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895&) China is a country in eastern Asia. China experienced a civil war in 1927 after world war 2 Mao Zedong established an autocratic social system that preserved China’s supreme power and strictly controlled everyday life but at the same time killed millions of people. When Mao died in 1976 his successor Deng Xiaoping introduced new reforms in 1978 with a market-oriented economic development. This resulted in China’s GDP rapidly increasing. A command economy is a system where the government decides which goods are produced, how much of it is produced and the pricing for what it is sold at. There are private businesses in china but most of the money management manag ement and financial financi al decisions are made m ade by the central government. g overnment. After china shifted from a centrally planned economy to a market based economy they experienced a rapid growth in GDP. In 1978 China established new reforms implementing incentives for agricultural farmers in rural areas allowing them to sell a portion of their crops in the free market. However, Chinas economy remains mostly command economy and there is currently no momentum for new reforms.
EKD D8T:TOU As of 2016, China’s GDP was 11.39 11 .39 trillion dollars. China's economy has grown increasingly faster since 1978 when new economic reforms were introduced. The Chinese government official statistics show that real gross domestic product (GDP) from 1979 to 1999 was growing at an average annual rate of 9.7 percent, making China one the world's fastest growing economies. In 2016, its growth rate was 6.6 percent which is the slowest growth rate in 26 2 6 years. China has a population of 1,373,541,278 people, with a GDP per capita at 15,400 dollars ranking China 104th in the world according to the CIA world fact book. China has an
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unemployment rate of 4.2 percent and has shown a downwards trend since 2009. Inflation rate in 2016 was 2.3 percent. p ercent. (CIA Factbook) In China the poorest 25% owns 1% whereas the richest 1% percent owns 33.3% of the nation’s wealth, it is among the countries with the biggest income inequality. In 2012 Chinas income inequality was at 0.49. The world Bank classifies countries that are over 0.40 as severe income inequality. inequa lity. (Financial Times)
CT\D]:OD:E There are many companies in china that the government controlled. The government also owns many subsidies and land.
E)I)"51&J The taxation system that China is currently using was wa s implemented in 1994 to suit the less command economy that China had become after earlier reforms. Since then the Chinese government has made several small adjustments to the system. The Chinese taxation system currently has 18 different taxation methods that c an be split into 3 categories “ ! Goods and Services Taxes - VAT, Excise tax, Business tax, Vehicle purchase tax, Customs duty. ! Income Taxes - Corporate income tax, Individual home tax. ! Property and Behavior taxes - Land Appreciation Tax, Real estate tax, Urban and township land use tax, Arable land use tax, deed Tax, Resources Tax, Vehicle and Vessel Tax, Stamp Duty, Urban Maintenance and Construction Tax, Tobacco Tax, and Vessel Tonnage Tax. “ (http://www.chinatax.gov.cn/eng/n2367731/index.html)
D$#0)"51& In China, all citizens attend 9 years of obligated education provided by the Central Government. At the age of 6 to 7, Chinese citizens begin their primary education lasting 6 years. Afterwards they study 3 years of junior secondary education. Since 1985 the government hasn’t paid for higher education so the citizens must compete for getting into universities.
K%)="90)4% Roughly 95 % of the citizens in china have basic health care insurance. However, this insurance only covers very basic medical costs and not doesn’t cover costs of serious chronic illness. (http://en.nhfpc.gov.cn)
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LDU ?:X^!E]?D! (N450#="#4% In 2015, roughly 9 percent of China’s GDP is from Agriculture. It also employs almost 34 percent of China’s population. Rice and wheat are the main crops grown, however, china also largely grows, “wheat, tobacco, potatoes, peanuts, millet, pork, fish, soybeans, corn, tea and oilseeds.” http://www.investopedia.com/articles/inve articles/investing/04281 sting/042815/fundamenta 5/fundamentals-how-chinals-how-china-makes-itsmakes-its(http://www.investopedia.com/ money.asp)
In average a Chinese farmer earns 5000 yuan a year from selling rice and other crops. Taxes cost about 4000 yuan and schooling costs around 2000 yuan. This meaning that farmers children typically don’t go to school and get an education forcing them to work on their parents farm their entire life. Chinese farmers aren’t are n’t allowed to mortgage property pr operty because becaus e the central government owns all the arable land, meaning they can’t afford to buy equipment or fertilizer to increase efficiency. In China, the land for agriculture is scarce. Only 10 to 15 percent of the land in china is good enough for growing crops. Crops are planted on the side of roads, on the side of buildings and in traffic cones. Although these measures are taken to maximise the output of crops, studies show that Chinese farmers are some of the least productive in the world. Research by the Deutsche Bank show that south Korean farmers are 40 times more productive than Chinese. (http://factsanddetails.com/china/cat9/sub63/item348.html#chapter-4)
!%4@50%6 While the manufacturing and agriculture sectors are slowing, the service sector is increasing its output. In 2013 China had the third highest services output in the world, in 2015 it provided 50.5 percent of China’s production. p roduction. The service s ervice sector provides provid es more than 300 million jobs jo bs for the 775 million working labourers. The service sector is cleaner and safer than working in a manufacturing sector factory. Although the working hours are longer. The sector grows when the GDP per capita increases due to more households being able to afford services. (https://www.bloomberg.com/news/articles/2016-01-28/china-trumpets-its-service-economy)
O))0"#45&N China is considered the largest manufacturing economy in the world. To date the growth of its manufacturing sector has been built on its high number of low cost labourers and natural resources. Currently China’s main manufacturing goods are, “ textile manufacturing…, machinery, cement, food processing, transportation devices (trains, planes, and automobiles), consumer goods and electronics.” (http://www.investopedia.co (http://www.investopedia.com/articles/in m/articles/investing/0428 vesting/042815/fundamen 15/fundamentals-how-china tals-how-china-makes-its-makes-itsmoney.asp)
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China is still a developing country, but its manufacturing industry is coming under pressure from the next generation of developing countries such as Vietnam and xxx, because their th manufacturing costs are lower. Chinas 12 5-year plan includes moving the manufacturing sector away from low-cost goods such as steel beams and plastic toys. China will instead focus on energy saving and environmental protection technology as well as high end equipment manufacturing. The Chinese economy believe that this action will generate more years of economic growth and will ensure China’s position as a leader in the manufacturing sector. (http://reports.weforum.org/manufacturing-growth/china/#view/fn-3)
?OBT]E-D_BT]E B(]E:D]! (:X B]TX^8E! In 2015 china imported a total value of 1.27 T USD, they exported 2.37 T USD giving them a total trade balance of 1.1 T USD. In February 2017 China had, for the first time in 3 years a negative monthly trade balance. This could partly be because of Chinese New N ew Year holidays, but b ut could also be be caused by political insecurity in the U.S due to elections and in Europe due to Britain leaving the E.U.
China has several trade agreements with many different countries. Chinas biggest trading partners are the United States and the EU. However, these trade agreements focus more in exporting manufactured goods and not as much on importing. China has trade agreements with developing countries that focus on importing materials needed for manufacturing. A method used for establishing these trade agreements is Chinas Foreign Aid Strategy. China donates money to a developing country that the country then can use for improving living conditions in return for mutual benefits.
Main imports (2015): Crude Petroleum Integrated Circuits Iron ore Petroleum gas Copper ore
9.4% 7.5% 3.4% 1.8% 1.4%
Main exports (2015):
Computers
7.9%
Broadcasting equipment Telephones Integrated Circuits Office machine parts
7.0% 4.7% 2.8% 1.9%
Main import origins:
Percentage:
Import value: $132B $129B $116B $78.6B $73.4B
South Korea United States Japan Germany Other Asia
10% 10% 9.1% 6.2% 5.8%
Main export destinations: United States
Percentage:
Export value:
19%
$458B
Hong Kong Japan Germany South Korea
12% 6.4% 4.1% 3.8%
$273B $152 $97.4B $90.1B
(http://english.gov.cn/archive/white_paper/2014/08/23/content_281474982986592.htm)
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E](XD (C]DDOD:E!-!(:8E?T:! China is one of the world’s largest manufacturing economies. They are involved in several trade agreements. In 2001 China joined the World Trade Organization. China has agreed to free trade agreements with; Australia, Korea, Switzerland, Iceland, Costa-Rica, Peru, Singapore, New Zealand, Chile, Pakistan and ASEAN (Association of South East Nations). Trade agreements under negotiation are; GCC (Gulf Cooperation Council), Sri-Lanka, Maldives, Georgia, Israel and Norway. (http://fta.mofcom.gov.cn/english/)
:%; <%)=)&$ New Zealand is an Island in the southwestern Pacific Ocean. It has a population of around 4.6 million. Its key industries are food processing, textiles, machinery, finance, mining and tourism. Over the past 30 years, New Zealand has evolved from an agrarian economy to a more industrialized and free market economy. The growth has boosted incomes, but some people are still at the bottom of the ladder. It has an “open economy” which works on free market principles. Their economy has gone from being extremely regulated to one of the most free-market base economies.
EKD D8T:TOU The most recent information (2016) on New Zealand’s GDP is estimated to be around $174.8 Billion. 9.7 percent of the GDP is used on public health expenditure. During the past year, their GDP has grown by 2.8%. According to the World Bank, New Zealand has a high incom e, this plays a part on their GDP/capita, which is $37.6 Thousand. There is a problem with their household incomes. These inequalities may be caused by the people’s residence and Ethnicity. The Lorenz curve helps to show the Wealth distribution in a certain country. New Zealand is close to having perfect equality, with w ith a Gini coefficient coeffici ent of 0.33. (CIA World Wo rld Factbook) The general inflation rate of New Zealand is an estimate of 0.6%. This means that the rate of products is rising. To keep an economy running smoothly, the government or the central banks must limit inflation and avoid deflation. (CIA World Factbook) The life expectancy for the total population in New Zealand is 81.8 years. The CIA World fact book has found that the life expectancy expect ancy for females is higher h igher than for males. mal es. This being 83.3 8 3.3 years and 79.1 years. The same goes for the school life expectancy from primary to tertiary education. The average amount is 19 years, but for males it is 18 years and for females it is 20 years. (CIA World Factbook)
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EKD CT\D]:OD:E The Treasury is a group that provides advice to the government in New Zealand. They have found that the most recent spending for education is $13.2 Billion for the 2015/16 financial year. Health care is another important part, in which the Government tries to help. The most recent spending on healthcare is $15.6 Billion for 2015/16. (The Treasury) The top personal tax rate is 33% and the bottom personal tax rate is 10.5%. This means that if someone has an income of NZ$70,000 they will have to pay the top personal tax rate and if they have an income of up to NZ$14,000 they th ey will have to pay the bottom personal tax rate. This Thi s implies that New Zealand is not a command economy where everyone has to pay the same tax and earn the same amount of money. This is a fair system because they are still paying the same amount, but since one is earning less than the other the tax rate will be lower.
The government of New Zealand has a public debt of 34% in 2016. Their debt has decreased by 1% in the last year, going from 35 to 34 percent.
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New Zealand is known k nown for its main m ain import and export products. It is the 58 largest export th economy in the world, and according to the Economic Complexity index (ECI) it is the 39 most complex economy in the world. (OEC) As shown in Figure 1 the main import products of New Zealand are Cars, Crude petroleum, Refined petroleum, Delivery trucks, Planes, Helicopters and spacecraft’s. th They were the 57 largest importer in 2014, when they made $41.6B dollars with imports. The imports have increase in the last 5 years by 11.1 percent. (OEC) (O EC)
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Figure 1: Main Import Products Figure 2 shows us that New Zealand’s main Export products are Concentrated milk, Sheep and Goat Meat, Butter, Rough wood and frozen bovine Meat. In th 2014, New Zealand was the 58 largest Exporter in the world, making $42.6B with exports. The export rate has increased by 10.4 percent in the last 5 years. (OEC)
Figure 2: Main Export Products New Zealand’s main export partners are China ($6.14B), Australia ($5.7B), The United States ($4.18B), Japan ($2.27B) and The United Kingdom ($1.2B). Its main import partners are China ($7.07B), Australia ($5.25B), The United States ($4.78B), Japan ($2.79B) and Germany ($1.91B). In 2015, New Zealand imported 35.7 Billion dollars and made 35.8 Billion dollars on exports. This gave them a trade balance of 71.8 million dollars. (OEC)
E](XD (C]DDOD:E! New Zealand has set s et up Free Trade Agreements Agreem ents (FTA) to help exporters and importers im porters (traders) by reducing the trade barriers in markets. mark ets. (Customs Service) Serv ice) New Zealand has a trade t rade agreement with Australia and South Sou th East Asian nations (ASEAN). It is called the “ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA).” (Customs Service) In 2010, the AANZFTA came into force for the countries Australia, Brunei, Myanmar, Malaysia, the Philippines, Singapore, Thailand, Vietnam and New Zealand. In 2011, Laos and Cambodia joined the trade agreement and then in 2012, Indonesia joined in. The agreement requires that a certificate of origin is shown when exporting to an ASEAN member. In 1983, Australia and New Zealand created a Trade agreement called “The Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA).” (Customs Service) This agreement helps determine which products are Australian and which ones are from New Zealand. In Australia, the exporter must show that the goods being traded meet the original criteria in the Agreement and where the goods come from. In New Zealand, the importer must provide evidence of either “the certificate of origin, a declaration of origin or other evidence that prove the goods follow the rules of the origin provisions” (Customs Service). China and New Zealand have a “Free Trade agreement” (NZCFTA) (Customs Service) which came into force in 2008. New Zealand was one of the first countries to sign a free trade
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agreement with China. In 2016, the rules that came into effect earlier were changed. The exporter must now show the Certificate of Origin number, where it’s requested. The Free Trade agreement between New Zealand and the Republic of Korea (KNZFTA) came into force in December of 2015. The importer is able to choose which document they seek from the exporter or producer. It must contain all the necessary data elements to the trade agreement. The last free trade agreement in New Zealand is with Malaysia (MNZFTA). It was entered into force in August of 2010. Malaysia is part of the ASEAN-Australia New Zealand Free trade agreement. The traders decide which agreement will provide the most benefits for their products. New Zealand has two t wo “Closer Economic Econom ic partnerships, one Strategic Economy Econo my partnership and one Trade and Economic Co-operation agreement.” (Customs Service) The two Closer Economic Partnerships are with Singapore and Thailand. The agreement with Singapore came into force in January of 2001 (ANZSCEP). The goods imported to Singapore are duty free. Since they are also Part of the “ASEAN-Australia New Zealand Free Trade Agreement” and the “Trans Pacific Strategic Economy Partnership” (Customs Service), the trader should consider the agreement which will benefit their product the most. The agreement between Thailand and New Zealand came into force in July of 2005. It was designed to improve business between the two countries and reduce the cost when doing business. Traders who are trading in this area should consider with agreement fits best with their products, the AAANZFTA Agreement or the Partnership with New Zealand.
New Zealand and Australia A ustralia offer “preferential “preferenti al tariff treatment i n the non-reciprocal trade t rade agreement called The South Pacific Regional Trade and Economic Co-operation Agreement (aka SPARTECA).” (Customs Service) To expert to a Forum Island Country, New Zealand’s products will be duty free. Some of the Forum Island countries include Fiji, the Cook Islands, Tonga, etc. In 2006 Brunei Darussalam, Chile, Singapore and New Zealand formed the “Trans-Pacific Strategic Economic Partnership Agreement (Pacific 4).” (Customs Sevice) Most of the tariff goods that are traded between members of their countries were removed. To claim preference in New Zealand the importer i mporter must show s how evidence that satisfy the rules of origin provisions. prov isions.
8123)4% )&$ 81&"4)6" ?:E]TX^8E?T: China and New Zealand are two countries that operate opposite economic models, one has a free trade economy and one is a command economy. The current GDP in China is much higher than the one in New Zealand, however the GDP per capita is higher in New Zealand. China’s annual GDP growth is 6.914% while New Zealand’s is only 3.393%. This is because China is starting at a much lower GDP per capita and China has also increased exports therefore generating more money. China is advancing faster than New Zealand, because they’re able to sell more products
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and raise their GDP faster. With an inflation rate of 2.3 percent, China’s GDP is able to grow more.
E](XD B(]E:D]! Trade plays an important role in the economy of a country. With increased trade, the country's GDP is able to grow. China has been able to generate more money from exporting produced goods than they have spent importing goods they do not produce such as raw material like crude petroleum and iron i ron ore, which gives gi ves them a higher high er trade balance than i n New Zealand. In 2015 2 015 China imported a total of $1.27 T USD and exported $2.37 T USD, while New Zealand was only able to generate 35.7 Billion dollars on imports and 35.8 Billion Dollars in exports. This helped China achieve a trade balance of $1.1 T USD, which is beneficial for the economy increasing their GDP and thereby increasing the living conditions of its citizens. New Zealand’s main import and export partner is China, while China’s largest trade partner is the United states. Predictably, due to population, China makes more money from trading than New Zealand, although New Zealand has a higher GDP per Capita. New Zealand mainly focusses on exporting animal products and food, foo d, China focusses mostly on exporting exp orting manufacturing. manufact uring. With importing, New Zealand’s main imports are manufactured goods and transportation, while China’s is Mineral Products and subcomponents needed for manufacturing. This difference shows what the government in these two countries has chosen to produce and import.
KTW XTD! EKD CT\D]:OD:E ?:ED]`D]D ?: EKD D8T:TOUV In china, the government heavily interferes with financial decisions in Chinese companies. This characterizes it as a command economy. However, many Chinese citizens see China as a mixed economy mostly leaning towards a free market economy due to reforms established in 1978, although The World Bank classifies it as mostly Command Market. The New Zealand government allow free trade and does not interfere in the same way as the Chinese do.
WD(aEK X?!E]?*^E?T: In China the Gini coefficient is at 0.49 whereas in New Zealand it is at 0.33. China is classified as with severe income inequality as it has a Gini coefficient over 0.40. New Zealand however, has a much lower Gini coefficient which is preferable as high inequality slows economic growth, since the poorer people do not have as much money to invest when most of the money is distributed to a limited amount of people in the highest 10%.
8T:8a^!?T: China’s economy is better at producing and exporting goods. It has a higher GDP and GDP growth rate. However, New Zealand has a higher GDP per capita and its economy has much less income inequality. The New Zealand government also provides basic needs free for all citizens such as public education and education. The two countries are in different stages of economic development. China remains a developing country with potential for accelerated economic growth, which will slow as it matures. New Zealand is already a developed country with a lower growth rate than China. We think that the New Zealand Governments economic model works better than the Chinese Ch inese government’s government ’s does.
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www.radionz.co.nz/news/national/322422/top-1-percent-of-nzers-own-20-percent-ofwealth. Accessed 23 Mar. 2017. “Income Inequality.” Stats NZ , www.stats.govt.nz/browse_for_stats/snapshots www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-social-of-nz/nz-socialindicators/Home/Standard%20of%20living/income-inequality.aspx. “Income Inequality, Gini Coefficient.” United Nations Development Programme - Human Development Records, hdr.undp.org/en/indicators/67106. Accessed 23 Mar. 2017.
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