StudentA StudentA Student B Student B Mr Soeldner Mr Soeldner
Individuals and societies Individuals and societies 24 March 2017
24 March 2017
ompare and contras
ompare and contrast
t
wo economical
wo economical
ountries
ountries
United States of
United States of
America and
America and
China
China
Table of Contents
Table of Contents
1. Introduction to the Compare and Contrast Report 1. Introduction to the Compare and Contrast Report 2. An economic overview of the U.S.A
2. An economic overview of the U.S.A
2.1 What elements of a free market or command economy has the U.S.A implemented? 2.1 What elements of a free market or command economy has the U.S.A implemented? 2.2 How does the American government deal with key economic questions?
2.2 How does the American government deal with key economic questions? 2.3 Key economic components of the U.S.A
2.3 Key economic components of the U.S.A
2.4 Main export and import countries and products 2.4 Main export and import countries and products 2.5 Income inequality
2.5 Income inequality
2.6 Taxation system in the United States 2.6 Taxation system in the United States
2.7 How does large debt effect the economy? 2.7 How does large debt effect the economy? 3. An economic overview of China
3. An economic overview of China
3.1 What elements of a free market or command economy has China implemented 3.1 What elements of a free market or command economy has China implemented 3.2 How does the Chinese government deal with key economic questions?
3.2 How does the Chinese government deal with key economic questions? 3.3 Key economic components of China
3.3 Key economic components of China 4. Compare and contrast
4. Compare and contrast
4.1 Similarities and differences 4.1 Similarities and differences
4.2 Total exports – GDP comparison 4.2 Total exports – GDP comparison
4.3 Population growth between the two nations 4.3 Population growth between the two nations 4.4 Human development between the two nations 4.4 Human development between the two nations
4.5 Income inequality between the United States and China 4.5 Income inequality between the United States and China 4.6 China and the United States in numbers
4.6 China and the United States in numbers 5. Which system is better?
5. Which system is better? 6. Works Cited
Introduction
Introduction
1.
1. By Student ABy Student A
This purpose of this report is to compare and contrast the two economic systems (The This purpose of this report is to compare and contrast the two economic systems (The U.S.A and China). This report will cover how societies, governments, business, households U.S.A and China). This report will cover how societies, governments, business, households and individuals allocate their scarce resources, as well
and individuals allocate their scarce resources, as well as how the government deals withas how the government deals with key economic questions.
key economic questions.
2. An economic overview of the United States of America 2. An economic overview of the United States of America The USA, formally known as the United States of America, The USA, formally known as the United States of America, is a constitutional federal republic composed of 50 is a constitutional federal republic composed of 50 states. With an area of 9.8 million km
states. With an area of 9.8 million km22, it ranks as the, it ranks as the third largest country by total area. With a population third largest country by total area. With a population of 320 million people, it is surrounded by its of 320 million people, it is surrounded by its neighboring countries: Canada, Mexico and Alaska. neighboring countries: Canada, Mexico and Alaska. The U.S follows a mixed economy, having the largest The U.S follows a mixed economy, having the largest economy in the world, representing 20% of the total economy in the world, representing 20% of the total global output. The United states is also the second largest global output. The United states is also the second largest in purchasing power parity (compares different countries' in purchasing power parity (compares different countries' currencies through a market). The economy in the United States is currencies through a market). The economy in the United States is
widely dominated by services-orientated companies such as technology, financial widely dominated by services-orientated companies such as technology, financial services, healthcare and retail. The services sector is the main engine of
services, healthcare and retail. The services sector is the main engine of the U.S economy,the U.S economy, but it also has an important manufacturing base, representing 15% of output. The U.S is but it also has an important manufacturing base, representing 15% of output. The U.S is the second largest manufacturer in the world and ranks first in higher-value industries. the second largest manufacturer in the world and ranks first in higher-value industries. 2.1 What elements of a free market or command economy has the U.S.A
2.1 What elements of a free market or command economy has the U.S.A implemented?
implemented?
A free market is an economic system in which the government does not interfere with A free market is an economic system in which the government does not interfere with business in anyway. The prices for goods and services are determined by
business in anyway. The prices for goods and services are determined by the demand ofthe demand of product and consumers. A command economy is an economic system in which the product and consumers. A command economy is an economic system in which the government determines the goods and services which are being produced, the quantity government determines the goods and services which are being produced, the quantity of the goods and services and the price which is offered for sale.
of the goods and services and the price which is offered for sale.
The U.S follows a mixed economy, where the government controls many goods and The U.S follows a mixed economy, where the government controls many goods and services, for example education, roads, hospital and utilities. A mixed economy, is most services, for example education, roads, hospital and utilities. A mixed economy, is most commonly referred to as a " free enterprise system ". The
commonly referred to as a " free enterprise system ". The American free enterprise systemAmerican free enterprise system emphasizes private ownership. Private businesses produce most goods and services, emphasizes private ownership. Private businesses produce most goods and services, almost two-thirds of the nations total economic output goes to individuals for personal almost two-thirds of the nations total economic output goes to individuals for personal use, the remaining one-third is bought by the government and business.
2.2 How does the American government deal with key economic questions? 2.2 How does the American government deal with key economic questions?
The U.S is a mixed economy, the government partially intervenes with the system, by The U.S is a mixed economy, the government partially intervenes with the system, by controlling goods and services such as,
controlling goods and services such as, education, courts, roads, hospital care and postaleducation, courts, roads, hospital care and postal delivery. The government also provides money for agricultural producers, oil companies, delivery. The government also provides money for agricultural producers, oil companies, financial companies and utilities. Most forms of economic exchange and nearly every financial companies and utilities. Most forms of economic exchange and nearly every type of business is affected by the government in the U.S. Private business are required type of business is affected by the government in the U.S. Private business are required to register with government agencies and can only operate with licenses approved by to register with government agencies and can only operate with licenses approved by the government. Some of these businesses include auctioneers, funeral attendants, the government. Some of these businesses include auctioneers, funeral attendants, private investigators, makeup artists, hairstylists, real estate agents and financial advisers. private investigators, makeup artists, hairstylists, real estate agents and financial advisers. 2.3 Key components of the U.S.A that make up their
2.3 Key components of the U.S.A that make up their GDPGDP
The four components that make up the gross domestic product (GDP) are personal The four components that make up the gross domestic product (GDP) are personal consumption, business investment, government spending and total exports. The gross consumption, business investment, government spending and total exports. The gross domestic product is the total economic output yearly, which is equivalent to what is being domestic product is the total economic output yearly, which is equivalent to what is being spent in the economy.
spent in the economy.
Components that make up the GDP Components that make up the GDP Agriculture Agriculture 1.1%1.1% Industry Industry 19.4%19.4% Services Services 79.5%79.5% GDP
GDP 16.77 trillion USD (2013)16.77 trillion USD (2013)
GDP per capita
GDP per capita 53,750 PPP dollars (2014) 11/185 ranking53,750 PPP dollars (2014) 11/185 ranking
GNI
GNI per per capita capita (USD) (USD) 53,96053,960 Population
Population 318.9 million (2014)318.9 million (2014)
Years of schooling (Primary to tertiary)
Years of schooling (Primary to tertiary) 17 years of schooling17 years of schooling
HDI
HDI 0.9150.915
Unemployment
Unemployment rate rate 4.7% 4.7% (2016 (2016 est.)est.) Life
Life expectancy expectancy 80 80 yearsyears Household
Household income income $50,000 $50,000 (2010 (2010 statistics)statistics) Ethnic
Important
Important (partners) (partners) China 21.5%, China 21.5%, Canada Canada 13.2%, 13.2%, Mexico Mexico 13.2%,13.2%, Japan 5.9%, Germany 5.5% (2015)
Japan 5.9%, Germany 5.5% (2015) Unemployment
Unemployment rate rate 4.8% 4.8% (2017)(2017) Government
Government constitutional constitutional federal federal republicrepublic Neighbouring countries
Neighbouring countries The Canada–United States border to theThe Canada–United States border to the
north of the Contiguous United States
north of the Contiguous United States
and to the east of Alaska. The Mexico–
and to the east of Alaska. The Mexico–
United States border to the south.
United States border to the south.
Debt
Debt $17.91 $17.91 trillion trillion (31 (31 March March 2016 2016 est.)est.)
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U.S is the 2ndnd largest exporter in the world, largest exporter in the world, exporting $1.45T in 2014. The exports of exporting $1.45T in 2014. The exports of the United states have increased at an the United states have increased at an annual rate of 8.5% in the last five years, annual rate of 8.5% in the last five years, from $967B in 2009 to $1.45T in 2014. The from $967B in 2009 to $1.45T in 2014. The most recent exports are refined petroleum most recent exports are refined petroleum which represents 7.11% of the total exports which represents 7.11% of the total exports of the U.S.A, followed by cars which of the U.S.A, followed by cars which represent 4.18% of the U.S.A total exports. represent 4.18% of the U.S.A total exports. 13% of exported goods are consumer 13% of exported goods are consumer goods (pharmaceuticals, cell phones, gem goods (pharmaceuticals, cell phones, gem diamonds etc.) which have an export value diamonds etc.) which have an export value of $194 billion. One third of the exported of $194 billion. One third of the exported goods are capital goods.
goods are capital goods.
The top five export destinations from the The top five export destinations from the United States are Canada ($241B) followed United States are Canada ($241B) followed by Mexico ($194B), China ($134B), Japan by Mexico ($194B), China ($134B), Japan ($67.5B) and Germany ($61.6B). ($67.5B) and Germany ($61.6B). @A)BC0' 8D E)*,# F'4G#$BH @A)BC0' 8D E)*,# F'4G#$BH @A)BC0' 6D E)*,# F'4G#$BH @A)BC0' 6D E)*,# F'4G#$BH
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The U.S is the largest importer in the world,in the world, importing $2.16T in 2015. The United importing $2.16T in 2015. The United States have increased yearly at a rate of States have increased yearly at a rate of 3.1%. In 2010 exporting $1.8T increasing to 3.1%. In 2010 exporting $1.8T increasing to $2.16T in 2015. The most recent exports $2.16T in 2015. The most recent exports include computers which account for 4.2% include computers which account for 4.2% of total imports of the United States, of total imports of the United States, followed by cars (7.8%) having an import followed by cars (7.8%) having an import value of $169B, Crude petroleum (5.6%) value of $169B, Crude petroleum (5.6%) with an import value of $120B , packed with an import value of $120B , packed medicaments (3%) ect. More than 80% of medicaments (3%) ect. More than 80% of imported items are goods. Capital goods imported items are goods. Capital goods make up for more than one fourth of all make up for more than one fourth of all imports. The remaining quarter is
imports. The remaining quarter is made upmade up of consumer goods.
of consumer goods.
The top five import origins of the United The top five import origins of the United states are China ($432B) followed by, states are China ($432B) followed by, Canada ($331B), Mexico ($291B), Japan Canada ($331B), Mexico ($291B), Japan ($128B) and Germany ($121B).
($128B) and Germany ($121B).
The United States imports more than it The United States imports more than it exports, resulting in a trade deficit of $502 exports, resulting in a trade deficit of $502 billion, importing $2.712 trillion and billion, importing $2.712 trillion and exporting $2.209 trillion. The trade deficit is exporting $2.209 trillion. The trade deficit is higher than it was in 2013 due t
higher than it was in 2013 due to the dollaro the dollar strengthening by 25% in 2014 and 2015. strengthening by 25% in 2014 and 2015. Though the United States exports billions Though the United States exports billions in oil and consumer goods, they still import in oil and consumer goods, they still import more than they export.
more than they export.
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Profit, rent, shares of stock, interest on saving accounts, salaries and wages are streams Profit, rent, shares of stock, interest on saving accounts, salaries and wages are streams of revenue that make up income. When income is distributed in an uneven manner of revenue that make up income. When income is distributed in an uneven manner among the total population, it is referred to as income inequality. The income inequality, among the total population, it is referred to as income inequality. The income inequality, the gap between the rich and the
the gap between the rich and the poor in the United States has poor in the United States has been growing markedly.been growing markedly.
On the graph shown above, the top 10% of On the graph shown above, the top 10% of average income earners in the Untied States earn average income earners in the Untied States earn roughly nine times as much as the bottom 90% roughly nine times as much as the bottom 90% which is the majority of the population. Americas which is the majority of the population. Americas 1% earn thirty-eight times more than the bottom 1% earn thirty-eight times more than the bottom 90%. There is a noticeable gap in average income 90%. There is a noticeable gap in average income between the bottom 90% and the top
between the bottom 90% and the top 10%, the U.S10%, the U.S tax system is supposed to help the growing tax system is supposed to help the growing income inequality in the United States between income inequality in the United States between the “haves”and “have nots”. The rising the “haves”and “have nots”. The rising inequality has its roots in politics (The great inequality has its roots in politics (The great recession 2008).
recession 2008).
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2.6 Taxation system – United States 2.6 Taxation system – United States
The taxation system in the United States is progressive. The percentage of income an The taxation system in the United States is progressive. The percentage of income an individual pays in taxes increases within the increasing income. Those with higher individual pays in taxes increases within the increasing income. Those with higher incomes pay more taxes and also pay a higher rate. The mandatory spending that the incomes pay more taxes and also pay a higher rate. The mandatory spending that the government spends, consist of five categories: A third of mandatory spending goes to government spends, consist of five categories: A third of mandatory spending goes to Medicare and health, half of the mandatory spending goes to Social security, the Medicare and health, half of the mandatory spending goes to Social security, the remaining is spent on unemployment and labor, food and agriculture, veterans benefits remaining is spent on unemployment and labor, food and agriculture, veterans benefits and transportation.
and transportation.
2.7 How does large debt effect the Economy? 2.7 How does large debt effect the Economy?
The current debt in the United States is $19.9 trillion. The debt in
The current debt in the United States is $19.9 trillion. The debt in the United States is thethe United States is the sum of all money owed by the federal government. One-third of the debt is sum of all money owed by the federal government. One-third of the debt is intragovernmental debt, the remaining two-thirds is debt held by the public. The intragovernmental debt, the remaining two-thirds is debt held by the public. The government owes this to buyers of the United States which includes companies, government owes this to buyers of the United States which includes companies, individuals and foreign governments. Deficit spending drives economic growth. The individuals and foreign governments. Deficit spending drives economic growth. The economy and voters benefit from deficit spending. The federal government spends economy and voters benefit from deficit spending. The federal government spends money on equipment, health care and construction. Private firms then hire new money on equipment, health care and construction. Private firms then hire new employees, creating jobs.
employees, creating jobs. 2.8 Conclusion
2.8 Conclusion
Discussing the economic overview of the united
Discussing the economic overview of the united states, as well as the elements the nationstates, as well as the elements the nation as implemented in terms of the free market or command econo
as implemented in terms of the free market or command econo my, how the governmentmy, how the government deals with key economic questions, key components that make up
deals with key economic questions, key components that make up their GDP, main exporttheir GDP, main export and import products and countries, i
and import products and countries, income inequality, taxation system and how the largencome inequality, taxation system and how the large debt in the United States effects the economy will help determine which system is better debt in the United States effects the economy will help determine which system is better between the two nations (The united states vs China), the similarities and differences as between the two nations (The united states vs China), the similarities and differences as well as which system is more successful will be discussed further in this report.
Introduction
Introduction
By Student B By Student B 3.
3. An Economic overview of ChinaAn Economic overview of China
China, also known as the People's Republic of China (PRC) is one of the
China, also known as the People's Republic of China (PRC) is one of the world's biggestworld's biggest countries, with an area of 9.597
countries, with an area of 9.597 millionmillion km² and 1.357km² and 1.357 billion citizensbillion citizens (2013 est.). It's capital is Beijing and is the second biggest city
(2013 est.). It's capital is Beijing and is the second biggest city after Shanghai with 21.5 million citizens (Mar 2016 est.). after Shanghai with 21.5 million citizens (Mar 2016 est.). It'sIt's located in East Asia (Figure 1) and has
located in East Asia (Figure 1) and has 16 neighbouring16 neighbouring countries by land: Russia, India, Vietnam, Pakistan, North countries by land: Russia, India, Vietnam, Pakistan, North Korea, Mongolia, Kazakhstan, Myanmar,
Korea, Mongolia, Kazakhstan, Myanmar, Afghanistan,Afghanistan, Nepal, Laos, Kyrgyzstan, Bhutan and
Nepal, Laos, Kyrgyzstan, Bhutan and Tajikistan. Two ofTajikistan. Two of them, Hong Kong and Macau are
them, Hong Kong and Macau are under Chinas control.under Chinas control. Neighbouring countries by sea
Neighbouring countries by sea include Brunei,include Brunei, Indonesia, Japan, South Korea,
Indonesia, Japan, South Korea, Malaysia, PhilippiMalaysia, Philippinesnes and Taiwan. Chinas official language is standard and Taiwan. Chinas official language is standard Chinese, but various other regional languages and
Chinese, but various other regional languages and dialectdialect are recognised. These
are recognised. These include Mandarin, Shanghainese,include Mandarin, Shanghainese,
Xiang, and Tibetan. China's "socialist market economy" (Insead Xiang, and Tibetan. China's "socialist market economy" (Insead Knowledge) is now the second largest in the
Knowledge) is now the second largest in the world, with a nominalworld, with a nominal
GDP over $10 trillion" (CSIS) and the world's largest economy by purchasing power parity GDP over $10 trillion" (CSIS) and the world's largest economy by purchasing power parity according to IMF. The GDP growth is one
according to IMF. The GDP growth is one of the fastest expansion ever known and resultedof the fastest expansion ever known and resulted with lifting more than 800 million people out of poverty. According to The World Bank "China with lifting more than 800 million people out of poverty. According to The World Bank "China reached all the Millennium Development Goals (MDGs) by 2015" and greatly contributed to reached all the Millennium Development Goals (MDGs) by 2015" and greatly contributed to achieving MDGs globally. The rapid economic growth caused
achieving MDGs globally. The rapid economic growth caused a few challenges as a few challenges as well. Thiswell. This includes external imbalances, rapid urbanisation and
includes external imbalances, rapid urbanisation and confrontations to environmentalconfrontations to environmental sustainabili
sustainability. Aging population and migration of labour ty. Aging population and migration of labour are a few are a few other challenges China hasother challenges China has to face. But no matter how
to face. But no matter how much change China's economy has gone through, it remains tomuch change China's economy has gone through, it remains to be a developing country, though it "recently became the second largest economy" (The be a developing country, though it "recently became the second largest economy" (The World Bank).
3.1 What elements of a
3.1 What elements of a free market or command economy has free market or command economy has China implementedChina implemented China
China’’ s Commus Communist parnist party has beety has been using “n using “ socialsocialist markist market econoet economymy ” ” (Inse(Inseadad Knowledge) to describe their economic system since the 1980s and the change that Knowledge) to describe their economic system since the 1980s and the change that occurred during this time caused a rapid social and economic development. In 1978, occurred during this time caused a rapid social and economic development. In 1978, China's communist government started to establish capitalist market reforms, which China's communist government started to establish capitalist market reforms, which resulted in companies turning
resulted in companies turning away from state-owned enterprises in later years. In away from state-owned enterprises in later years. In 19781978 state-owned enterprises were responsible for nearly 80% of all Chinese industrial output state-owned enterprises were responsible for nearly 80% of all Chinese industrial output according to the Investopedia, while in 2013 it decreased to only 45%. This massive according to the Investopedia, while in 2013 it decreased to only 45%. This massive decrease just proves the enormous change China has gone through and caused China decrease just proves the enormous change China has gone through and caused China to catapult to one of the largest economies in the world.
to catapult to one of the largest economies in the world.
There are few similarities to mixed economies, seen in the western countries with basic There are few similarities to mixed economies, seen in the western countries with basic differences. The main distinction lies “less in the implementation of the mixed
differences. The main distinction lies “less in the implementation of the mixed economiceconomic model but rather in the degree of state-ownership and underlying authoritarian political model but rather in the degree of state-ownership and underlying authoritarian political philosophy” (South China Morning Post).
philosophy” (South China Morning Post).
Over the past few decades Chinas economy has multiplied by nearly 50 times and Over the past few decades Chinas economy has multiplied by nearly 50 times and resulted in a GDP growth of roughly 10%. Early reforms concentrated more on agriculture, resulted in a GDP growth of roughly 10%. Early reforms concentrated more on agriculture, rather than manufacture, but this soon changed and it focused on broader sections. Now, rather than manufacture, but this soon changed and it focused on broader sections. Now, China is one of the world’s largest economy, both and population and total economic China is one of the world’s largest economy, both and population and total economic product wise. It is possibly the world’s most important producer and manufacturer. product wise. It is possibly the world’s most important producer and manufacturer. Both of these areas make up more than 40% of China’s
Both of these areas make up more than 40% of China’s GDP. “China is also the world’GDP. “China is also the world’ s largest exporter and the second largest importer, and it contains the fastest-growing s largest exporter and the second largest importer, and it contains the fastest-growing consumer market.”(Investopedia). One of its largest and most successful industries consumer market.”(Investopedia). One of its largest and most successful industries include telecommunication services and manufacturing. Just over 50 years ago, China include telecommunication services and manufacturing. Just over 50 years ago, China was struggling with poverty, repression and hunger, while now it is one of the globally was struggling with poverty, repression and hunger, while now it is one of the globally most important economic powers.
most important economic powers.
China is a mixed economy, like most countries are now, but uses the term “socialist China is a mixed economy, like most countries are now, but uses the term “socialist market economy”to describe their country’s economy. A
market economy”to describe their country’s economy. A socialist market economy issocialist market economy is based on the dominance of the government and a free market economy and was first based on the dominance of the government and a free market economy and was first introduced by Chinas former president Deng Xiaoping. There are seven key introduced by Chinas former president Deng Xiaoping. There are seven key characteristics in a socialist market economy: 1. People can buy what they like to, but characteristics in a socialist market economy: 1. People can buy what they like to, but
Despite the denial, it is a form of state capitalism. The ideal rationale is that China is in Despite the denial, it is a form of state capitalism. The ideal rationale is that China is in an early stage of socialism and socialist
an early stage of socialism and socialist mode of production and the mode of production and the country must adaptcountry must adapt to capitalist techniques to advance.
to capitalist techniques to advance.
Like any economy, there are advantages and disadvantages to each. Advantages in a Like any economy, there are advantages and disadvantages to each. Advantages in a social market economy include people working harder and the variety of consumer social market economy include people working harder and the variety of consumer goods. Most people work very hard for their job or position, sin
goods. Most people work very hard for their job or position, since losing the job and thece losing the job and the money they earn in it is a good motivator. The huge variety of consumer goods is another money they earn in it is a good motivator. The huge variety of consumer goods is another advantage for those
advantage for those who can afford it. who can afford it. Another great advantaAnother great advantage is the rapidge is the rapid development of the economy. According to Nyu "The forces of production, or at least development of the economy. According to Nyu "The forces of production, or at least those involved in making those things people with money at home or abroad want to those involved in making those things people with money at home or abroad want to buy, undergo rapid development.”
buy, undergo rapid development.”
There are quite a few disadvantages to a socialist market economy as well. One of them There are quite a few disadvantages to a socialist market economy as well. One of them is the overproduction of goods. This is because workers as a class usually don't aren't is the overproduction of goods. This is because workers as a class usually don't aren't paid enough to buy the products. Nowadays machines do all the work so the gap paid enough to buy the products. Nowadays machines do all the work so the gap between what machines and workers can produce is enormous. Another major between what machines and workers can produce is enormous. Another major disadvantages is the growing unemployment that comes with the machines. It
disadvantages is the growing unemployment that comes with the machines. It is all aboutis all about profit for the owners of the machines. Social relations are basically impossible in a profit for the owners of the machines. Social relations are basically impossible in a socialist market economy, since there is a huge gap between the rich and poor. In most socialist market economy, since there is a huge gap between the rich and poor. In most cases, people with a lot of money think of themselves as better people, while the poor cases, people with a lot of money think of themselves as better people, while the poor feel envy and hatred for the rich.
feel envy and hatred for the rich.
How does the Chinese government deal with key economic questions? How does the Chinese government deal with key economic questions?
"China has experienced uninterrupted trade surpluses since 1993. Total trade multiplied "China has experienced uninterrupted trade surpluses since 1993. Total trade multiplied by nearly 100 to USD 4.2 trillio
by nearly 100 to USD 4.2 trillion in only three decades and, n in only three decades and, in 2013, China surpassed thein 2013, China surpassed the United States
United States as the as the worldworld ’’ s biggest s biggest trading nation."(Focus trading nation."(Focus Economics). ChinasEconomics). Chinas enormous investment programs caused the country
enormous investment programs caused the country to become "a major manufacturingto become "a major manufacturing hub"(Focus Economics) and this situation encouraged trade growth, especially in 2001, hub"(Focus Economics) and this situation encouraged trade growth, especially in 2001, when China joined the World Trade Organization. Since the economy is greatly when China joined the World Trade Organization. Since the economy is greatly integrated in the global trade system, steady improvement in the 2000's trade, the integrated in the global trade system, steady improvement in the 2000's trade, the country steadily improved. However, the country's trading sector got dragged down in country steadily improved. However, the country's trading sector got dragged down in 2008-2009 because of the global economic downturn.
2008-2009 because of the global economic downturn. China has signed several multilateral, between three
China has signed several multilateral, between three or more countries and bilor more countries and bilateral tradeateral trade agreements. Multilateral trade agreements means a trade between three or more agreements. Multilateral trade agreements means a trade between three or more countries and Bilateral means a trade between two countries. The Closer Economic countries and Bilateral means a trade between two countries. The Closer Economic Partnership Arrangement with Macau and Hong Kong was signed in 2003. In January Partnership Arrangement with Macau and Hong Kong was signed in 2003. In January 2010, a Free Trade Agreement (FTA) between China and the ASEAN (Association of 2010, a Free Trade Agreement (FTA) between China and the ASEAN (Association of
worlds “third largest free trade area in terms of nominal GDP” (Focus Economics). FTA worlds “third largest free trade area in terms of nominal GDP” (Focus Economics). FTA were established with countries like Singapore, Peru, Pakistan, South Korea, Australia, were established with countries like Singapore, Peru, Pakistan, South Korea, Australia, New Zealand, Chile and Costa Rica as well. At the moment, there are other FTAs under New Zealand, Chile and Costa Rica as well. At the moment, there are other FTAs under negotiation
negotiation with Sri Lanka, with Sri Lanka, Japan, the Japan, the Gulf Cooperation Council Gulf Cooperation Council and Norway.and Norway.
China has become one of the biggest economies and has become the largest exporter China has become one of the biggest economies and has become the largest exporter with a total of $2.37 Trillion in 2015. Chinas top 5 export products consist of mostly with a total of $2.37 Trillion in 2015. Chinas top 5 export products consist of mostly machines making up nearly half of Chinas total
machines making up nearly half of Chinas total export, with 48%. These include export, with 48%. These include computers,computers, which makes up 7.9% and broadcasting equipment, which makes up 7.0% of its total which makes up 7.9% and broadcasting equipment, which makes up 7.0% of its total exports. Other exports products are telephones, making up 4.7%, Integrated Circuits, exports. Other exports products are telephones, making up 4.7%, Integrated Circuits, making up 2.8% and office machine parts, making up 1.9% (Figure 2). Chinas top 5 export making up 2.8% and office machine parts, making up 1.9% (Figure 2). Chinas top 5 export destinations include countries such as the United States and Germany. 18% of Chinas total destinations include countries such as the United States and Germany. 18% of Chinas total export products get exported to the United
export products get exported to the United States, 14.6% to Hong Kong, 6% to Japan, 4.4%States, 14.6% to Hong Kong, 6% to Japan, 4.4% to South Korea and 3.0% to Germany (Figure 3).
to South Korea and 3.0% to Germany (Figure 3).
[Figure 2, Janine Steinhaeuser] [Figure 2, Janine Steinhaeuser]
Besides being the largest exporter, China is also the second largest importer with a total Besides being the largest exporter, China is also the second largest importer with a total of $1.27 Trillion. Its top 5 import products consist of mostly Crude Petroleum and of $1.27 Trillion. Its top 5 import products consist of mostly Crude Petroleum and Integrated Circuits. Crude Petroleum makes up 9.4% of Chinas total imports, while Integrated Circuits. Crude Petroleum makes up 9.4% of Chinas total imports, while Integrated Circuits make up 7.5%. Other import products include Gold, making up 5.2%, Integrated Circuits make up 7.5%. Other import products include Gold, making up 5.2%, Iron Ore, making up 3.4% and cars, making up 3.0% (Figure 4). Chinas top 5 import origins Iron Ore, making up 3.4% and cars, making up 3.0% (Figure 4). Chinas top 5 import origins include countries such as South Korea and Japan. 10.0% of Chinas total import products include countries such as South Korea and Japan. 10.0% of Chinas total import products origin from South Korea, 10.0% from the United States, 9.1% from Japan, 6.2% from origin from South Korea, 10.0% from the United States, 9.1% from Japan, 6.2% from Germany and 5.8% from other countries in Asia (Figure 5).
Germany and 5.8% from other countries in Asia (Figure 5).
China makes a lot China makes a lot of its money of its money through its mining through its mining industry and industry and manufacture Its manufacture Its mining industry mining industry extract 3.68 billion extract 3.68 billion tons of coal (2015 tons of coal (2015 est.), 1,4 billion tons est.), 1,4 billion tons of iron ore (2015 of iron ore (2015 est.), 70 million tons est.), 70 million tons of salt (2015 est.), of salt (2015 est.), 215 million tons of 215 million tons of oil (2015 est.), 124.3 billion cubic meters (2015 est.) according to Investopedia. China is oil (2015 est.), 124.3 billion cubic meters (2015 est.) according to Investopedia. China is also known as a manufacturing powerhouse. The economy has a "large textile also known as a manufacturing powerhouse. The economy has a "large textile manufacturing sector" (Investopedia), it supplies transportation devices, such as planes, manufacturing sector" (Investopedia), it supplies transportation devices, such as planes, automobiles and trains, electronics, machinery, consumer goods and
automobiles and trains, electronics, machinery, consumer goods and cement, The belowcement, The below figure (Figure 6) shows the income inequality in
figure (Figure 6) shows the income inequality in China and shows a significant differenceChina and shows a significant difference between the rich and the poor.
between the rich and the poor. [Figure 4, Janine Steinhaeuser] [Figure 4, Janine Steinhaeuser]
China makes a lot China makes a lot of its money of its money through its mining through its mining industry and industry and manufacture Its manufacture Its mining industry mining industry extract 3.68 billion extract 3.68 billion tons of coal (2015 tons of coal (2015 est.), 1,4 billion tons est.), 1,4 billion tons of iron ore (2015 of iron ore (2015 est.), 70 million tons est.), 70 million tons of salt (2015 est.), of salt (2015 est.), 215 million tons of 215 million tons of oil (2015 est.), 124.3 billion cubic meters (2015 est.) according to Investopedia. China is oil (2015 est.), 124.3 billion cubic meters (2015 est.) according to Investopedia. China is also known as a manufacturing powerhouse. The economy has a "large textile also known as a manufacturing powerhouse. The economy has a "large textile manufacturing sector" (Investopedia), it supplies transportation devices, such as planes, manufacturing sector" (Investopedia), it supplies transportation devices, such as planes, automobiles and trains, electronics, machinery, consumer goods and
automobiles and trains, electronics, machinery, consumer goods and cement, The belowcement, The below figure (Figure 6) shows the income inequality in
figure (Figure 6) shows the income inequality in China and shows a significant differenceChina and shows a significant difference between the rich and the poor.
between the rich and the poor. [Figure 5, Janine Steinhaeuser] [Figure 5, Janine Steinhaeuser]
Figure 7 shows the Gini Coefficient of China. "This statistic shows the inequality of Figure 7 shows the Gini Coefficient of China. "This statistic shows the inequality of
income distribution of China from 2006 to 2016 based on the Gini Index" (Statista) The income distribution of China from 2006 to 2016 based on the Gini Index" (Statista) The closer the value gets to 100, the higher is the inequality. The United Nations set a
closer the value gets to 100, the higher is the inequality. The United Nations set a warning level at 40. Chinas highest score is 49.1 in 2008.
warning level at 40. Chinas highest score is 49.1 in 2008. [Figure 7]
3.3 Key components of China 3.3 Key components of China
GDP $12.9T
GDP $12.9T
GDP
GDP per per capita capita $15,400 $15,400 (2016 (2016 est.)est.) GNI per capita
GNI per capita (USD) (USD) 14,160 (2015 est.) 14,160 (2015 est.) Population Population 1,388,232,693 1,388,232,693 (2017)(2017) Years of schooling Years of schooling (Primary to (Primary to tertiary) tertiary) 13.5 (2016 est.) 13.5 (2016 est.) HDI HDI 0.727 0.727 (2014)(2014) Unemployment Unemployment rate rate 68% 68% Life
Life expectancy expectancy 75.875.8 Household Household income income $47,300 $47,300 Ethnic
Ethnic groups groups Han Han Chinese Chinese 91.6%, 91.6%, Zhuang Zhuang 1.3%, 1.3%, other other (includes (includes Hui, Hui, Manchu,Manchu, Uighur, Miao, Yi, Tujia, Tibetan, Mongol, Dong, Buyei, Yao, Bai, Uighur, Miao, Yi, Tujia, Tibetan, Mongol, Dong, Buyei, Yao, Bai, Korean, Hani, Li, Kazakh, Dai and other nationalities) 7.1%
Korean, Hani, Li, Kazakh, Dai and other nationalities) 7.1% Export
Export (partners) (partners) United United States States (18%), (18%), Hong Hong Kong Kong (14.6%), (14.6%), Japan Japan (6%), (6%), South South KoreaKorea (4.4%), Germany (3%) (4.4%), Germany (3%) Important Important (partners) (partners)
South Korea 10.0%, United States 10.0%, Japan 9.1%, Germany 6.2%, South Korea 10.0%, United States 10.0%, Japan 9.1%, Germany 6.2%, Other countries in Asia 5.8%
Other countries in Asia 5.8% Unemployment Unemployment rate rate 4.2% (2016 est.) 4.2% (2016 est.)
4. Compare and Contrast 4. Compare and Contrast
4.1 What are the
4.1 What are the similarities and differencessimilarities and differences
The United States and China are both one of the biggest economies in the world. Both The United States and China are both one of the biggest economies in the world. Both are very successful in terms of economic growth and trade, although they are different are very successful in terms of economic growth and trade, although they are different economies. The United States has more traits of
economies. The United States has more traits of a free market economy, while China hasa free market economy, while China has more traits of a command economy. In the United States individuals have more power more traits of a command economy. In the United States individuals have more power and are independent, while the government interferes sometimes to keep the economy and are independent, while the government interferes sometimes to keep the economy steady. In China, the government has a lot more control over individuals and their steady. In China, the government has a lot more control over individuals and their decisions. Although the United States follow more of a free market economy compared decisions. Although the United States follow more of a free market economy compared to China which follows more of a command economy both nations are the world’s to China which follows more of a command economy both nations are the world’s leading economies, but this only proves that both economies have good traits in terms leading economies, but this only proves that both economies have good traits in terms of economic growth.
of economic growth.
There are quite a few differences between the
There are quite a few differences between the two economies, since they folltwo economies, since they follow differentow different systems. The major difference is the independence of individuals and government systems. The major difference is the independence of individuals and government interference. As stated before, the United States follows more of a free economy, interference. As stated before, the United States follows more of a free economy, meaning that the government interferes very little with individual’s decision. China on meaning that the government interferes very little with individual’s decision. China on the other hand follows more of
the other hand follows more of a command economy, meaning that the government hasa command economy, meaning that the government has a lot of controls over individual’s decisions. Other differences are all due to government a lot of controls over individual’s decisions. Other differences are all due to government interference, such as
interference, such as owning private property. This again is owning private property. This again is associated with governmentassociated with government interference. In China, the government has control over it, so technically it can’t be interference. In China, the government has control over it, so technically it can’t be considered a “private” property. On the other hand, in the United States you can own considered a “private” property. On the other hand, in the United States you can own private property and you have a lot of control over the things associated with it. Prices private property and you have a lot of control over the things associated with it. Prices in command economies like China, cannot rise like they do in free market economies, so in command economies like China, cannot rise like they do in free market economies, so they are set by the government.
4.2 Total exports – GDP
4.2 Total exports – GDP comparisoncomparison
The United States and China are both very big economies making up 36% of the total The United States and China are both very big economies making up 36% of the total world economy. Currently the GDP rate in the United States is ($18.7T) compared to world economy. Currently the GDP rate in the United States is ($18.7T) compared to China that has a lower GDP ($12.9T), though
China that has a lower GDP ($12.9T), though the United States exceeds in gross the United States exceeds in gross domesticdomestic product currently, in 2030 it is estimated that China will have a greater GDP. According product currently, in 2030 it is estimated that China will have a greater GDP. According to IMF and the world bank,
to IMF and the world bank, china now ranks as the largest economy based ochina now ranks as the largest economy based on Purchasingn Purchasing Power Parity (PPP). Despite the recent slowdown,
Power Parity (PPP). Despite the recent slowdown, China’s economy is growing at China’s economy is growing at almostalmost three times the rate of the United States.
three times the rate of the United States. The two nations are even when it
The two nations are even when it comes to exports. The United comes to exports. The United States imports more thanStates imports more than it exports and therefore as a trade deficit. China exports more than it imports, resulting it exports and therefore as a trade deficit. China exports more than it imports, resulting in a trade surplus. Studies on exports in 2015, show that the United States exported in a trade surplus. Studies on exports in 2015, show that the United States exported $1,482B and China $2,466B, imports for the United States in 2015 are $2,242B and $1,482B and China $2,466B, imports for the United States in 2015 are $2,242B and $1,602B for China. The world trade in 2015 for the United States results in $3,724B and $1,602B for China. The world trade in 2015 for the United States results in $3,724B and $4,068B for China.
$4,068B for China.
[Figure 6, Ticha Netfang] [Figure 6, Ticha Netfang]
4.3 Population growth between the two nations 4.3 Population growth between the two nations
[Figure 7, Ticha Netfang] [Figure 7, Ticha Netfang]
Chinas population of 1.3 Billion is around four times higher than the United States Chinas population of 1.3 Billion is around four times higher than the United States population of 320 million. China by far a
population of 320 million. China by far as a larger population, s a larger population, providing a large domesticproviding a large domestic market for the economy. Population growth encourages competition. T
market for the economy. Population growth encourages competition. T hough a growinghough a growing population can be seen as a positive effect, it also has its downsides such as food
population can be seen as a positive effect, it also has its downsides such as food scarcity,scarcity, and imposes constraints on the development of savings and human resources. and imposes constraints on the development of savings and human resources. Population growth enlarges labor force and therefore increases the economic growth. Population growth enlarges labor force and therefore increases the economic growth. China has a lower GDP, because a higher population growth rate can lead to a decline China has a lower GDP, because a higher population growth rate can lead to a decline in economic growth which goes under Gross Domestic Product per capita. The reason in economic growth which goes under Gross Domestic Product per capita. The reason for the decline in the GDP per capita is due to the capital dilution, standard of living and for the decline in the GDP per capita is due to the capital dilution, standard of living and resource scarcity. resource scarcity. ? ? 6???????? 6???????? 7???????? 7???????? ;???????? ;???????? I???????? I???????? 8MN?9 8MN?9 8=6MN?9 8=6MN?9 8=7MN?9 8=7MN?9 8=;MN?9 8=;MN?9 8 899<<? ? 8899II? ? 889999? ? 66????? ? 66??88? ? 66??88<<
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4.4 Human development between the two nations 4.4 Human development between the two nations
The HDI value in the United States is 0.920 and has a rank of 10 in the world human The HDI value in the United States is 0.920 and has a rank of 10 in the world human development index, in comparison to China that has a HDI value of 0.738, ranking 91 in development index, in comparison to China that has a HDI value of 0.738, ranking 91 in the human development index. The HDI emphasizes the people and their capabilities to the human development index. The HDI emphasizes the people and their capabilities to assess the development of the country not just economic growth. The HDI is a assess the development of the country not just economic growth. The HDI is a combination of the following topics: Health, knowledge and standard of living. The h
combination of the following topics: Health, knowledge and standard of living. The h ealthealth criteria is measured by life expectancy at birth, education is measured by the expected criteria is measured by life expectancy at birth, education is measured by the expected years of schooling and the standard living criteria is measured by gross national income years of schooling and the standard living criteria is measured by gross national income per capita. The expected years of schooling in the
per capita. The expected years of schooling in the United states is 17 years, in comparisonUnited states is 17 years, in comparison to China that has 13.5 years of schooling. A difference between the two nations are that to China that has 13.5 years of schooling. A difference between the two nations are that the United States have a higher HDI value which mean the United states are more the United States have a higher HDI value which mean the United states are more developed in terms of health, education and standard living.
developed in terms of health, education and standard living. 4.5 Income inequality between the United States and China 4.5 Income inequality between the United States and China
One similarity between both China and the United States according to a new paper from One similarity between both China and the United States according to a new paper from the economists (Thomas Piketty of the Paris school of economics) are that both have had the economists (Thomas Piketty of the Paris school of economics) are that both have had an extreme rise in income inequality since the 1970s. The division between the “haves an extreme rise in income inequality since the 1970s. The division between the “haves “ and “have nots” have grown during the years in both nations. The top 20% of the “ and “have nots” have grown during the years in both nations. The top 20% of the countries national income are taken home by Americas 1%. Over the same time in China countries national income are taken home by Americas 1%. Over the same time in China the top 1% doubled their income. China and the United states are both experiencing the top 1% doubled their income. China and the United states are both experiencing grown of inequality income, though in the United States the problem is more extreme. grown of inequality income, though in the United States the problem is more extreme. According to the economists, the economy in China has been so strong that despite the According to the economists, the economy in China has been so strong that despite the widening inequality, the incomes of the bottom 50% have grown markedly. The income widening inequality, the incomes of the bottom 50% have grown markedly. The income of the poorest half of Chinese workers have grown more than 400% from 1978 to 2015. of the poorest half of Chinese workers have grown more than 400% from 1978 to 2015. The income inequality in the United States may be bigger, due to the HDI, more people The income inequality in the United States may be bigger, due to the HDI, more people in the United States get an education and attend school for more years than they do in in the United States get an education and attend school for more years than they do in China, which means that more people in the United States are educated.
4.6 China and the United States by
4.6 China and the United States by numbersnumbers
The chart shown above, shows the countries comparisons by economic leadership, The chart shown above, shows the countries comparisons by economic leadership, quality of life, energy and environment and international role. These factors help quality of life, energy and environment and international role. These factors help determine which economy is more advanced, which will be discussed further below. determine which economy is more advanced, which will be discussed further below.
Economic leadership Economic leadership $12.9T
$12.9T Gross Gross domestic domestic product product (GDP) (GDP) $18.7T$18.7T $19.39T
$19.39T Purchasing power Purchasing power parity parity (PPP) (PPP) $17.95T$17.95T Quality of life
Quality of life $15,400
$15,400 Average income Average income (GDP (GDP per per cap)cap) $53,750$53,750
4.2%
4.2% Unemployment Unemployment rate rate 4.7%4.7% 36%
36% Freedom Freedom from from corruption corruption 75%75% Energy and environment
Energy and environment 6.19
6.19 metric metric tons tons Carbon Carbon emissions emissions 5.31 5.31 metric metric tonstons 5,919,800,000,000
5,919,800,000,000 Average Average annual annual electricity electricity usageusage (kw-h)
(kw-h)
3,913,000,000,000 3,913,000,000,000 4.3
4.3 Oil Oil imports imports (2009, (2009, in in billions billions ofof barrels per day)
barrels per day)
9.6 9.6 International role
International role 22.1%
22.1% Share Share of of worlds worlds good good (export) (export) 12.6%12.6% 18.6%
5. Which system is better? 5. Which system is better?
Both economies have their advantages and disadvantages. Though the United States Both economies have their advantages and disadvantages. Though the United States follows a mixed economy, it foll
follows a mixed economy, it follows more free market with little government interference.ows more free market with little government interference. The advantages to this are that the system has the
The advantages to this are that the system has the freedom to act on changes in freedom to act on changes in marketmarket situations. Advantages in mixed economies with more traits of capitalism, like China are situations. Advantages in mixed economies with more traits of capitalism, like China are that the Government takes more control and can protect people from bad influences in that the Government takes more control and can protect people from bad influences in the market. It is clear that both a mixed economy and command economy are effective the market. It is clear that both a mixed economy and command economy are effective because the United States and China are both successful in terms of economy. Though because the United States and China are both successful in terms of economy. Though currently, the United States’ economy is stronger, it is predicted that China will soon currently, the United States’ economy is stronger, it is predicted that China will soon have the strongest economy in the upcoming
have the strongest economy in the upcoming years. This is due to years. This is due to Chinas past economicChinas past economic growth, which is the fastest ever seen in history. In terms of
growth, which is the fastest ever seen in history. In terms of GDP, China is currently doingGDP, China is currently doing better, but in terms of HDI, the United States are.
better, but in terms of HDI, the United States are.
In conclusion, both economies are doing exceptionally well, but China is doing just the In conclusion, both economies are doing exceptionally well, but China is doing just the slightest bit better. This is because China has outstandingly good industries, and great slightest bit better. This is because China has outstandingly good industries, and great import and export values. All these factors contributed to a great GDP growth of roughly import and export values. All these factors contributed to a great GDP growth of roughly 10%. It is clear that neither of these two economies are perfect in any way, but both 10%. It is clear that neither of these two economies are perfect in any way, but both countries have proven that either economy can work, therefore, there are benefits to countries have proven that either economy can work, therefore, there are benefits to them as well.
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