave behind the elderly population. This puts into question the elderly falling into poverty and being unable to escape it. This is especially true of rural areas where households with an elder as the head are more likely to be poor (Long et al., 2012). The income poverty rate for households with a head age of 71-80 was 15% in 2004, compared to that of 8.5% for households with a head of working age (Cai et al., 2012).

                There are also several economic impacts that have manifested as a result of the ageing population. Firstly, the rapid demographic shift has led to a decrease in the number of people within the working age (Cai et al., 2012). The population aged between 18-22 fell from 124 million in 2008 to 108 million in 2011 (OECD,2013) showing that the number of newcomers to the labour market is rapidly decreasing. As a result of this, labour costs will rise, undermining the competitive economic advantage China has spent so long building (England, 2005). This increased burden on the working population (Cai et al., 2012) is shown through the growing value of China’s dependency ratio which is expected to reach 0.8 in 2011, meaning that for every 4 working people they will have to support at least 2 elders and 1 child (OECD, 2013).

                Moreover, it has been suggested by the OECD (2013) that China simply isn’t prepared financially for this rapidly ageing population. Public spending on old age is limited, yet the demands of the Chinese elderly for social support and medical care is forever increasing (OECD, 2013). In addition, finances that would otherwise be spent on expanding the economy now have to fund lifestyles of the elderly. This could include home helps, bus passes and other day to day activities (Bloom et al., 2010).

                To conclude, this brief analysis into the background to China’s ageing population has highlighted its major social and economic implications. Evidently, there is a need for the implementation of policies geared towards the elderly, for example pension schemes such as the New Rural Social Pension Scheme (Help Age International, 2013) and a focus on the development of the new “silver industries and white economies”. China must deal with this problem appropriately, and not simply sweep it under the carpet.



Bloom, D. E., Canning, D., Günther, F. (2010) Implications of population ageing for

economic growth. Oxford Review of Economic Policy, 26(4): 583-612


England, R. S. (2005) Aging China. The Demographic Challenge to China’s Economic

Prospects. Westport: Praeger.


Cai, F., Giles, J., O’Keefe, P., Wang, D. (eds) (2012), The elderly and old-age support in rural China. Washington DC: World Bank


Help Age International (2013) Pension Coverage in China and the expansion of the

New Rural Pension Scheme. Briefing no. 11


OECD (2013) The Silver and White Economy: The Chinese Demographic Challenge. Available: [Last accessed 24th March 2014]


WHO. (2011). China Country Profile. Available: [Last accessed 25th March 2014]


Wolfgang, L., Sanderson, W. and Scherbov, S. (2008) The coming acceleration of global population ageing. Nature: 451, 716-719

China’s One Child Policy, Its Contemporary Challenges

26 Mar

China’s ‘One Child Policy’ has become the figurative poster child of modern Chinese legislation, proving to be both a contemptuous yet thought provoking issue since its implementation in 1979. In light of China’s burgeoning population growth, government policies were paramount in shifting the demographics of the country in order to quell poverty and nurture future economic growth. As such, Festini and de Martino (2004) comment that ‘250-300 million’ Chinese births have been prevented, reducing the fertility rate to ‘1.8 in 2001’ which is below the replacement rate of 2.1 children per woman.



Fertility and Family

Beyond the initial human rights issues, some unforeseen issues have arisen from the policy, particularly concerning discrimination against girls, changing demographics and social difficulties. Research has questioned the discrepancies present  between the Chinese birth ratio of 117 males to 100 females (Gu and  Roy, 1995) commenting that archaic cultures of son preference (Poston, 1997)  still permeate society,  often being blamed for the practised (yet illegal) action of aborting female foetuses. In addition, many girls die due to neglect.

Following this trend, China now faces a social backlash from millions of single men without spouses (Branigan, 2011) in rural areas. To some extent, the disparity between males and females may create an oppressive environment for men whom are denied wives and families. Further anecdotal evidence suggests women are increasingly being kidnapped or trafficked into rural marriages, where eligible women are sparse. Moreover, it is common for women to suffer tremendous pressure to bear a son (Kane and Choi, 1999) which has led to rising suicide rates amongst women .It suggests that future demographics of the Chinese population may change, as men may emigrate and women immigrate in order to seek relationships. Particularly as the Chinese ethos centres so fiercely on marriage, children, the home and supporting ones elders.

 It could therefore be evident that older generations may suffer into old age without adequate support, as their only child struggles financially to support himself and his elders. Furthermore, the traditional process of wives moving into the husbands’ family may become transgressed as men often travel away from their locales and settle elsewhere with a spouse.

Critiques Of The Policy

Potts (2006) provides a reflective analysis on China’s One Child Policy, noting that its modern day success in guiding the population away from socio-economic disaster is now reaching our own doorsteps. This being evident through China’s rapid industrialisation, and fervent consumption of raw materials. The consequences of which are putting strain on demands for oil and staple crops that ultimately drive up global prices.

One may then ask whether the policy has been detrimental to the Global South, as 1.351 billion ( World Bank, 2012) Chinese put pressure on staple crops like maize (Delgado, 2003). This crop feeds livestock, the products of which are deemed luxurious to China’s rising middle classes. Others then argue that the One Child Policy has inadvertently created a myriad of socio-economic deficits on a global scale which influence consumers’ struggle to afford basic foods and energy. Some may discuss that the policy was not strict enough, as ‘Fig 1’ demonstrates a scenario where the policy affects everyone without exceptions (The Economist, 2011). The forecast shows a dramatic difference in population, even by 2030 compared to the UN prediction.


Figure 1: Projections for a strict ‘blanket approach’ to the policy (The Economist, 2011)

Other critics argue that despite these disadvantages, benefits are clear within the domestic sphere of single child families. The policy has essentially removed 150 million people from abject poverty and arguably enabled the economy to grow ‘7-8%’ a year (Potts, 2006).


These innovations in living standards as a whole are examples of the delayed benefits of abstaining from large families, particularly as only child’s are privy to greater access to resources, especially girls who would otherwise lose out to the culture of son preference (Festini and de Martino, 2004). Other scholars too, are quick to point out that the “小皇帝” (Little emperor syndrome) is often unproven by recent psychological assessments by Hesketh et al (2003).  Finding that, although spoiled during childhood, many children without siblings often excel at social interaction. Goh (2011) finds that multiple caregivers have direct access and attention to the one child and will share their resources.


Demographic Shift: Its Complications

The policy has coincided with China’s progression into an aging population, as Festini and de Martino (2004) estimate that by 2050, a quarter of China’s population will be over 65. This is beginning to show a discrepancy between the working population (limited by the policy) and the now surviving parents and grandparents of the one child generation.

In economic terms, the typically youthful labour driven market that has forged China’s success in recent years is likely to grow into a predominantly aging population, one that increasingly relies on the capital of their children. Single children therefore suffer from what some demographers have coined the ‘4-2-1 problem’ which depicts a child having to support his or hers parents, grandparents and those of their spouse.

This socially constructed dilemma is likely to bestow negative aspects both financially and psychologically on the sole ‘breadwinner’ of an extended family. Especially as older generations in rural China are traditionally poorer and likely to remain so (Cai et al, 2012). Suggesting that as China advances further with healthcare and infrastructure, its aging population will become increasingly reliant on their children as they live longer.




China’s rapid growth and ongoing economic success has arguably been enabled by policies like ‘One Child’. Chiefly those resources have been better distributed amongst the population, within a more stable economy. By removing the predicted exponential growth of China’s population, it has helped avoid issues facing other countries like India that are seeing unstable predictions in population.

The balance of ‘greater good’ and individual sacrifice, although politically entrenched and disputed is evidently a working success for the Chinese.  The policy has however become troublesome within the realms of family structure and discrimination. One must ask whether these personal sacrifices have been a temporary fix, or will be proven successful within future population cohorts.

Word count (without captions and references) : 996


·         Branigan, T. 2011, ‘China’s village of the bachelors: no wives in sight in remote settlement, The Guardian, 2 September [Online]. Available:            [accessed 2014,  March 2].


·         Cai, F., Giles, J., O’Keefe, P., and Wang, D. 2012, The Elderly and Old Age Support in Rural China, World Bank Publications.


  •          Delgado, C. L. 2003,  ‘Rising consumption of meat and milk in developing countries has created a new food revolution’, The Journal of Nutrition, vol. 133, no. 11, pp. 3907-3910.



  •          Festini, F. and de Martino, M. 2004, ’Twenty five years of the one child family policy  in China’. Journal of Epidemiology and Community Health, vol. 58, pp. 358-60.


  •          Goh, E. 2011, China’s one-child policy and multiple caregiving: raising little suns in  Xiamen, Routledge, London.



  •          Gu, B and Roy, K. 1995, ‘Sex ratio at birth in China, with reference to other areas in East Asia: what we know’,  Asia Pac Popul , vol. 10, pp. 17–42.


  •          Hesketh, T., Qu, J. D., and Tomkins, A. 2003, ‘Health effects of family size: cross sectional survey in Chinese adolescents’, Archives of disease in childhood, vol. 88, no. 6, pp. 467-471.

·         Kane, P. and Choi, C.Y. 1999, ‘China’s one child family policy’, British Medical Journal, vol. 319, pp. 992-4.

·         Krishnan, A. 2012, ‘China battles the 421 problem’, The Hindu, 7 October [online]. Available:  [accessed 2014, March 16].


  •          Poston Jr, D. L., Gu, B., Liu, P. P., and McDaniel, T. 1997, ‘Son preference and the sex ratio at birth in China: A provincial level analysis’,  Biodemography and Social Biology, vol. 44, no. 1-2, pp. 55-76.


  •          Potts, M. 2006, ‘China’s one child policy. The policy that changed the world’. British Medical Journal vol. 333, pp. 361-2.

·         The Economist Online. 2011,‘O brother where art thou?’, The Economist, 2 August [Online], Available: [accessed 2014, March 16].


·  World Bank Population Data China, [Online], 2012, Available: [accessed 2014, March 15].

Inequality in China: The Rural and Urban gap widens

22 Mar


In the last 50 years China has undergone what can only be described as an economic miracle. To many, China’s growth is deemed as the most rapid of any economy on this earth. The last half a century have seen changes to China in an economic, social and environmental manner on a scale unprecedented before them. Since the ‘Open Door Policy’ was established in December 1978, the east coastal regions of China have expanded and developed in phenomenal ways to adjust, accustom and utilise the new influx of various types of business from foreign land (Wikipedia 2014). This has caused China to acquire wealth fast over a relatively short period of time. Wealth which was utilised for a country wide development scheme. This expansion and development however, hasn’t affect China in a universally equal way. The more western parts of the country suffer from poor geographical conditions and a lack of good infrastructure which has kept its usage more for agriculture and less for development (Wu, M. 2006). Over time the inequality of income and growth between the two main regions of China has become a very big problem, a problem of a scale that can slow or even retard the excellent growth China as a country has displayed up until now (Seeking alpha 2014). Overall the problem of inequality can become a roadblock for China in terms of social stability as well as its emergence as a world power and thus must be dealt with as soon as possible. In this blog I will talk mainly on the post reform era of inequality in China


The graph above shows a drastic increase in income inequality since the 1980’s. It must be stated however, that this doesn’t mean the rich are getting richer and the poor poorer.

Extracted from the sources website of this graph, it states that “While inequality has been rising in China, hundreds of millions of people have been lifted out of poverty




Above is an image of railway infrastructure in China. As you can clearly see the eastern coastal areas of china have a well-connected and expansive network which slowly decreases in railway available the further west you go until eventually there are no railway links available.



The Inequality Crisis Now

Before the reform, China was considered to be approaching what is known as economic convergence. Economic convergence is when the poorer parts of an economy may grow quicker (catch up) with the richer parts of the economy to reach an equilibrium.  After the reform however, China’s economy began to see an economic divergence as the divide been the Urban and Rural populations grew (Wikipedia 2013). A graph posted by the ‘National Bureau for Statistics in China’ (Fig.1) shows that from 1978 to 2010 the average wealth per Chinese citizen has increased by $17,126. This is a value almost double that of other countries considered high-growth economies (India for example). This however is coupled with a median wealth of $6,327. These figures indicated an uneven distribution of wealth within China (BBC 2011).



As you can see from Fig.1 also, the rural net income has slowly shown a greater margin between itself and the urban disposable income since 1978. This indicates the wealth is uneven between the Urban and Rural areas. Inequality is shown in a more personal manner in table by the ‘National Bureau of Statistic for China’ (Fig.2). In this table we can see that that the rural areas lack many appliances and technologies considered necessary for living in this day and age compared to that of the urban population. The problem seems to be bettering however, as from the table we can see a slower growth in the number of these appliances owned by urban households compared to rural in which the growth of their appliances and tech over the years have shown an exponential increase. These trends indicate that in China’s current state the inequality is slowing and may even be reversing to a more equal economy but this is too big an assertion to be making already.

Urban v rural China


Urban households

Rural households









Colour TV
























Washing machines















The main area of inequality in China as you can see is money distribution. As mentioned earlier, China is showing a growing inequality in the distribution of money throughout the country, mainly divided into a more generalised inequality for riches among the west and the east. As you would expect from such a divide in money distribution, standards of living throughout have been affected and are now also unequal. This is the case in many countries, including developed ones.

Closing The Gap

China does have plans and are taking steps to tackle their overwhelming inequality crisis. China has stated that one of their key focuses for their ‘five year plan’ revolves around tackling the issue of inequality. One way that China is trying to tackle inequality is by its new ‘Tax & Wage Reform’ announced last tear. The aim of this reform is to “raise wages, make interest rates more flexible and improve households’ return on assets”. This is all with the aim of reducing the population in poverty and increasing the middle class which would therefore begin to alleviate the inequality margin. In the ‘U.S.-China Economic and Security Review Commission Staff Research Backgrounder’ it is stated that China intends to raise the minimum wage to about 40% of the average wages in China. This is a step in the right direction, however, by the time this raise comes into full affect the effects of inflation may neutralise any potential gains in equality across the nation (Salidjanova, N. 2013). Since 2008 the income gap in China has decreases showing progress in China’s efforts to tackle inequality. For the past 5 years the GINI coefficient of china has decreased indicating change for the country in the right direction (Fig.3) however, experts say a coefficient above 4 can lead to social unrest that of which China still has. The GINI Coefficient is a measure of income distribution among countries residents. A lower score meaning a better distribution (Investopedia 2014).




*WORD COUNT (Without References): 1078


References (Harvard):

BBC (2011) Inequality in China: Rural poverty persists as urban wealth balloons [online] available at: [Accessed 12 March 2014]

Wikipedia (2014) Open Door Policy [online] available at: [Accessed 12 March 2014]

Wu, M. (2006) China’s Wealth Disparity Between City and Country and the Government’s Policies

Toward It [online] available at: [accessed on 10 March 2014]

Seeking Alpha (2014) Chinese Inequality And The Growth Imperative [online] available at:

[Accessed on 10 March 2014]

Wikipedia (2013) Convergence (economics) [online] available at: [Accessed 12 March 2014]

Salidjanova, N. (2013) China’s New Income Inequality Reform Plan and

Implications for Rebalancing [online] available at: [Accessed on 8 March 2014]

Gini Index [accessed one 14 March 2014]

*WORD COUNT (With References): 1233


Is The Three Gorges Dam a Force For Good?

21 Mar

The Three Gorges Dam is the world’s largest hydropower project and one of the most notorious dams in the world. Not only does the dam produce electricity for a large proportion of china’s inhabitants, factories and other socio-economic factors, it also increases the Yangtze River’s overall shipping capacity. As a result this improves space available for imports and exports, essentially benefitting china’s ever-growing economy. Whilst the dam was initially rewarded for its social and economic success and being branded as ‘a state-of-the-art historic engineering process’ by the Chinese government, China, as a whole are now beginning to acknowledge the serious problems created by this engineering process.

The creation of the reservoir has a number of economic values. ‘It will aid in boosting agriculture, since the reservoir will hold more water for irrigation. With a final depth of 525 ft, larger ships can be used to transport products up and down the Yangtze River. This increased navigability will increase the economy in the area.’ (, 2014) Trade is also estimated to increase five times in the Central China. Transportation costs are also expected to reduce by 35-37%.

The dam was produced with the idea of creating electricity and moving towards the reduction of greenhouse gas emissions. The project may have achieved these intentions, however, many concerns have arisen from the project since. The huge project set records for the number of people displaced by the creation of the dam, which was more than 1.2 million. A large number of cities and towns were also flooded as a consequence of its presence.

‘The project has been plagued by corruption, spiraling costs, environmental impacts, human rights violations and resettlement difficulties.’ (International Rivers, 2014), The environmental impacts of the project have also been profound. ‘The submergence of hundreds of factories, mines and waste dumps, and the presence of massive industrial centers upstream are creating a festering bog of effluent, silt, industrial pollutants and rubbish in the reservoir.’ (International Rivers, 2014). This has resulted in the widespread contamination of the waters around China, creating hazardous water and serious threats to anyone who may consume it, as well posing threats to the wildlife and nature around the area.

The dam also poses serious threat the land surrounding the dam. Erosion of the reservoir and downstream riverbanks are causing landslides, and threatening one of the world’s biggest fisheries in the East China Sea. Not only does this impact the environment, but also Chinese industries, such as the fishing industry.

The government maintains that “the project is now greatly benefiting the society in the aspects of flood prevention, power generation, river transportation and water resource utilization”, but it has also “caused some urgent problems in terms of environmental protection, the prevention of geological hazards and the welfare of the relocated communities.”

Critics have also argued that the project may have exacerbated recent droughts by withholding critical water supply to downstream users and ecosystems, and through the creation of a microclimate by its giant reservoir.

All in all, the construction of the Three Gorges Dam has had many implications on the environment and people of China. ‘Official estimates put the cost of the dam at $24 billion’ (TPJC, 2014), this also has to be paid by the people of China and many are wondering if their money is really being put to good use. It is still yet to be discovered if the energy created by the Three Gorge Dam can be efficiently utilized into China’s energy grid. If proven successful, this could result in many other countries in the world following a similar path to China and constructing dams of their own.


International Rivers. 2014. Three Gorges Dam. [online] Available at: [Accessed: 19 Mar 2014]. 2014. Economic Issues. [online] Available at: [Accessed: 19 Mar 2014].

TPJC, G. 2014. Three Gorges Dam. [online] Available at: [Accessed: 19 Mar 2014].


Improved relations between China and the USA

20 Mar

Michelle Obama has recently begun her week long ‘non-political’ trip to China that will stop off in Beijing and Chengdu. She has decided to focus her trip on “the power and importance of education”  and will write a blog on this subject.

The reason as to why this visit is so interesting is because it comes as such a crucial time in regards to relations between the two countries with issues such as Crimea and China’s relationship with North Korea being at the top of the agenda. Although it has been claimed by The White House that this trip is not political, it is believed that the purpose is to prove that relations between the two countries are not just through leaders and are through the people also, as supported by a statement put out by the deputy national security advise for security communications, Ben Rhodes. This trip will hopefully improve relations between the two countries so that disputes over major and minor issues can end

                                                                                                                                                               By Joss Woodhead