CHINA: Economic Policy Analysis

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The study is by Feng Chao Jun, a Chinese native who currently [May 2009] lives in San Francisco; this study presents the Chinese government's economic policies as compared to the MIEPA list of policies as outlined above. The ratings herein are based on the following rating scale:

RATING SCALE

5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2005. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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China - Feng Chao Jun

Comparison of China's economic policies to MIEPA criteria as prepared by native student of China, Feng Chao Jun, studying in the US in May 2009.

RATING SUMMARY

POLICY NUMBER      RAW SCORE   ADJUSTED SCORE    POSSIBLE   PERCENTAGE

        1               3.5          10.5             15.0        70 %

        2               3.0           9.0             15.0        60

        3               2.0           6.0             15.0        40

        4               4.0          12.0             15.0        80

        5               5.0          15.0             15.0       100

        6               4.5          13.5             15.0        90

        7               4.2          12.6             15.0        84

        8               4.0          12.0             15.0        80

        9               4.0          12.0             15.0        80

        10              5.0          15.0             15.0       100

        11              5.0          15.0             15.0       100

        12              4.0           8.0             10.0        80

        13              5.0          10.0             10.0       100

        14              4.5           9.0             10.0        90

        15              4.5           9.0             10.0        90

        16              4.5           9.0             10.0        90

        17              2.5           5.0             10.0        50

        18              3.5           7.0             10.0        70

        19              2.8           5.6             10.0        56

        20              4.0           8.0             10.0        80

        21              4.0           8.0             10.0        80

        22              3.0           6.0             10.0        60

        23              2.0           4.0             10.0        40

        24              2.5           5.0             10.0        50

        25              2.5           5.0             10.0        50        

        26              4.5           9.0             10.0        90

        27              2.5           5.0             10.0        50

        28              3.0           6.0             10.0        60

        29              4.0           4.0              5.0        80 

        30              2.5           5.0              5.0        50

        31              4.0           4.0              5.0        80

        32              3.5           3.5              5.0        70

        33              4.5           4.5              5.0        90

        34              4.0           4.0              5.0        80

   TOTAL              126.0         276.2            375.0        73.6%
                      =====        ======            =====        =====

INDIVIDUAL POLICIES

1. Freedom from Internal Control: 3.5

In China, citizens need to fill out paper works in the local police departments where they relocate to a new place. This requirement for migrate workers to file documents enable the central census bureau to conduct their survey in population and overall economic statistics. However, citizens are free to create their wealth anywhere else in the country.

Source:

http://news.southcn.com/gdnews/nanyuedadi/content/2009-02/05/content_4885991.htm

http://www.asiapump.cn/html/20080701/news_6035.html

2. Freedom of Speech: 3.0

While a lot of people worldwide criticize China’s freedom of speech are too limited, I would confidently say that in China, freedom of speech are way better than what critics stated. First of all, like anywhere else in the world, freedoms are base on rules and regulations. So does the freedom of speech in China. Regarding the China’s constitution, practices in freedom of speech need to follow the fundamental policy that to maintain the country’s unity. This requires protest groups to file proposal in advance in order for officials to arrange resource to maintain public safety during the event. There are a lot of protests in different parts of China. And from success legal protest, it proven that China’s regulation on freedom of speech highly increase the effectiveness of the protest event and greatly reduce the unnecessary financial lose like the “Oakland Bart police protest”. In contrast, I disagree with how the central broadcasting company handles the Taiwan issue programs. Although personally understand that they are trying to avoid confusion of what the country stand, and so do the majority of the citizen, however, the central broadcasting census department should let viewers to listen or see for themselves.

Source:

- http://www.lxxf.gov.cn/xwzx/ShowArticle.asp?ArticleID=11687

http://www.rfa.org/mandarin/yataibaodao/shunde-20080101.html

http://www.xwcbj.gd.gov.cn/news/html/gz/article/1226700458111.html

http://www.rfa.org/mandarin/yataibaodao/wuhan-20071228.html

http://www.usconstitution.net/china.html

3.Effective, Fair Police Force: 2.0

China’s police forces are pretty fair, Although small corruption occasionally happen in small towns, which cases like that would eventually surface and higher officials will solve the case from the bottom, again, there is a very lean chance for it to happen. But unfortunately, china’s police forces still need to work on their effectiveness. The source indicated crime solve rate in china among different part of the country are about 22.7%. Compare to European country like Bulgaria, their crime-solving rate are at 80%. My family have experience the ineffective police work 3 years ago when my parents’ house was burglarized, we have not heard any thing regarding this case till this day. Event the officials reaffirm the urgency to improve the police force effectiveness in order to protect citizens’ properties.

Source:

Personal experience

http://www.12edu.cn/zuowen/dybg/200901/234139_2.shtml

http://www.zhbj.gov.cn/client/InfoView.aspx?GoryID=NewSS&ID=313

http://www.novinite.com/view_news.php?id=57386

http://english.peopledaily.com.cn/english/200010/08/eng20001008_52078.html

4. Private property: 4.0

In China, Private properties are on a 70 years lease bases from the central government. However, properties are available for local citizens and foreigners as long as they provide identification to prove the name use to register for the property is as present, and all legal registered properties are recognized nationally. Owner(s) of the property can exchange ownership, state it on their will, sell it on the real estate market for cash, or event use it as asset to get equity from banks.

Source:

Personal experience

http://www.baojifdc.gov.cn/Article_Print.asp?ArticleID=6140

http://yhcs.bank.cnfol.com/060421/138,1399,1807848,00.shtml

5. Commercial Banks: 5.0

In China, there are more than 20 commercial bank which are include Bank of China, Industrial and Commercial Bank of China, HSBC, Bank of American and other world wide bank. All of them offer all kind of loans to business and event personal loan. Lending by the Industrial and Commercial Bank of China (ICBC) alone rose 14.2 percent year-on-year in 2008 to a record high of 530 billion yuan (77.5 billion U.S. dollars), the bank said at a work meeting Monday.

About half of the total went to small and medium-sized companies and individuals, in line with a government call to boost domestic demand by supporting smaller companies and private consumption. Lending to smaller companies stood at 175.9 billion yuan, while loans to individuals reached 77.3 billion yuan, according to ICBC.

Source:

http://report.cei.gov.cn/2004report/report/d/d01.htm

http://www.entrancechina.org/news.php?id=81906

6. Communication Systems: 4.5

With the large-scale promotion of China’s domestic 3G-network development and application, the mobile phone-based mobile Internet influenced citizens’ life greatly. Visible chatting, mobile phone TV, high-speed mobile Internet access and other applications appeared one after another. The ever-increasing subscriber number also testified it. Currently, the subscriber population of China's mobile internet has breached 85 million with the compound growth rate reached over 60 percent while the growth rate of traditional internet is around 20 percent. "Once the 3G network is built up, over 600 million mobile phone subscribers will get rid of the restriction of bandwidth and speed, and enjoy quicker internet businesses, an insider explained. All the accessible communication helps businesses to connect with their network, thus increase the efficiency in business transactions.

Source

http://en.ce.cn/Insight/200902/05/t20090205_18122682.shtml

7. Transportation: 4.2

China’s transportation transform has achieved greatly. 44 high ways cover the entire country, and more under construction. These highways are benefiting agricultural and industrial products transportation, so as benefit the whole country’s economic. And major public transportations are public buses and metro system. Basically, there are bus lines between states, one city to another, and from one part of the city to another. Underground railways are located in 12 major cities, total 602.3 kilometers. With total of approximately 92 billion U.S dollar invested, more than 15 cities’ 36 subway under construction, By 2019, China will have addition subway coverage in 15 more cities, expand its total length will reach 1700 kilometers. China also has great railroad and flight coverage all over the country, these help the economy growth tremendously.

Source:

http://glcx.moc.gov.cn/

http://www.china.com.cn/news/txt/2007-10/10/content_9024352.htm

http://en.wikipedia.org/wiki/Rail_transport_in_the_People's_Republic_of_China

8. Education: 4.0

China’s school life expectancy is 11 years (2006), It is a quarter shorter compare to U.S’s 15-16 years (2006), The total number of graduates from colleges and universities in 2004: 2.8 million, which is about 25% of the total high school graduate population. Number of Students in Colleges and Universities is 4.13 million, which is about 33% of the total young adult population. In contrary, the education quality is pretty good in China. Comparing to the USA, the ration of the colleges and universities students are much lower, is a result of greater restrictions to enter a university in China. And China has some historical and world famous universities, for instance, Beijing University, Tsinghua University and so on.

Source:

Personal experience

https://www.cia.gov/library/publications/the-world-factbook/print/ch.html

https://www.cia.gov/library/publications/the-world-factbook/geos/us.html

http://www.chinatoday.com/edu/a.htm

9. Social Mobility: 4.0

Nepotism yet still appears in some township level official selection, But when it comes to enterprise, together with the blooming economic since the early mid 80’s and early 90’s, entrepreneurships have grown rapidly. And this phenomenon has happened to all level of Chinese people since then, including the poor ones from rural areas whom were drop out of school due to poverty. Some of them were only with 20 U.S dollar capital at the beginning, and they have the opportunities to become owner of today’s multi million enterprise.

Source:

Personal experience

http://news.mainone.com/talk/2008-12/182792.shtml

http://www.zhiyin.com.cn/zc/2009/0121/article_579.html

10. Freedom from Outside Control: 5.0

Undeniably, China is one of the strongest countries in the world, the country does not facing any threat from other countries, Chinese citizens are only under China’s jurisdiction. And as mention in the beginning, China’s military spending accounted for only 1.4 per cent of its GDP, compared to 4.6 percent for the United States, and more than 2 per cent for France and the United Kingdom, said Mr. Huang. China would continue to carry out comprehensive military exchanges with other countries and fill its obligation as a major country in the future.

Source:

Personal experience.

http://news.xinhuanet.com/english/2009-01/16/content_10667910.htm

http://www.hindu.com/2009/01/18/stories/2009011856101200.htm

11. Foreign Currency Transactions: 5.0

For exporting businesses, they could choose to use U.S dollar in their contract since foreign buyers are likely to electronically transfer payments for their order. However, generally, among domestic businesses, only CNY (Chinese Yuan) is recognized in economic activities. Local store and businesses will not accept any currency rather than CNY.

Source:

Personal experience

http://www.asia-planet.net/china/currency.htm

12. Border Control: 4.0

Certainly China has a very strict border control policy and force in effort to crack down illegal activities, protect country’s stability. Despite the strict border control, China still receive drug smuggles from Northern Burma and Laos.

Source:

http://hongkong.usconsulate.gov/uscn_narcos_2008022901.html

13. Currency: 5.0

The only official currency in China is CNY (Chinese Yuan). Any foreign currency has to exchange to CNY first in the bank in order to do businesses transactions.

Source:

Personal experience

https://www.cia.gov/library/publications/the-world-factbook/print/ch.html

14. Cultural, language homogeneity 4.5

There are seven major Chinese dialects and many sub dialects. Mandarin (or Putonghua), the predominant dialect, is spoken by over 70% of the population. It is taught in all schools and is the medium of government. About two-thirds of the Han ethnic groups are native speakers of Mandarin; the rest, concentrated in southwest and southeast China, speak one of the six other major Chinese dialects. Non-Chinese languages spoken widely by ethnic minorities include Mongolian, Tibetan, Uygur and other Turkic languages (in Xinjiang), and Korean (in the northeast). How ever, the official language is Mandarin, School, businesses and government officials’ use language.

Source:

Personal experience

http://www.state.gov/r/pa/ei/bgn/18902.htm

15. Political Effectiveness: 4.5

When it comes to relief inevitable natural disasters and terrorist acts, China does it effectively, the latest Sichuan Wenchuan earthquake proof of this. By the first day of the disaster, China central government send out over 182 teams of medical teams that include 42 epidemic prevention team, 8 psychology intervention team, and field operation blood station, brought in more than 4000 emergency crews at the very beginning, in result, reduced death toll. The timely, complete, and effective work received high recognition from W.H.O.

Source:

http://www.chinamil.com.cn/site1/xwpdxw/2008-05/30/content_1289367.htm

http://www.chinamil.com.cn/site1/2008a/2008-05/22/content_1273012.htm

16.Institutional Stability: 4.5

Chinese government puts forth efforts in maintain country’s stability, therefore under leadership by the communist party, schools, courts, central and local government, and other organizations in the country are stable. Again, most of them have been established for more than 60 years in China.

Source:

Personal experience

http://www.gov.cn/gjjg/2005-08/28/content_27083.htm

17. Honest Government: 2.5

In recent years, China has prosecuted many corrupted individuals or government officials, and it is continuing fight against corruption. However, from CPI information offered on Transparence International website, it is easy to see that China’s 3.1-3.6 confidence rating does not look too well compare to Singapore 9.0-9.3, and New Zealand’s 9.2-9.5. China has to take event further action in order to eliminate corruption.

Source:

http://www.transparency.org/policy_research/surveys_indices/cpi/2008

18. Common Laws: 3.5

China has improved significantly in perfecting her common law, especially for the last decade. Although there is room to improve, but compare to how the justice it was before, individuals are more likely to receive effective and fair justice.

Source:

Personal experience

19. Central Bank: 2.8

The central last month raised interest rates for the third time since April 2006 to help reduce the risk of accelerating inflation and asset bubbles. The Chinese central bank's historical use of quantity tools instead of price tools is quite consistent with China's history as a centrally planned economy. After all, the whole idea behind central planning is to have a planner dictate quantities produced, rather than allowing price signals to tell firms how much of what to produce. Under the central bank manage, there is no bank filed bankruptcy. However, China’s price of export goods have risen for the last 8 months, which indicate the inflation.

Source:

http://www.nytimes.com/2008/02/01/business/worldbusiness/01inflate.html

http://streetlightblog.blogspot.com/2007/04/chinas-monetary-policy.html

20. Domestic Budget Management: 4.0

In 2008, China’s total expenditure were 126.3 billions U.S dollar, fairly close to its revenue, which approximately 133.97 billion U.S dollar, recording to a report on Rueters.com,

Source:

http://www.cnguy.com/financial/news/2009/01/05/3060/fiscal-revenue-and-fiscal-expenditure-for-china-in-2008.html

http://cn.reuters.com/article/cnBizNews/idCNnCN044217720090114

21. Government Debt: 4.0

Analyses prove that China's foreign and domestic debt. Foreign debt poses no threat to China. Although China ranks high in terms of total foreign debt, the relative size of its foreign debt to GDP is small, and all its risk exposures are low. Also, China's foreign exchange reserves are much higher than total foreign debt outstanding. As for its domestic government debt, the figure is large but manageable. By the end of 2008, China’s foreign debt rose to 441.952 billion U.S dollar, in contrast, it is only approximately 10% of nation’s GDP 4421.6 billions in the same year.

Source:

http://www.safe.gov.cn/model_safe/news/new_detail.jsp?ID=90000000000000000,706&id=2

http://muse.jhu.edu/login?uri=/journals/china/v001/1.1lin.html

22. Economic Statistics: 3.0

In most cases, China’s statistics are becoming more reliable as modern survey methods are implemented. However, as the government’s tight control over the population loosens and more of the economy moves toward privatization, the accuracy of many statistics is being challenged., Yet reporting systems in different agencies create uncertainty for market analysts. For example, multiple agencies report their own production estimates for important crops, such as grain and cotton, and the estimates from different agencies are often inconsistent.

Source:

http://www.ers.usda.gov/publications/aib775/aib775r.pdf

23. Protection of Public Health and Safety: 2.0

In the light of the recent “Poisonous Milk Powder ” scandal case, 1253 babies poisoned, among which 2 died from kidney failure. it is easy to see that China has fail to protect public’s food safety, due to corruption among food safety officials. However, we should also acknowledge the improvement China has made on reduce the nation’s tuberculosis rate with the support from World Health Organization. China seeks cutting TB illness rate in half by year 2015.

Source:

http://www.un.org/apps/news/story.asp?NewsID=11514&Cr=

http://news.bbc.co.uk/2/hi/asia-pacific/7839481.stm

24. High Wage Policies: 2.5

There were 0.226 billion rural workers in total 2007. In the first half of 2008, the average salary of rural workers rose to 1,240 Yuan, 16.4% higher than the same period last year.

On the contrary, Information shows that the average price of the secondhand house price in Guangzhou, one of biggest industrial and most workers populated cities, reached CNY 5,963 per square meter in May 2007. Another word, an average will take at less 8 years to save up 40% down payment for a 40 meter squares house if he/ she does not have to spend a penny out of salary, which saving the entire pay check won’t be the case. China has to step faster in reforming not only corporation worker union, but also help the medium size business build their form their worker union.

Source:

http://english.people.com.cn/90001/90776/90882/6489568.html

http://www.highbeam.com/doc/1P1-141081788.html

25. Environmental Protection: 2.5

As a result of China’s booming economy, severe pollution problems appear out of control in the country. In order to preserve the natural resources for economic grow in the long run, China has to put in more effort to save the nation’s environment by strengthen the pollution law, set higher standers for potentially pollution industries, and nevertheless, educate public on environmental issues.

Source:

Personal experience

http://siteresources.worldbank.org/INTEAPREGTOPENVIRONMENT/Resources/China_Cost_of_Pollution.pdf

26. Strong Army: 4.5

Protecting the country’s safety and territorial integrity, is China’s top priority. China put in great effort in developing her national defense and military power. China also recognize the importance of world peace, she will continue her international responsibility in promoting the world’s lasting peace, and mutual prosperity. China put in great afford in military science, allocated military spending in investing hi-tech military engineering. China's military expenditure in 2005 accounted for 1.35 percent of its GDP, the lowest compared with 4.03 percent in the United States, 2.71 percent in Britain and 1.93 percent in France.

At the Fifth Session of the 10th National People's Congress, it was announced that the country's military budget for 2007 is 350.92 billion yuan, or roughly US$44.94 billion. This marks a 17.8 per cent increase over the previous year, or $6.8 billion.; besides that, China keep very close relationship with other countries, not only exchange visit, but also successfully complete cooperated drill with in each other’s sea water in the effort of both countries. For example, the rescue drills in September and November 2005 with U.S, and the “Peace Mission” in September 2005 with Russia. Unquestionably China has a very strong army force – Ground force alone 1.9 million men; 14,000 tanks; 14,500 artillery pieces and 453 helicopters.

Source:

Personal experience

http://old.yuan.gov.cn/yaq_news01.asp?d_ID=10754

http://mil.news.sina.com.cn/2009-01-20/1058539493.html

http://www.chinadaily.com.cn/china/2007-03/15/content_828342.htm

http://www.chinatoday.com/arm/index.htm

27. Foreign Trade Impact: 2.5

In 2008, China’s GDP reached 4,421.6 billion U. S Dollar, total of import and export 2,561.63 billions, which it is approximately 58% of GDP. As a result, put China’s economy in a very dangerous position since it’s major income depended on foreign trade, if the foreign market goes down, China will surfer the same effect if not more.

Source:

China's GDP grows 9% in 2008, (Xinhua News Agency January 22, 2009) http://www.china.org.cn/business/news/2009-01/22/content_17169174.htm

http://www.china.com.cn/book/zhuanti/qkjc/txt/2008-01/10/content_9512778.htm

28. Protection of Foreign Currency Earning Enterprises: 3.0

China has a relatively strict law on both domestic and export product, yet lack of implementation, reportedly companies took slacks, exported unqualified products to other counties, for example, the latest toxic lead toy from China, and poisonous pet food. These cases not only cause public out cry, but specially damages the over all impression of China’s export industry; strike foreign buyers’ confident in Chinese product. On the other hand, China encourage export enterprise by offering tax return, range up to 13% of the total amount, depend on individual product imply to China custom regulation.

Source:

http://www.china-customs.com/customs-tax/

http://en.wikipedia.org/wiki/2007_Chinese_export_recalls

29. Management of Foreign Currency Budget: 4.0

Statistics from China custom shows, in 2008, China’s export total 1428.55 billion U.S dollars, Import 1133.08 billion U.S dollar, GDP US$4,421.6 billion U.S dollar. China has a trade surplus 295.47 Billion, 7.86% of GDP.

Source:

http://news.sohu.com/20090123/n261926315.shtml

30. Layers of Collective Action: 2.5

Since elections in China only up to township level, the Communism Party in charge of appointing officials above that level. The P.R.C Congress committee chooses national leaders. Up to current, people have to go through layers and layers of government office if citizens are not satisfied with the one particular department. Although there are still long way to go until Chinese can vote due to large population and other issues, China has improved a lot in assigning official members by stricter standers for candidate, enforce officials to enhance aptitude and ability, encourage public to over sees officials, hence would deliver better service to citizens.

Source:

Personal experience

http://www.sbsm.gov.cn/article/gzcy/chlt/200803/20080300033304.shtml

31. Pro-business Climate: 4.0

Since the early 80’s, China starts to realize the critical role businesses play: Creating jobs, reduce poverty rate, bring in tax revenue, and promote country’s prosperity. Therefore, government encourages and helps business arise in a lot of ways: Frequent hold business forums in motivate entrepreneur start their start their businesses, offer loans to entrepreneur at a low interest rate, and lower tax and so on. Entrepreneurs are highly respected among Chinese people and the government. Overall, the climate for businesses is very positive.

Source:

Personal experience

1. http://www.ft.com/cms/s/0/868dc78c-db50-11dd-be53-000077b07658,dwp_uuid=eced8d08-6d64-11da-a4df-0000779e2340.html? Nclick_check=1

2. http://dangan.jianghai.gov.cn/Article_Show.asp?ArticleID=9390

32.Government Enterprises: 3.5

For the last 2 decades, China have put forth effect in intensify the reform of governmental enterprises: turn governmental enterprises into share holding companies, regulate companies’ legal representative managing system, investing risk control, and internal administration; achieve a multi- investor structure economic. After 41 times central governmental reform since 2003 to 2007, central governmental enterprises number went from 196 to 157, These enterprises bring in sales 829397 billion Chinese Yuan ($= 6.8 Chinese Yuan), net profit 76815 billion Yuan, Bring in 8225 billion Chinese Yuan of taxes.

Year 2007 along, China’s governmental company reached 2025 billion U.S Dollar net profits.

Source:

http://www.gov.cn/gzdt/2008-01/23/content_866971.htm

1. http://www.gov.cn/ztzl/2007zfgzbgjd/content_555808.htm

2.http://www.86mdo.com/ExpertsREVIEW/0852717475459C53HEIFC1KKIDCCF2.html

33. International Security Agreements: 4.5

No doubt that China is a strong country, apparently does not receive any international threat from other counties.

Source:

Personal experience.

34. Protection of Domestic Enterprises from Government Mandated Costs: 4.0

In China, domestic enterprises have to comply with labor law, commercial law, pay taxes, and follow regulations with in your business range. However, commercial law and business regulations in China are not as strict as it appears to be, and the tax rate in China is very low, take hi- tech enterprise tax rate for example, State Administration of Taxation reduced hi-tech companies tax from 25% before, to now 15%, in effort to reduce businesses’ the financial burden, the law went into effect December 2, 2008.

Source:

Personal experience

http://portal.gd-n-tax.gov.cn/web/vfs/gd/content/ContentTemplate.jsp?CategoryId=490&ContentId=146029&siteName=mz&styleName=null

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McKEEVER INSTITUTE of ECONOMIC POLICY ANALYSIS