Verified Document

Business Cycle Analysis Overview- From The End Research Paper

Business Cycle Analysis Overview- From the end of World War II to the early 1970s, China was relatively isolated from the global landscape. It was a part of the Soviet Communist Bloc, but remained inwardly focused on improving its own infrastructure and economy, all the while poised for rapid modernization. Openness towards the West began around 1978 with increased trade, a small amount of additional transparency internally, and at least the semblance of allowing more capitalistic templates like ownership of businesses, development of more modernized factories, etc., and less journalistic control. After 1978, Mao's successor Deng Xiaoping realized that the government had to increase the standard of living for its population, or face revolt. Deng's, and subsequent regimes, focused on market-oriented economic development. By the turn of the century, for instance, Chinese output had quadrupled, living standards improved as well as personal choices -- to a degree. There has been increased global trade, outreach, dialog, and participation in international organizations of all types (Central Intelligence Agency, 2013).

Data from China can be problematical at times prior to 2007-2008. Reporting measurements change and the opening of the economy to more capitalistic measures indicates data that are far more viable after 2010. However, data is correct enough to at least get a trending in overall GDP growth since 2007 a pinnacle in early 2010 with a downward curve until 2012, then flattening out. See Figure 1 -- (Trading Economies, 2013)

Real GDP -- China's real GDP growth for 2012 was the slowed since 1999 to roughly 7.8% as opposed to 9.3% in 2011 and 10.4% in 2012. Real GDP reached about $8.28 trillion U.S., likely the result of the growth of industrial production combined with the government's shift of reducing inflation to stabilizing growth (See Figure 2) (Xinhu, 2013).

Price Inflation -- In 2012, China's inflation slowed to a 23-month low due primarily to falling food prices; slowing to 3.0% (See Fig. 3) (China's inflation eases further, 2012)

Figure 3 - China's inflation rate

Private Consumption -- Private consumption plays quite a small role in China's economy, particularly when compared with the developed world. However, right now there are millions of Yuan hidden and disproportionately in the hands of the rich (The Economist, 2012) (Fig. 4).

Fixed Investment -- China's fixed asset investment rose 20.6% to 5.81 trillion dollars in 2012; down a bit from 2011, but growing overall because of agriculture and investment in industry (see Fig. 4) (English News China, 2013)

Inventory Investment- Inventory investment at the end of 2012 was rather critical for China because of lax lending policies and an oversupply of real estate -- with higher than average manufacturing inventories expected to react negatively in 2013.

Level of unemployment/employment- Unemployment figures for China are problematic at best, for the last several years they have hovered at 4.1%. China's official unemployment figures are calculated by only those urban workers who are formally registered and eligible for benefits -- leaving out 230 migrant workers or surplus agricultural workers (See Fig. 4-5) (Roberts, 2013).

Productivity- Despite rapid urbanization and globalization, the labor market in China is still fairly inexpensive. To put it in perspective, despite the major cities and booming economy, the country as a whole has wages lower than Mexico. Wages, then, are not completely indicative of Chinese productivity. Instead, most economists suggest that measuring Chinese productivity should be done on a combination of what labor produces and that capital investment in China yields higher dividends with greater output per worker than ever before (Cowen, 2010). As seen in Figure 6-7, China has helped power global economic growth and keep inflation low; with the cost of real median family income and wages that have remained stagnant despite increases in economic activity.

Short-term interest rates- China's interest rates remain highly controlled showing very little variability cine 2008 -- or hovering between 5.5 and 6.5. Most analysts see the last few years trending because of higher than average interest rates, high home prices in the major cities and the People's Bank of China's decision not to inject liquidity into the marketplace (Figure 7) (Trading Economics, 2013).

Growth in monetary supply- The money supply is an aggregate amount of monetary assets available. For China, the money supply has been steady from 2005 to 2010, then rising as investment and disposable income increase savings levels within the country (See Figures 7 and 8) (Trading Economics, 2013)

Figure 8 - Long-Term money supply

Figure 9-2012-13 Money Supply Increase

Nominal Exchange Rate- Many in the developed world believe that China undervalues its exchange rate; but it has strengthened since 2005 by about 50%. This takes into account private movements in comparative countries, which means real and nominal rates will be different (See Figure 9-10).

Real Exchange Rate -- This shows that prices are rising faster in China, meaning higher prices in China make Chinese firms less competitive, just as if their currency rate had risen drastically (The Economist, 2010).

Trade Balance- Trade balance is the difference between the value of exports and imports between two countries -- or the relationship between a nation's imports...

Parts of this document are hidden

View Full Document
svg-one

In terms of China, this is country dependent, of course. Between China and the United States, trade rose from $5 billion in 1981 to $536 billion in 2012 with China as the U.S.'s second largest trading partner. China is now a $250 billion market for U.S. firms, but the issues remain complex. Historically, we see a huge trade imbalance up until 2009, with the balance narrowing between 2010-2012 (Morrison, 2013).
Yield Curve- Over the last few years, China's short-term rates have been nearly reversed, but the yield curve has not changed much since the valley of 2008.

Figure 12 - Yield Curve (The Global Yield Curve, 2012).

Stock index -- Stocks show that the extreme growth of 2007-2008 has not been sustainable and shows a trend in a reduction of tourism, rising real estate prices and less confidence in the market since about 2011 (MISH's Global Economic Trend Analysis, 2012)

Commodity Price Index- The three largest trading partners globally are China, the U.S. And the EU. New economic data is showing that recently China has evened out on commodity prices, approaching parity with the U.S. And the EU (See Fig. 14) (Talk, 2013):

Figure 14 - Consumer comparison

Consumer Confidence Index -- The Chinese economy is still evolving, particularly when it comes to consumerism. Consumers are more trained in the urban areas regarding prices, price fluxuations, and price elasticity of goods and services. Not having a lengthy history and a consumer culture for decades has left them less suspicious and jaded about prices (note comparison to the U.S. And the world average) (China Internet Watch, 2013).

House price index -- Traditionally, Chinese have not had a long history of housing ownership. However, the recent rise in urban apartments, condominiums and even single-family homes result in the period of 2001-2009 seeing large increases in home ownership with reasonable prices. Lately, though, since 2011, housing prices in the major cities have drastically jumped, some as much as 20% as the government refrains from introducing property curbs and regulations (Bloomberg Business Week news, 2013).

Government Debt - China's government debt was 23% of GDP in 2012 having hovered around 12% from 1984 to 2011/12. China's foray into a more capitalistic economic structure globally but retaining socialism internally means that the government will still need to spend in order to retain urban and technological growth and a population that remains satisfied with the direction of the economy.

Conclusions - China's massive growth now shows an economy about 1/4 ths size of the U.S. economy. China's output will exceed America's in the 2020s, and their standard of living overall will continue to grow. China has looked at the long-term economic paradigm rather than the short-term model favored by many American investors. Through 2012, for instance, they received $59 billion in direct investment, ahead of the U.S. By $2 billion. "China's biggest attraction to global investment is now its huge market, contrasting the long-time low cost, which is now ranked third or fourth…. The economy is growing in China, outperforming the U.S. And the EU, which are suffering medium- or long-term troubles" (Trifunov, 2012).

Works Cited

Another Bubble Bursting. (2012). The Los Angeles Times -- China. Retrieved from: http://www.latimes.com/news/nationworld/nation/wire/sns-graphic-china-housing-gx,0,1151349.graphic#axzz2jEFZT3cw

The Global Yield Curve. (2012). Macro Investing Strategy. Retrieved from:

http://www.macro-investing-strategy.com/global-yield-curve/

Bloomberg Business Week news. (2013, October 22). China Major Cities Home Prices Jump. Retrieved from bloomberg, com: http://www.bloomberg.com/news/2013-10-22/china-home-prices-rise-led-by-record-gains-in-four-major-cities.html

Bureau of Labor Statistics. (2013). International Labor Comparisons: China. Retrieved from: http://www.bls.gov/fls/china.htm

Central Intelligence Agency. (2013, January). World Factbook - China. Retrieved from cia.gov: https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

China Internet Watch. (2013, June 15). New Buying Behavior of Chinese Consumers. Retrieved from chinainternetwatch.com: http://www.chinainternetwatch.com/category/economy-trade/

China's inflation eases further. (2012, June 9). Retrieved from English News China: http://news.xinhuanet.com/english/china/2012-06/09/c_131641255.htm

Cowen, T. (2010, July 16). The important thing is Chinese productivity is rising. Retrieved from The Economist: http://www.economist.com/economics/by-invitation/guest-contributions/important_thing_chinese_productivity_rising

Durden, T. (2010, June). China's Trade Balance By Country. Zero Hedge. Retrieved from: http://www.zerohedge.com/article/chinas-trade-balance-country-and-why-fx-action-less-deal-media-will-have-you-believe

Economist. (2011). The Book of Vital World Statistics. London: Crown.

English News China. (2013, January 17). China's 2012 Fixed Asset Investment Up. Retrieved from English.news.china: http://news.xinhuanet.com/english/china/2013-01/18/c_132111474.htm

MISH's Global Economic Trend Analysis. (2012, September 26). Is China Burning? Retrieved from globaleconomicanalysis.blogspot.com: http://globaleconomicanalysis.blogspot.com/2012/09/is-china-burning-shanghai-stock-index.html

Morally…

Sources used in this document:
Figure 15? SEQ Figure * ARABIC "2" - Consumer Confidence Comparison (China Internet Watch, 2013)

Figure14 - Housing Issues (Another Bubble, 2011)

Figure 15 - Debt to GDP
Cite this Document:
Copy Bibliography Citation

Related Documents

Business English Learning Requirements Questionnaire
Words: 1353 Length: 5 Document Type: Essay

Mr. Masoni is now being prepared for his first trip to the United Kingdom and, as part of this preparation, he has been signed up for a course in business English. The first step in devising the course is that of conducting a language analysis through the following lenses: Job analysis The needs in terms of outcomes Target performance objectives Performance areas in terms of language Language analysis. The first step is that of understating the

Business English and Implications on
Words: 4703 Length: 16 Document Type: Essay

In practice, TESOL is often used as synonymous with TESL or TEFL, where the acronyms stand for Teaching English as a Second Language and Teaching English as a Foreign Language. TESOL has however become more popular than these two concepts since its focus is that of language development for the students, without the differentiation of the English language as a second language or as a language taught to people

Business English What Skills, Functions
Words: 2116 Length: 5 Document Type: Essay

Wishing they were more or less in use is not an option; they simply are here to stay and are becoming even more insidious. For example, most memos are now sent via email -- and many of the protocols of business English are often not followed when utilizing email -- which changes the standard of usage within the workplace. Similarly, with so much diversity, working from home, globalization, out-sourcing,

Business English for Business Purposes
Words: 3975 Length: 15 Document Type: Essay

In such an environment, linguistic knowledge can be acquired directly as tacit knowledge, without formalizing it as grammar rules or vocabulary lists. At the same time, scenario-based learning allows learners to focus on the target context of language usage (in our case -- business English communication), resulting in more student interest and involvement in the learning tasks. (Bin Baharum et al. 2007) There are of course negative aspects to consider

Business Plan This Business Plan
Words: 2364 Length: 8 Document Type: Business Plan

The office and administrative expenses would remain constant even to that point, as would the insurance expense. Exhibit B: Cash Flow Statement, Year Two At this point, the business is earning a healthy return and Mr. Ahn is receiving will be able to bring in a reasonable salary. The nature of the business may well change at this point. At the maximum revenue of $144,000 per year the pretax profit would

Business Proposal in Ghana Giam's
Words: 5365 Length: 20 Document Type: Business Proposal

2% of the population is younger than 14; 58.2% is aged between 15 and 64 and 3.6% is over the age of 65. This affect Giam's in a positive way as most of the population is properly aged to work The median age of the population is 20.2 years, with 19.9 years for men and 20.4 years for women The birth rate is of 29.85 births per 1000 individuals The death rate is

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now