The Rise of China

TWO WORLD ECONOMIES AT GLANCE

CHINA - TODAY
Chinas economy has grown rapidly as market reforms have continued. Today, Chinas economy is the second largest in the world, behind only the United States. As the economy has improved, so has the standard of living for many Chinese.

Economic Development
Economic growth has not reached all Chinas 1.3 billion people To prevent further population growth, Chinese government encourages families to have only one child

Other Challenges
Large population, rapidly expanding industries High demands on resources, environment Imports coal, iron ore, oil, natural gas to meet energy needs

This has caused shortages and higher costs for these resources on the global market, as well as air and water pollution within China.

Foreign Direct Investment (FDI)

FDI, at US$60 billion a year, amounts to approximately 10% of the annual Chinese aggregate gross domestic investment of approximately US$500 billion. Moreover, a significant proportion of it is what is known as recycled or round-tripped , Investment ultimately originated by Chinese entities and individuals. Qualitatively, FDI is probably more important because it brings in technology, know-how, business methods, management techniques and markets that will otherwise be unavailable in China. China became the Worlds leading recipient of FDI for the first time in 2002, with US$52.7 billion, overtaking the United States with approximately US$44 billion. FDI has been responsible for most of the growth of exports (and imports). However, the nature of FDI has also changed--from exportoriented to domestic market oriented; from light industry to heavy and high-technology industries; and from small projects to large projects.

China as the Worlds Factory as well as the Worlds market.

Financial Regulatory Structure

The State Council

CBRC
Commercial Banks Credit Cooperatives

CSRC
Securities Firms Exchanges Fund Management

CIRC
Insurance Companies

Trust & Investment

The States Dominance of the Banking Industry

Urban Credit Union 0.5% City Com m ercial Bank s 6.9% Joint Stock Bank s 18.8% Rural Credit Union 9.5% Foreign Bank s 2.1%

State-owned Bank s 62.2%

Progress of Chinese Stock Market Reform

Before 2005, state-owned and legal person-owned shares could not be traded on stock exchanges. Large shareholders paid little attention to the prices of tradable shares held by the public. In 2005, the government initiated reforms that made non-tradable shares tradable. This aligned the interests of large shareholders with that of outside shareholders

Great Leap Forward in Equity Market

An average of US$9 billion raised per year from 1991 to 2006 In 2007, $50 billion new A-shares were issued, taking the first place in the world (the second place US equity markets raised less than $40 billion in 2007)

Shanghai Stock index increased by almost 100% in 2007