Dec 10 2008

Big trouble in little China – how slowing growth may mean major problems for the Chinese Communist Party

How high is China’s jobless rate? | The great wall of unemployed | The Economist

China Faces Unemployment Woes

Unemployment in China is a big deal. The legitimacy of the Chinese Communist Party hinges on its ability to assure  stable jobs and income growth for the 300 million “middle class” Chinese who live in the country’s cities. When the urbanites are unhappy, trouble ensues.

So a dip in economic growth rate into single digits, while we in the West may think of it as silly to fret about, is a major deal for China. Interestingly, according to the Economist newspaper, unemployment data in China is notoriously unreliable; in fact analysts have no clear idea of just how much unemployment there is:

Until the 1990s, the government more or less guaranteed full employment by providing every worker with an “iron rice bowl”—a job for life. But when soaring losses at state-owned firms forced the government to lay off about one-third of all state employees between 1996 and 2002, the official unemployment rate rose only slightly. Today it is 4% in urban areas, up from 3% in the mid-1990s.

But the official rate excludes workers laid off by state-owned firms. Thus at the start of this decade, when lay-offs peaked, it hugely understated true unemployment. Over time, as laid-off workers have found jobs or left the labour force, the distortion will have shrunk. Another flaw is that the official unemployment statistics cover only people who are registered as urban dwellers. An estimated 130m migrant workers have moved from the country to the cities, but there is no formal record that they live there, so they are ignored by the statisticians. After adjusting the official figures for these two factors, several studies earlier this decade concluded that the true unemployment rate was above 10%—and might be even as high as 20%.

The textbook definition of unemployment is the percentage of the labor force actively seeking but unable to find a job. In China, however, the “labor force” only includes the 25% of the country’s population that lives in cities, and the massive number of workers who were fired from state-owned enterprises over the last decade are mysteriously excluded from official figures. 4% unemployment, the official number, puts most developed countries to shame, as it represents extremely low levels of unemployment.

Despite the fuzziness in the figures, one thing is for sure, slower economic growth, even though it is still expected to be between 8-9% this year, means fewer new jobs in China, hence the government’s recent slashing of interest rates to re-invigorate investment and spending in the economy.

…on November 26th the People’s Bank of China slashed rates by more than a percentage point—the most in 11 years—to boost growth. The slowing economy has led factories to cut jobs, and there are mounting fears that the swelling ranks of the unemployed might one day take to the streets and disrupt China’s economic miracle.

An interesting point made in this article is that even continued economic growth in China does not guarantee continued job growth. Basic economic theory holds that when a nation’s output is increasing, employment is also increasing, since growth in output implies increase demand for labor. China, however, is experiencing a different type of growth today than that of years past:

China is creating fewer new jobs than it used to. In the 1980s, each 1% increase in GDP led to a 0.3% rise in employment. Over the past decade, 1% GDP growth has yielded, on average, only a 0.1% gain in jobs. Growth has become less job-intensive, so the economy needs to grow faster to hold down unemployment.

One reason for this is that the government has favoured capital-intensive industries, such as steel and machinery, rather than services which create more jobs… China needs to shift the mix of its growth from industry, investment and exports to services and consumption. To adjust the structure of production requires a further strengthening of the yuan, raising the price of energy, scrapping distortions in the tax system which favour manufacturing, and removing various shackles on the services sector.

More labour-intensive growth would also boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus.
But most important, by allowing more workers to enjoy the rewards of rapid growth, it could help to prevent future social unrest.

Discussion Questions:

  1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
  2. Why would a stronger RMB contribute to greater domestic job creation?
  3. “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
  4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

63 responses so far

63 Responses to “Big trouble in little China – how slowing growth may mean major problems for the Chinese Communist Party”

  1. Talia Greeneon 30 Nov 1999 at 1:00 am

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    The goods they are exporting are typically manufactured goods that don’t require a lot of jobs to create. Their production is more factory based. Production of domestically demanded goods and services, such as financial services, requires more workers and creates more jobs.

    2. Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB would decrease demand for Chinese exports, forcing them to focus on producing goods for domestic consumption in order to keep growing.

    3. “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    The labour-intesive growth it refers to is for goods that are mostly for domestic consumption. This growth would increase income and consumption, but would shift the focus of growth away from exports, lowering their trade surplus.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    The CCP was not democratically elected. In order to avoid a revolution, they must satisfy the middle-class.

  2. Talia Greeneon 30 Nov 1999 at 1:00 am

    @Benji:

    I agree, a domestic-growth strategy would make China a lot less dependent on other countries and a lot more stable in times such as these, when foreign consumption is low.

  3. Catherineon 15 Dec 2008 at 8:32 pm

    China’s export-oriented growth results in fewer new jobs than a growth strategy based on domestic consumption would, because there is more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States. The Chinese government's main concern is unemployment, which is why the governments ensures a low RNB, favouring a devaluation of it's currency more than an appreciation (or evaluation). As a result, the Chinese RNB is in surplus while the U.S dollar is in deficit. In digression, it should be noted that the U.S congress has been trying to get the RNB (China) to float and appreciate, moving the U.S into a trade surplus. A stronger RNB would also contribute to greater domestic job creation; improving the "social situation". As it is stated in the article, "more labour-intensive growth would also boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus. But most important, by allowing more workers to enjoy the rewards of rapid growth, it could help to prevent future social unrest".

  4. Michael Mayeron 20 Dec 2011 at 5:08 pm

    I find this format a bit hard to follow, it almost seems as though you have mixed up the order of the questions, and on top of that, I cannot figure out which question you are answering because you do not separate your answers in separate paragraphs or anything. But….. why do you think that a stronger RNB would contribute to greater domestic job creation? You say it does but you do not explore why…

  5. Palmion 16 Dec 2008 at 5:55 am

    1.) How does China’s export-oriented growth result in fewer new jobs than a growth strategy based on domestic consumption would?

    Well, this is mostly explained by the fact that, as the article states, a large part of china's exporting industries have shifted to capital-intensive industries, such as steel. For simplicity's sake, lets just say that China exports mainly steel: So – with its growth strategy based on these exports, (as china manipulates currencies for example, in order to increase foreign demand for its steel by devaluing (not depreciating!) its currency and making its steel expotrs appear cheaper to foreign importers)…anyway so as Chinese policies encourage its exports sector, and foreign demand for its steel increases, China will want to shift out the supply of steel. However, as this is a capital-intensive industry, what will happen, is that chinese steel firms will buy say, 5 new steel-making machines each, and increase their output by 10%…but they will only need 2 new people to operate the machines.

    As this rather simplistic scenario demonstrates, under the circumstances, china's export-oriented growth, although very capable of increasing production, will not create very many new jobs and will not help battle unemployment.

    In the meantime, a growth strategy based on domestic consumption would mean that local producers will produce for local consumers – who often enjoy more labor-intensive goods, such as the textile industry. If china were to stimulate its production of and demand for such goods, it would find that this sector of its economy will grow and result in the creation of many more jobs relative to its export-growth.

    why is this issue so important to china? As we discussed in class, the poor chinese farmers are getting sick of digging around the mud all day for what the virtually inexistent benefits of working for a communist government. As a result, they are migrating to cities and searching for jobs (now making them part of the labor force – willing but unable to find work) at a faster rate than new jobs are being created, because of china's export-oriented growth, as previously explained.

    This has put china in a bittle of problem, because as their unsustainable growth slows down, their unemployment goes up – potentially threatening the communist ruling party…again we also see politics forming a large portion of economic decisions.

    i have my own ideas about this, but i've already written enough. would anyone care to discuss why china doesn't simply switch to a more consumer-oriented growth strategy???

  6. Mitchell Broughtonon 20 Dec 2011 at 3:56 pm

    Palmi, the simple answer to this is that it is not as effective. With China keeping its currency's exchange rate so low, it can export goods at incredibly cheap prices and still retain the same profit. This may negatively affect employment; however, sometimes that is a sacrifice a government makes to improve growth.

  7. Wilhelm Non 16 Dec 2008 at 7:26 am

    China is currently enjoying a capital-intensive growth strategy. The article states that a "More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus". A capital intensive economy relies on the manufacture of Capital goods – such as iron or steel. The government of china is very concerned with keeping low unemployment, as an increase in unemployment among the 'middle class' chinese could have a destabilizing effect both socially and economically. A vicious circle is formed from the current economy strategy, as the Capital production makes some workers obsolete increasing unemployment, but it provides the bulk of jobs in China. The article offers to move to a labour-intensive growth strategy. This poses the problem of structural unemployment; to create the new labour intensive jobs, capital intensive jobs must be forgone. In the short term, many 'middle class' Chinese would lose their jobs as they become retrained for service and consumption jobs, which would potentially destabilize the government as unemployment would rise and the "swelling ranks of the unemployed might one day take to the streets and disrupt China’s economic miracle."

  8. Lisa Gon 16 Dec 2008 at 8:27 am

    Question 1 and 4)

    As stated in the article and in the blog posted before, it is very clear that china has an export oriented growth strategy. However, this strategy only works if the rate of growth would continue to increase at this alarming rate (I means seriously, about 10% of growth each year?) and if only labor intensive good as being manufactured. The export based strategy pushes producers to produce as many goods as possible, meaning that the more they produce the more income they will earn in terms of exports. As the income of these producers rises, the more likely they are to purchase capital goods or robots to produces the goods. Machines, oppose to human labor, as cheaper in the long run, can more work more hour (max 24 hours a day), do not complain or go on strike (I don’t know if you can do that in China…). As machines replace human labor, unemployment rise, however the exports continues to rise as the same or more can be produced. Even if the demand for the good increases, only very few workers will have to employed to man the new machinery acquired.

    The Chinese Communist Party has to maintain high growth rate, as this does created jobs and decrease unemployment. The growth rate must increase as the more and more framers migrate to cities to find work/jobs to support their families. As more and more people migrate more and more jobs must be created, meaning the rate of growth must increase. High unemployment, there are more and more unsatisfied people (one must take into account that 4% of unemployment in china is a huge number of people) which can lead to social unrest, which is not what the Chinese party wants. Politics, here again, trumps good economic solutions and growth strategies.

    The better strategy of the long run, I believe, would be a domestic consumption based one, as it would ensure more labor intensive good (increase employment) and allow the Chinese people to receive higher wages, thus allow them to enjoy consumer goods and trade and not be stuck in poverty. More jobs will be created, causing the demand and thus wages of works to increase. This effect this may take while to be seen as there are a lot of people unemployed in China at the moment.

  9. Ece ERDEMon 19 Dec 2011 at 11:35 am

    Hi Lisa, I agree that you stated that the machinery won't create opportunities for unemployed people because human labor is not needed. So the Chinese should be focusing on services to decrease the umemployement levels.

  10. Calvinon 17 Dec 2008 at 4:10 am

    Why would a stronger RMB contribute to greater domestic job creation?

    This statement is very controversial in the sense that there are always two sides to a story.

    For one a stronger RMB would not allow a greater domestic job creation, since as the chinese currency appreciates there would be less consumers demanding chinese exports. This means that companies would have to lay off workers and contribute to unemployment, since they can no longer afford to employ as many people as they did before. This is due to the declining revenue the chinese companies are having to deal with. Yes the elasticity of the produced goods and services affect whether or not the demand for chinese will decrease or increase as the currency appreciates in value. However since china's growth and economic prosperity is due to its labour intensive goods it produces, it is very easy vor China to loose this competative advantage to other nations such as Bangladesh, Burma, and Vietnam who also have a large labour force.

    An argument that could be used to support the claim that as the RMB would increase there would be more emplyment in China is: A stronger RMB means that domestic firms can purchase natural resources more cheaply, thus lowering the cost of production. This could help China as they are one of the nations who are consuming the most natural resources on our planet. This lowering in the production costs could mean that chinese companies may want to increase the production of their goods and may therefore employ more workers. Greater production = more employment.

  11. Manu R.on 17 Dec 2011 at 4:18 pm

    I agree about the effects of more purchasing power for raw materials, It is true that as they are able to afford them cheaper they´ll be able to decrease prices and therefore increase the demand of Chinese products, but somehow this means that the decrease of demand due to an stronger RMB would be faced by an increase of it thanks to the decline of prices, I mean, there wouldn't be any change at all. Don't you think that maybe Chinese economy would go through a transition moving from an economy based in manufacture to one based in service, which employees more people than factories?

  12. Horia Stanescuon 17 Dec 2008 at 6:32 am

    As Calvin stated, the effect of the Chinese currency is a double-sided blade with regards to total number of jobs in China.

    On one hand, the more expensive currency will render Chinese exports more expensive and Western societies will be less inclined to import them. This will cause firms to lay off employees in order to cover their costs and as such will increase unemployment in China.

    On the other hand, a more valuable currency will allow producers to import more prime and capital goods such as machinary or timber. An increase in the import of these primary resources will require extra labor in order to operate the machinery and work in these new businesses, which will again decrease the unemployment level in China and thus lead to the creation of more jobs domestically.

  13. Gorka Zubieteon 17 Dec 2008 at 7:09 am

    Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    Nowadays I believe that both the Chinese Communist Party and the political parties have the same amount of pressure to have high growth and low unemployment. In China, if the population is unemployed, they will undergo severe poverty and thus eventually revolt against the communist state. In the USA, a democratic state high unemployment would result in angry voters and thus more votes for the opposition. Clearly, both parties must keep unemployment low and high growth to please the population.

  14. nmolenkampon 15 Dec 2011 at 7:48 pm

    I agree with your statement that the democratic elected party will also experience some pressure, however I believe that that pressure is lower than the pressure that the Chinese Communist Party will experience. Because a revolt against the communist state will have to my opinion a greater negative effect on a country. If in America low unemployment results in more votes for the opposition then this will especially disadvantage the Republican party, however they will still be able to have some power in the government, even though it might be less. It is not as bad as having a whole country in revolt.

  15. Sebastian Son 17 Dec 2008 at 7:15 am

    If a country economy grows to fast and faster than others it will experience a dramatic fall. This is especially the case when a countries growth is based on exports as by China. So Chinas exports will eventually create a surplus of goods as their output is greater than the demand. Any countries greed for greater profit drives an economy to its ppc, but the ppc does not match the demand of goods. With this miss allocation of resources the unemployment in China will fall until equilibrium is reached again and unemployment will rise. Since the firms want to have the least production cost for their goods. They will replace labour by machines as they are cheaper in the long run. So in the end Chinas unemployment will rise unless their is growth. But if the economy grows to fast it will self correct itself.

  16. Matteoon 18 Dec 2008 at 6:02 am

    Question 1

    Export has been so far the engine of China's growth. However, exports have been generally driven by plants of foreign producers located in China rather than by domestic industry. This helped to accumulate huge trade surplus in last decade and foreign currency reserves, mainly in USD.

    Without a strong domestic industry, though, based on labout intensive productions, employment will not grow in next years as needed. With more labour intensive industries real incomes may rise and so consumtpion of both domestic and foreign goods.GDP growth will be driven also by consumption and domestic investments rather than by foreign investments and export industries. Proceedings from tariffs may be replaced by higher taxes on profits. China's economy would become more open to the rest of the world and increase of trade may lead to higher competition among firms with more benfits for the consumers. To balance all this may take time and strong leadership by the chinese government.

  17. Theresa Mehlon 22 Apr 2009 at 3:35 am

    1.It is clear that in the current economic crisis the export oriented china suffers great losses as less and less products are ported to foreign contries. The rising unemployment is the result of this, since firms have to cut down jobs, if they do not want to fall out of profit. When firms realize in deflation, that their year to year output is sinking, they will cut off on workers to prevent great losses.

    2.A stronger currency would make products more expensive. On one side this would be very benefitial since firms will earn more profit and will therefor employ more people, which could lead to a decreasing unemployment.

    On the other side, of course as products are getting more expensive less will be exportet which could reverse this aspect.

    3.Of course more labour intensive growth would boost incomes and consumption since people who work earn more and can therefor spend more. This would be very benefitial to the market.

    4.To keep utility up it is important to keep a low level of unemployment and a stable economy.

    A party in a democratic system will be overvoted in the next elections if people are unhappy with their behaviour. But in this case people's only chance would be to start revolting and crush the whole economic system.

    An example is the fall of the Berlin wall, where the bad economic situation was a reason for the unsettlement of the people.

  18. djohnon 19 Dec 2011 at 3:02 am

    Good answers! I do agree that a stronger currency would make products more expensive and China would profit from this and employ more people.

  19. Alex Hanon 22 Apr 2009 at 4:47 am

    As a large percentage of China's GDP is the export China is very reliant on foreign countries to inject money into it's economy. But now due to the recession, foreign countries are reluctant to buy from oversea producers. This is detrimental for China. Therefore, China needs to keep its GDP by other means that can increase consumption and income. China's method of doing so is increasing labor.

    I suppose a communist party would be more pressured because of its communist ideals. As many say, Communism in theory, and in an ideal situation may be favorable. It is a system in which ALL PEOPLE ARE EQUAL. Therefore, if some people are unemployed and some people are unable to enjoy the levels of income and consumption that others enjoy, equality is diminished. Furthermore, communists want to be equal, but probably not all equally poor. If recession hits communism, equality is hard to establish, and if it is established, all people are equally poorer. This could perfectly lead to unrest, thus the authorities are pressured

  20. Bryan_DiLauraon 20 Dec 2011 at 9:18 pm

    I like your answer to question 4. However you didn't really mention how a democratic system would be more lenient on unemployment, etc. I think it is because of the more constant change, and the ideal that you're success is based on how much you work.

  21. Maren Rackebrandton 22 Apr 2009 at 7:01 am

    China exports a large amount of goods it produces. But because of the economic problems, the countries are more likely to buy goods from their own country to stabilize the economy. So less goods are exported from China, leading to a decrease in employment, because less workers are needed.

    If the income of the Chinese would increase, consumption of goods would increase as well, because there is a higher standard of living and therefore more goods and services are consumed. More of the goods produced in China would be consumed by the Chinese and so export could decrease to a degree where it is most beneficial for China.

  22. Rocio Perezon 23 Apr 2009 at 5:08 am

    As you all know a large proportion of China's economy centers on its exports, and although it might guarantee growth, it does not ensure an increase in employment. Their reliance on the capital dependent industries eliminates new possibilities for job openings. In fact, China's service sector GDP makes up only 40.2% of the three sectors (industry, agriculture and services) and services is where new jobs can be created in a time of crisis. It is in the country's best interest to work on structuring and strengthening the service and consumer sector to keep the money flowing to the households who in turn continue to spend. This doesn't mean to keep the capital intensive industries from growing, it simply means to focus largely on the service and consumption sector for the sake of the Chinese and the country as a whole. The service sector GDP can be boosted up higher than just 40.2% and make up a larger portion of the three sectors like many of the countries today with lower unemployment rates.

  23. Christian Evertzon 23 Apr 2009 at 4:10 pm

    Exports from China have rapidly decreased during the economic crisis. This poses a big

    problem to China which heavily relies on its exports, in the past the main factor for China's increasing economic growth. China has to compensate for the decrease in exports in order to keep GDP up. Increasing labour would be one possibility, since more people had money to spend which would boost consumption. The Chinese government cannot afford any failures, since the economic miracle created by the Chinese could be damaged and more importantly social unrests could follow which would make economic growth at an increasing rate even more difficult.

  24. Benji Rosenon 24 Apr 2009 at 7:27 am

    China is a dilemma, their one child policy forced many families to pick a gender, and in most cases this was male. What whilst the population rate is now under control, to a certain extent, there are still hundreds of millions of men, and a defecit of women. Also in a non democratically elected government in which the people feel they have no say, they will be less tollerant to a government which is not helping them in their lives. The preassure is huge to keep the economy running smoothly because if the masses suddenly turn on the government, they have a civil war on their hands.

    Their new idea of a domestic growth strategy rather than export strategy is one of much greater stability. If their own people cannot afford to buy their goods then they are bound to the fate of their customers world wide. That well has dried up partially now, and they realize that they have hardly any domestic buyers. Also they would not always have to buy so many dollars. As long as the other countries in the world are in a recession, they have no one to sell to. Therefore to create self sustainability they should internalize some of their consumption. If they created a service sector large enough, and changed their economic and social strategy a little, they could not only make the people happier and richer, but they would be able to rely a little less on exports. Given, there would be a period of structural unemployment, and some public desturbances to deal with, but seeing as they can obstruct human rights in their country, stopping the rioting should be a doddle.

  25. nmolenkampon 15 Dec 2011 at 7:43 pm

    1)The production of the type of goods they are exporting do not create a lot of jobs. Such as the production of steel and machinery, which is more factory based. They will need to shift to the supply of services that do create a lot of jobs. They will have to focus more on services and consumption, rather than exports and manufactured goods in factories.
    2)A higher value of the RMB will result in a decrease in exports; therefore they will have to focus more on domestic production of goods and services, which will result in greater amount of domestic jobs.
    3)More labor intensive growth means that China focuses on production of goods and services that will result in a greater amount of domestic jobs. If more people are working then they will have a greater amount of income to spend, which will increase consumption. Also if the focus is more on domestic production then exports are likely to decline, which may balance the trade surplus a little.
    4)The difference is that the Communist Party is not democratically chosen, which means that it might be that actually a great amount of the Chinese population is not happy with this party and therefore would take every change to criticize the Communist Party. So the pressure on this Party is high, as they have to satisfy the middle-class to avoid any unrest or a potential revolution. The Republicans in America experience less pressure, as they are democratically chosen, which means they have a lot of support of the population.

  26. Manuel R.on 17 Dec 2011 at 2:17 pm

    1.How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    Their economy based in exports of factory capital goods do not create us much jobs as desired, while the production of domestic services as tourism, banking, etc needed by domestic consumers, demand bigger amount of people working, and therefore would boost more jobs.

    2.Why would a stronger RMB contribute to greater domestic job creation?

    If RMB was stronger the exports of Chinese products would be demanded. This would first make loses in Chinese economy, but it would finally promote a change in the type of production hold, I mean, economy would move from a manufacture base economy to a service based economy, and as we said this creates more jobs.

    3.“More labor-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    I believe that if incomes increase, as well as consumption, Chinese people will be able to demand imported foreign goods and this would obviously mean a decrease in the exports.

    4.Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    Communism is based in the “force of workers” Marx, main booster of this theory, explained that people should unify and work what they need, therefore each worker would be employed, of course this utopia is not followed in China, but if unemployment increases it would be seen by communism as a loss of strength by proletariat in benefit of “bourgeoisie”. In the other hand, being USA based in mixed economy, unemployment may happen, but this is not totally regulated by the State.

  27. djohnon 19 Dec 2011 at 2:40 am

    1.How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    Instead of using a lot of machinery and causing a lot of workers to lose their job, China should use less machinery and steel and instead use more of their labour force. China is producing a lot of goods which are being exported but now they should start producing more services for domestic firms and international firms.
    2.Why would a stronger RMB contribute to greater domestic job creation?
    China exports more than they import. When Chinese products are sold to other countries the products are way cheaper because of many factors. Chinese products are known to be cheap in the US market and demand for Chinese products rises due to the low prices. A greater RMB would suggest that when China exports its goods and services to other countries the prices of the products will rise causing the income from exports for China to increase leading to an increase in economic growth. Since economic growth will increase it will lead to a decrease in unemployment as China can now employ more people and make more jobs available.
    3.“More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    Since China exports so much more than what they import, China is famous for its exporting. If China increases their labour and reduces their machinery they can reduce their trading and this would lead to more consumption domestically. China’s extensive trading is because of its machinery and this causes a lot of unemployment and to reduce unemployment and China’s large trade surplus they should employ more people in domestic firms as this will lead to a boost in income, economic growth and consumption. As this leads to a decrease in unemployment people are earning more which means that they can afford more products.
    4.Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    From my point of view the Chinese Communist Party and the Republicans in the United States have a lot of pressure to maintain high growth and low unemployment. Every country has a lot of responsibility. But due to China’s excessive population there is more pressure on the Chinese Communist Party as they need to see that majority of the huge population of China has jobs because if they do not have jobs then the national income, economic growth, economic development and many other factors will decrease making China a declining country. Also this will refrain other countries from trading with China

  28. Noah Flanikenon 20 Dec 2011 at 4:21 am

    @djohn

    Also, with a communist party, goods are publicly owned/shared, people are provided with what they need and produce what they are able to produce. If the people aren't provided for as much as they think they should be, they might revolt.
    Good answers,
    Noah

  29. Jaime Ariason 20 Dec 2011 at 12:17 pm

    @djohn

    Hi;
    I totally agree with your answer to question number 1 since you used a different point of view than the one i used.
    In general I think you did a great job specially discussing number 3.

  30. Asucan Odcikinon 20 Dec 2011 at 12:35 pm

    Hi,
    I guess for the last question the effect of democracy plays an important role as well. Because as we know in China the party is not elected democratically which gives more right to be cross with the currenct decisions of Chinese government to Chinese people. So that they can react more than other people when they are not happy with the economic situation like unemployment.

  31. Gökçe Gündüzon 19 Dec 2011 at 7:31 am

    1.There is a economic crisis which is caused by the exports of china less products are ported to foreign countries. As a result the unemployment increases because the firms have to cut down the jobs which is needed to not fall out of profit.
    2.The products are more expensive due to stronger currency. Also this is very beneficial because firms make more profit so more employers as a result less unemployment. However products are getting more expensive since less exported.
    3. More labour intensive growth would boost incomes and consumption since people who work earn more and can therefor spend more. This would be very benefitial to the market.
    4.To keep utility up it is important to keep a low level of unemployment and a stable economy.A party in a democratic system will be overvoted in the next elections if people are unhappy with their behaviour. But in this case people’s only chance would be to start revolting and crush the whole economic system.

  32. Ece ERDEMon 19 Dec 2011 at 11:29 am

    1. China is mainly getting benefits from exports, and in a way they are dependent on their exports. So the economic crisis causes China to experience a loss because they cannot export products as much as they did before. They are producing mainly steel and machinery is important, so this type of production does not create much job opportunities for the workers. Since now the exports are less, the loss of job will increase as well. So as a strategy, they should be focusing on services and they should try creating new job opportunities rather than focusing on production of the goods which are exported.
    2. If the value of RMB increases, this is a good thing for domestic producers because it will decrease the exports due to high currency rates. Eventually, this will attach importance on domestic production of goods and services, and this will mean that unemployement levels will decrease due to increased job opportunities in domestic production firms.

  33. Ece ERDEMon 19 Dec 2011 at 11:29 am

    3. More labor intensive growth is that China will be focusing on domestic production causing more jobs for unemployed people. The more the people are employed, the more income they have and their consumption of goods will increase due to the rise on their wages. Furthermore, the increased importance on domestic production will decline the rate of exports and the trade surplus will be balanced.
    4. As stated before, the Communist Party in China is not chosen with democracy, this means that the citizens may not be happy with the result and may be more critical against the party. In USA, the republicans are elected with democracy, so the citizens approved it, this means that they will be more relaxed and the Community Party because they won’t be facing that much pressure. As a result, the unemployement rates increases because firms unemploy people because they want to maximize their profits but in China this will cause much more of a problem, whereas the Americans won’t mind it that much.

  34. Christian Camarilloon 19 Dec 2011 at 8:21 pm

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    China’s current account surplus led to more and more manufactured goods. His means that machines, not humans, were making the goods and were also taking people’s jobs away. Domestic consumption would help decrease the unemployment rate because it would offer more service jobs and machines cannot handle that type of work which is why China should do this.

    2. Why would a stronger RMB contribute to greater domestic job creation?
    When RMB increases, the rate of exports will do the opposite and decrease. Since the rate of exports will decrease, the workforce would be more concentrated in the domestic goods and services area which would create more jobs for people because machines wouldn’t be able to take it from them.

    3. “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    Labour-intensive growth refers to a rise in domestic based jobs. A rise in this field would take away the rise in exports. If the export rate in China decreases, then it will help their trade surplus lower and eventually be even with imports. Also, a rise in labour growth would create more incomes for people which means they will be able to consume more and more goods than before.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    There is more pressure on China’s Communist Party to keep growth high and unemployment low because that is what the party guarantees to the people. That is what communism is all about. If it is not guaranteed, the people could revolt which is the last thing any government wants to deal with.

  35. Christian Camarilloon 19 Dec 2011 at 8:27 pm

    Hey Rocio,
    I agree with you that China centers its economy on exports. China is one of the countries with a trade surplus, not deficit like the United States. This doesn’t mean that it is a good thing too because like you said, employment doesn’t necessarily go up. In fact, it will decrease.

  36. Noah Flanikenon 20 Dec 2011 at 4:18 am

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    China has been strongly relying on the export of its good for foreign consumption. The problem with a lot of these goods, such as steel and machinery, is that they do not create as many jobs. If China increased its domestic services, which requires a larger labor force, they could increase the number of new jobs.

    2. Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB would mean that China does not export as many goods. This is because as the value of the RMB increases, the price of Chinese goods from other countries’ perspectives, such as that of the US, increases. Thus countries like the US will not buy as many goods from China. This will reduce the demand for Chinese exports. Chinese exports are currently focused on goods, which are produced with a lot of machines. By reducing the demand for these goods, China would have to focus on more domestic services and goods which require more human labor.

    3.“More labor-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    If China reduced its large trade surplus, it would be reducing the number of exports and increasing the number of imports and goods for domestic consumption. More domestically consumed goods would mean more labor-intensive jobs. This would increase the number of people working in China, which would increase their wages. Higher wages means people could buy more goods and thus increase the consumption of domestically produced goods.

    4.Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    The idea of communism is that goods are publicly owned. People receive/consume what they need and produce what they are able to. The communist party guarantees low unemployment and high growth and thus they do not want the people to revolt. In a democratically elected party such as in the US, the president is voted for every four years and thus the people can change what they want the president to stand for. Also, people are treated differently in a democracy.

  37. Jaime Ariason 20 Dec 2011 at 12:13 pm

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    China is highly dependent on exports. If they do not sell enough products they cannot offer new jobs. As a main general export China highly depends on its main buyers to produce jobs, since the exports are one of the main reasons for Chinese growth. If China doesn’t sell, China doesn’t grow.
    2. Why would a stronger RMB contribute to greater domestic job creation?
    A stronger RMB could contribute to a greater job creation due to the necessity of employing more people to keep the value of the products low. With an RMB stronger China will able to export more with less restrictions caused by the low value of the RMB which causes complains from EU and US mainly.
    3. “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    More labour will cause a higher price on the products sold. A higher price will cause a reduction of production which will end with the possible trade surplus.
    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    Because the main idea of Communism is: “all citizens are equal” which means that all citizens should have a job. It does happen to elected parties because they are usually more directed or in favour of capitalism which does not promise everyone to be equal, but promises to give the chances to do things differently.

  38. Asucan Odcikinon 20 Dec 2011 at 12:31 pm

    1)Firstly, China relies on its exports a lot so that their growth strategy becomes more about export rates. Also, they give loads of importance to their industrial development rather than giving importance to service which requires more workers. So when they always give importance to industry the machinery replaces the need for workers which creates unemployment. On the other hand, if Chinese government chooses to make investment on tertiary sector, service, new job opportunities can be created.
    2)When the RMB gets stronger it means that Chinese exports would be less. It can be seen as a bad scenario because of fall in export rates but China it is good as China should rely on other economic factors not only to their high exports. So when RMB gets stronger it means that Chinese currency appreciates and for other countries Chinese goods become expensive than before that’s why their willingness to import Chinese goods will diminish. When exports will decrease the demand for these goods will diminish as well which means the need for industrial goods like textile products will be needed less. That’s why Chinese governments will shift their economic interest on tertiary sector which will obviously create new job opportunities in the domestic market for Chinese people who are unemployed.
    3)Labor intensive growth means that there are more labor intensive jobs in a country which refers to domestic demand and production. So in China labor intensive growth can decrease the export rates as there will be more importance given on domestic demand. This decrease in export rates can bring trade surplus to disappear in China. And also when there is labor intensive growth it means that there will be more people working in China which means unemployment will start to decrease that will reflect into the incomes of workers in China with a positive effect as well.
    4)As it is stated in the question as well Communist Party in China is not elected democratically so that people can give over reactions to the situations like unemployment in this case. But if we think of the USA, people in the States choose a political party democratically by voting system which shows that they approves the ideas and actions of the party that they choose and also they can have a chance not to choose the same party in the next election if they are not happy with the decisions and current economic situations unlike Chinese people.

  39. Mitchell Broughtonon 20 Dec 2011 at 3:54 pm

    -How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    This current account surplus is due to the large amount of exports that China has and its relatively little imports. The reason employment is not improving is because the vast amount of China's exports come from factories which produce goods mostly by machine. A growth strategy based on domestic consumption would include jobs that are more worker oriented, thus improving employment.

    -Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB would decrease the demand for imports and force China to focus more on domestic production, thus creating more domestic jobs.

    -“More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    This statement is saying that if firms in China started using more workers instead of machines to produce their goods it would reduce unemployment as well as peoples incomes. The statement says that China's trade surplus is "embarrassing"; however, I feel as though this is not the proper word to use, as China is purposely creating this surplus. Clearly it hurts them in terms of employment; however. their country is still growing at a very rapid pace.

    Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    There would be more pressure on the Chinese Communist Party because even if they do something wrong, they will not be out of office. If an elected party does not maintain high growth and low unemployment then they know they will not be re-elected, thus there is already enough pressure.

  40. Behiye ?lkayon 20 Dec 2011 at 8:27 pm

    Hi,
    I think you expressed your ideas clearly in the third question. However, I guess I am a bit cruel to say the word "embarrasing" is right word to use. As you stated the situation has many drawbacks for them, but they do not appreciate this fact and try to grow more and more without considering what it takes from them.
    Behiye ?lkay

  41. Javier Alberiteon 20 Dec 2011 at 9:39 pm

    I think that what happens with the pressure on the Chinese Communist Party is more about trying to maintain the already diminished honor of the communist system intact, what they are trying to do is to show the world that the communist system can provide low unemployment rates and good living conditions for citizens, trying to "convert" capitalist adepts to communism in a new communist fever such as the one after the 1929 crisis.

  42. Quinn Richardsonon 20 Dec 2011 at 4:03 pm

    1.New jobs in China have centered around labour intensive manufacturing positions. This kind of job creation yields less job growth than would new jobs in the services and consumption sector.
    2.A stronger RMB would increase the purchasing power of Chinese citizens as well as Chinese firms overseas. This would thus reduce the production costs for the Chinese firms and would result in greater employment.
    3.An increase in any kind of employment would result in increased consumption and thus would reduce the trade surplus. However, if the Chinese RMB is not allowed to appreciate in value, citizens would be deprived of their potential purchasing power. Keeping the Chinese consumption low will deprive the services sector of demand and thus revenues they could use to increase employment.
    4.Communism prides itself on the fact that everyone is employed in such a system. If they aren't able to keep their promises to their citizens, they will face civil unrest. The American government simply would not be reelected if its policies and actions were unpopular.

  43. Quinn Richardsonon 20 Dec 2011 at 4:17 pm

    @Noah Flaniken

    The problem with the Chinese government is that they have to guarantee job growth and economic growth as along as they are in power. This may be the motivation behind their currency augmentation. Keeping Chinese purchasing power low is more favourable than keeping them unemployed. They would be blamed for unemployment would likely face unrest.

  44. Haleigh Eppleron 20 Dec 2011 at 4:40 pm

    How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    Why would a stronger RMB contribute to greater domestic job creation?
    The account surplus results in fewer jobs because the exports are for capitol intense goods rather than labor intense goods. Because the goods are not consumed domestically there are fewer tertiary sector jobs created leading to a higher unemployment level. A strong RBM would decrease the amount of exports on the market because they would be less competitive.

    “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    A growth in labor intensive jobs would increase the employment level because fewer goods would be produced solely with machines. If the goods are more labor intensive they are less competitive on the international market decreasing the trade surplus as a higher persentage of goods are consumed domestically. The type of goods consumed domestically are also the type which creates more economic development like food increasing the standard of living for those in the rural areas of china.

    Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    Because the government is Chinese and claims to know what is best for the people, it must have a lower unemployment rate because the American people are able to elect officials. The ability to change officials and choose officials puts more of the responsibility on the people of the country.

  45. Michael Mayeron 20 Dec 2011 at 5:06 pm

    -How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    Intensive manufacturing jobs do not yield as many new jobs as a growth strategy based on domestic consumption would, because a growth strategy based on domestic consumption would actually call for more workers that aren't machines who produce things in mass quantities.

    -Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB would cause other countries to demand fewer products from China, and as such would force domestic production to increase.

    -“More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    People are getting more worth for their money because the quality of products increases. China has a huge trade surplus and it is almost embarrassing; they export so much of their products.

    Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    Because if the Chinese Communist Party does not keep high growth and low unemployment, people will become unhappy and they might be overthrown whereas an elected party in the U.S. would definitely keep office and as such are not quite as pressured.

  46. Mehmet M Sumaon 20 Dec 2011 at 7:44 pm

    1.China's economy is mainly based on exports which are generally manufactured goods such as steel. The problem is that manufacture industries are not labour intensive sectors. So, China needs a growth strategy based on domestic consumption which would aggrandize service sector which demands more labour force.
    2. A stronger RMB would decrease exports and increase imports i.e. domestic consumption which is needed to aggrandize service sector which would reduce unemployment.
    3. More labour-intensive growth would lead to higher employment and domestic consumption. As people start to earn, they will start to spend. The increase in domestic production would reduce the trade surplus as there would be a higher demand for imports.
    4. The principal argument of communism has been "job for everyone". When people in China cannot see the truth of this claim, they object to the party and its argument. However, in other countries, most of the parties do have a such a claim.

  47. Julian Cuervoon 20 Dec 2011 at 7:59 pm

    1. China’s current account surplus results in fewer new jobs than a growth strategy based on domestic consumption would because large, exporting industries yield more capital goods than labored goods. The mass production of capital favors machinery more than laborers, so jobs can’t be equally created. A domestic strategy allows employment to increase because it calls for domestic goods and services, thus requiring domestic labor workers to fill the demand.
    2. A stronger RMB contributes to greater domestic job creation because it will decrease the exchange rate and decrease the demand for exports. International trade and exports will decrease because the demand for the RMB currency will decrease. This allows the government to focus more on domestic production that will require domestic laborers over machinery that produces mass quantities of goods.

  48. Julian Cuervoon 20 Dec 2011 at 8:00 pm

    3. This statement is interesting and theoretically accurate because if China increase labor intensive work to boost incomes and consumption, inflation will decrease in China as the value of the Yuan would have to increase in order to increase incomes. This will therefore cause the demand for its exports to decrease because the value of the Yuan will increase, making it less demanded. All in all, international trade and exports (along with employment) for China would decrease, reducing the trade surplus.
    4. There is more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there may a democratically elected party such as the Republicans in the United States because Communism/Marxism is widely criticized as it goes against capitalism and the Keynes economic theory. Communism is attacked worldwide and historically is has been an issue as it isn’t as economically efficient nor does it merit wealth. So, the Communist Party in China has to feel pressure to be efficient in order to avoid worldwide economic mediation.

  49. Behiye ?lkayon 20 Dec 2011 at 8:23 pm

    1- How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    As it stated the basic exports of China depend on steel, machinery. However, as the firms prefer machinery to produce steel, for instance, instead of labour, structural unemployment occurs since the machinery takes place of labour. Thus, if the demand for Chinese exports increase- its currency depreciates-, the entreprenurs would prefer less labour but more machinery. That is why, the current account surplus would trigger the firms to be more productive and efficient with more machinery, less labour; therefore, less new jobs would be offered.
    2- Why would a stronger RMB contribute to greater domestic job creation?
    China is dependent on its exports in a way. That is why, it tries to keep RMB low so that the consumers would choose it because it is cheap. However, as RMB gets stronger, the level of Chinese export would fall. This would lead the domestic firms to sell the products at higher prices, and this means more profit. Then, the domestic firms can employ more people. The economy would be more dependent on the domestic goods and services.
    3- “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    As more job opportunities are offered, the unemployment rate in China would fall. This would increase the consumer confidence that the demand would increase. The consumption would increase.That would lead the imports to increase, as well. Since China is undefetably largest exporter in the world right now, the difference among its exports and imports would decrease. In the statement, "embrassingly" is used. Actually, this is a correct expression, because China has some tricks to keep its export levels high. It buys US dollar to keep its value high, so that the consumers prefer Chinese products whose prices are cheaper than dollar. At this juncture, China does not appreciate RMB value and let it be low. This is kind of embarrasing, I suppose.
    4- Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    In the United States, the party like Chinese Communist Party would be reelected since the inhabitants would be unpleasant by its policies. However, in China, with the dominant effect of communist system, even the inhabitants are not quite glad with the strategies, it is the task of government to correct it. That is why, there is more pressure on Chinese Communist Party to maintain high growth and low unemployment.

  50. M. Murat SEKBANon 20 Dec 2011 at 8:34 pm

    1.How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    China is highly dependent on exports. If China government can’t sell enought products they can not offer new jobs for people. As a result of this the growth of China will be affected in a negative way.

    2.Why would a stronger RMB contribute to greater domestic job creation?
    A powerful RMB directly has increasing effect on the purchasing power of Chinese consumers as well as the Chinese firms. As a result of this the production costs will reduce and there will be greater employment.

    3.“More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    More labour will affect the prices of the sold products and the prices will be higher. This will reduction effect on production.

    4.Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    Because according to the view of communism all citizens are equal and according to this idea each citizen should have a job. So if the elected parties are not able to keep their promises, they may face with civil unrest . The promises that government gives can be accepted as pressure on the government.

  51. Bryan_DiLauraon 20 Dec 2011 at 9:15 pm

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    Because China has a current account surplus, they export a lot of goods. Many of these goods are in the manufacturing industry for businesses in other countries. Because other countries are beginning to have less and less growth in their businesses, they are very easily laying people off. If these goods were going to domestic markets, then there would be more of an incentive to keep people, as the whole business relies on the domestic consumer.

    2. Why would a stronger RMB contribute to greater domestic job creation?
    A stronger RMB would decrease demand for exports, increasing domestic production, increasing employment.

    3. “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    This statement refers to China focusing on jobs that produce more domestically. This will increase consumption domestically, increasing imports, and hopefully balancing out the current account.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    The Chinese Communist Party is the only thing that is in charge in China, and there is no choice for the people in who leads them. If the economic environment is unfavorable, it makes a revolution look very attractive. However for a democratic situation, there are changes in the leadership often, making a bad economic situation seem more bearable.

  52. AydaAydon 20 Dec 2011 at 9:19 pm

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?
    China has strongly depend on its export and so the growth strategy also relies on export rates. If the exports are getting less in China, than that means there can be crisis caused by the structural unemployment. Plus, when the understanding of industry and service sectors, which are also called as secondary and tertiary sector respectively, are compared the industrial developments are more important for China’s economy. So in this case, the unemployment rate also increases as the new-tech machines are chosen instead of people who willing to have a job and actively seek for a job, which also creates the unemployment problem.

    2. Why would a stronger RMB contribute to greater domestic job creation?
    A stronger RMB means greater job opportunities, as the export rate will decrease and China will be in a position to give importance to other particular sectors like tertiary; so that the unemployment rate will decrease, since tertiary sector is person-oriented.

    3. “More labor-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.
    In this case, number of exports will reduce, and the number of imports increases especially the domestic consumption. Thus, the labor intensive growth will decrease the export rate because of the relation between domestic and foreign demand. So by the increase in domestic consumption, and the decrease in export levels, the unemployment rate will decrease, as people will have the chance to find jobs.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?
    In communistic regimes, the idea is being equal in many ways like having a fair distribution of income, having jobs (for everyone), having fair distribution of goods and services. So by this method, communism will ensure the low levels of unemployment and high growth; so that the communistic regime works in terms of economics in theory.

  53. Javier Alberiteon 20 Dec 2011 at 9:35 pm

    The current account surplus means that generally the country is living under worse conditions than it could, and as a result there is no incentives for consumption; a strategy based both in exports and also domestic consumption by a higher income level of the citizens would mean a constant growth based on a greater amount of new jobs thanks to that boost of domestic production.

    A stronger RMB would help to increase imports and acquisitive power of the chinese citizens therefore boosting domestic consumption and as a result to a greater domestic job creation. Although, a too strong RMB would reduce exports since the Chinese products would be more expensive for foreign trade and that would somehow be balanced.

    That great capital surplus that China is enjoying means that they are living under their possibilities, a labour-intensive growth would help to increase consumption and trade therefore producing a current account stabilization and therefore decreasing that too high capital account deficit that as a result is striking the chinese unemployment rate.

    Since the Chinese is one of the last Communist ruled countries in the world it is philosophically compelled to maintain good economic levels that justify the existence of communist regimes, the fact that many communist countries had failed before to achieve complete economic success is one more incentive for the chinese seek of economic leadership in order to show the world that the communist system is the right one.

  54. Huanni Won 21 Dec 2011 at 1:48 am

    ·I agree that stronger yuan would increase domestic consumption, but as imports become more attractive, it is hard to say the increase in aggregate demand would be significant as money would be spent largely on imported goods. I don't think there is a tight connection between "higher level of consumption" and "job creation" as the drawbacks of a stronger yuan would hinder its way towards low unemployment.

  55. Nesibe Zirzakiranon 20 Dec 2011 at 11:05 pm

    1.How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    Their exports are factory capital goods which is not requiring the jobs, the workers for it. Instead of this, China may focus on service goods; the services which involve more of people working; the demand for jobs would increase then.

    2.Why would a stronger RMB contribute to greater domestic job creation?

    The stronger RMB would result in the more demand of the Chinese products. That would turn the Chinese economy from a secondary sector ( manufacture) based on to a tertiary sector based on which would give a way to creation of job opportunities.

    3.“More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    As the people get job, they can have greater amount of income which would be an incentive to demand more ( rise in AD and eventually consumption) also the rise in consumption would be effective in the sense that Chinese people would demand more of imported goods on their country and by this way the imports and exports would be balanced maybe.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    It is because China comes from communist roots which encourage the work and equal payment of work to the everyones and a risk of high unemployment would confict with their view and aim of standard life for everyone. In US it is not such a big concern because their economy is liberal and private markets are supported. In China, the equality among all the people according to their work and increasing infrastructure as a whole unity, whole nation are important aspects.

  56. Huanni Wuon 21 Dec 2011 at 1:49 am

    1. 1.How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    A growth strategy based on domestic consumption may increase demand in the service sector which is more labor-based. However, as China depends on net export to grow, the increase in demand for goods doesn't lead to a lot of job creation as goods are more machine-based.

    2. Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB will adjust China's trade surplus. However, I am not sure if this will lead to definite job creation because there would be initially massive job losses in export industry due to the decrease in foreign demand. In addition, as increased purchasing power of the Chinese allows more imports to flow into the country, domestic producers would be put in an even weaker position because their market share is shared by foreign competitors. Although it is arguable that this may also flourish the service sector and a lower level of inflation would encourage more people to join the work force (as they expect lower wage, companies would be willing to hire more people), it is really unclear whether such change would reduce the level of unemployment as many drawbacks would be involved. The time period also needs to be considered, as to restructure production isn't something can be accomplished within just a few years. It may create more jobs in the long term, but by the time people reach there, we might already have harmed a generation.

    3. “More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    "More labor-intensive growth" relates to the development of the service sector and the reduction in export production. Currently the workers in export industry are receiving low wages and there would be more opportunities of income in the service sector. The firms would use higher wages to fulfill their labor demand. In addition, reduced reliance on export industry would contribute to a long-term adjustment in the production structure and resource reallocation. A reduced trade surplus would also relief international conflicts and give way to a stronger currency. The country would benefit from a lower level of inflation and enjoy a more independent growth.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    A country follows communism values the creation of "common wealth". Given that China has a large population, the Chinese Communist Party cannot guarantee the welfare of everyone and thus the decision makers are bound to sustain a high level of economic security so that even the poor ones have the opportunity to make livings for themselves. For the more democratic country – the US – the government doesn't have such the same concern because the economy of the US can be supported by corporations and individuals. Another difference is that China has a central-planned economy while the US has a more market oriented economy. For the former one, as there isn't much power endowed to the private companies and individuals, the government bear a heavier burden to achieve the macroeconomic goals.

  57. tsekineon 23 Dec 2011 at 5:11 pm

    For the second question, I strongly agree with your statement about how the stronger RMB will not lead to a "definite" job creation due to the 'unattractive' Chinese exports to foreign countries. Then again, if they can potentially receive more money/return, they may have the incentives to create products with better quality and end up making their products 'attractive' again, not with the low price but with the higher quality.

    For the fourth question, I disagree or rather need some clarification of the US being "supported" by corporations and individuals. I feel that the corporations and the "individuals" are the problem to the US economy. They are the ones who have power, and they are the only ones. By individuals, I am referring to the 'rich individuals'. The poor are not even taken into account/consideration. With the new elections in 2009, did things get better? Not that the previous president was a lot better but the new president certainly has not made a significant improvement to the US economy. So in the end, does this so called "democracy" help a country's economy at all?

  58. awallaron 02 Jan 2012 at 11:37 pm

    Your reply to the second question was great, really great. I especially like "It may create more jobs in the long term, but by the time people reach there, we might already have harmed a generation". The one thing that I would add to your response is that a stronger RMB would be an incentive for the growth of a domestic market.

  59. jjowetton 22 Dec 2011 at 8:13 am

    1. A current account surplus usually leads to an appreciation of the currency on the foreign exchange markets as it implies an increase in demand for the currency. This will make imports cheaper, so reducing inflationary pressures, but will also make exports more expensive, which harms exporters. Large exporting companies are thus forced to cut costs by “letting some of their workers go.”
    2. I don’t think that a stronger RMB would lead to greater domestic job creation! As I said in question 1, an appreciation of the RMB makes imports a lot more popular but in turn makes Chinese exports very unpopular as they seem very expensive. This means that Chinese exporting companies have to cut costs and “let people go” in order to remain afloat.
    3. More labour intensive growth refers to the development of the service sector, as it is sector that is more reliant on human-labour than capital and machinery. The service sector usually pays quite highly, thus increasing the incomes of many families in China who are able to find employment in the service-sector. By having more income, consumer spending will increase as they have the ability to fulfil their wants (that they were not able to before because of low incomes). This will increase the amount of imports in China, thus reducing the large trade surplus. Furthermore, by developing the service-sector, the export sector will in turn decrease, thus reducing exports and the trade surplus.
    4. China is one of the last communist regimes left in the world. So many communist countries have before failed to maximise and maintain high economic growth. China needs to maintain its current amazing growth to prove to the world that the communist regime is the right one, and that it is the one that will stimulate the greatest economic growth possible. China needs to prove its worth to the democratic countries such as the US (who dominate world politics).

  60. jjowetton 22 Dec 2011 at 8:16 am

    # Huanni Wu

    An very correct set of responses to what I considered to be a quite tricky set of questions. An interesting take on the fourth question. You seem to have talked about the the importance for the chinese people. You should consider the need for China to prove to the world that communism can work and that it can only do so by retaining its high economic growth!

  61. tsekineon 23 Dec 2011 at 5:02 pm

    1. China’s current account surplus results in fewer new jobs than a growth strategy for the economy as China is experiencing a surplus, most likely in the balance of trade in goods (not services, as the extract above discusses the lack of services by China which could in fact create more jobs). This means that China does not have the incentives to experience further economic growth as their goods (exports) are rather successful.

    2. A stronger RMB would contribute to greater domestic job creation as a higher RMB would mean that the return from the Chinese imports (into foreign countries) would be higher. Therefore firms are able to pay a higher wage for their domestic workers, and without having the need to lay-off or fire workers to pay existing workers. This would also allow them to employ more workers, thus leading to a higher employment rate.

    3. The statement states and explains exactly what it is meant to explain, as a more “labor-intensive growth” (emphasis on labor/work force within China) would result in a higher income for the workers, and therefore lead to higher consumption (as they now have more income). As they have a higher income and consume more products, China is more likely to import goods rather than just exporting a whole lot in comparison to importing foreign goods (thus, reducing China’s trade surplus).

    4. I would imagine simply because of the fact that in a communist government structure, there is no private ownership and all income is divided among the citizens equally (therefore, everyone is “equal”). However the whole idea of communism has failed in the past as the ‘strong’ powerful leaders misused their position. Therefore if people do not like the way they are ‘treated’ or they do not like the system they are under, there may be a form of voluntary unemployment, thus limiting growth and increasing unemployment rate. Although having said this, I do not think the Republicans in the United States are any better. There is no “democracy” in the United States, or there is no such thing as “democracy” in this world.

  62. Dilan_Guneson 24 Dec 2011 at 6:28 pm

    1.How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    Because the current account surplus is related with exports China uses factories for its exports and there is no need to have workers but China is more into service products where workers will be needed.

    2.Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB will lead China to create more job opportunities between it. Because stronger RMB will be decreasing the demand for Chinese exports and afterwards China will give importance to domestic production.

    3.“More labour-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    The export amount will be decreasing and the amount of imports will increase. At the same time when the unemployment will decrease there are more people with a job that shows that their income increased and they can spend money on products. And they will demand on the imports.

    4.Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    China has communist regime for a very long time and this logic has the ideas of equal payment between workers. If the unemployment rate is high in China there will be a negative impact because China is trying to balance the living standards of people.

  63. awallaron 02 Jan 2012 at 11:33 pm

    1. How does China’s current account surplus result in fewer new jobs than a growth strategy based on domestic consumption would?

    The current account records the value of exports and imports of goods and services in a country over a course of time. This means that a current account surplus would be a trade surplus meaning that there are more exports then imports of real goods. This leaves the business sector of the economy to only a few business (mostly state owned). This, as we know, limits the job market because instead of employing in parallel, China is employing in series; sort of like a monopoly in the job market. China needs to stimulate small scale capitalism. If China needs to make it possible for the average endowed consumer to start a business. This would instigate domestic consumption and would therefore increase employment.

    2. Why would a stronger RMB contribute to greater domestic job creation?

    A stronger RMB would not necessarily lead to job creation in the short run. The stronger RMB would decrease the demand for Chinese exports because they would become relatively more expensive. This, in the short run, would lead to unemployment because employers are not able to sustain as high of a workforce. However, in the long run, it is possible for the revaluation of the RMB to increase employment. China, contrary to the American economy, has a centrally planed, export based economy. A strong RMB would decrease the power of the exports and therefore a new paradigm of sorts would be needed. The other side of the economic spectrum would illuminate and consumers would buy overseas goods (more purchasing power). Entrepreneurs would also start to emerge because of the decrease in the demand for Chinese exports. Small, local businesses would start employing, and the unemployment rate would start to decrease.

    3. “More labor-intensive growth would boost incomes and consumption and so help to reduce China’s embarrassingly large trade surplus” Discuss this statement.

    First off, the speaker of this quote is describing China's trade surplus as “embarrassingly large”. It is indeed embarrassing because even though China is in a surplus, meaning it is exporting more than it is importing, China still has impressive levels of unemployment. The speaker also suggests that “labor intensive growth” would “help to reduce” said surplus. The “labor intensive” growth refers to the service sector of the economy. The service sector would serve to fulfill domestic demand. This new businesses would require labor and therefore the unemployment rate would decrease. This would put more money into consumers' pockets and therefore increase consumption. The creation of domestic service businesses would give incentive and initiative to people that a domestic market for goods could also be created. Domestic businesses would start emerging and more wealth would be allocated locally thus decreasing the amount of money needed to be used for exports. This would decrease the “embarrassingly large trade surplus”.

    4. Philosophically speaking, why is there more pressure on the Chinese Communist Party to maintain high growth and low unemployment than there might be on a democratically elected party such as the Republicans in the United States?

    Oxford's dictionary defines communism as “a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works according to their abilities and needs”. The key phrase from the definition is that “each person works”. Full employment is not only the goal but a foundation for the political philosophy. Not meeting near full employment is a failure of the Chinese Communist Party. This is contrary to the “democratically elected party such as the Republicans in the United States”. American Republicans more or less endorse the idea of capitalism. Capitalism, by Oxford dictionary, is “an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state”. It is more of an “every man for his self” situation. The government in no way says that there will be full employment, instead the government says we will help you gain employment but it is in the consumer's hand whether or not he/she will gain full employment. China is nearly forced to employ every able consumer (as dictated by the Communist philosophy), but the United States is not bound by any such clause.