Fall 2015 Syllabus

China’s Modern Economy
Economics 274 Fall 2015

MWF 11:15 am – 12:10 pm Huntley 220

Prerequisites: Economics 101 and 102.
Prerequisites are flexible: please speak to me if you want to take the course but have not had “Principles”.

China’s economy is the size of those of the EU and the US; India and Japan are only 1/3rd its size. This reflects a population of 1.35 billion combined with 30 years of 10% per annum growth. Yes, there’s a slowdown – to a bit under 7%. At that rate, China’s economy will still double by 2025, while the US and Europe will expand by a mere 25%. While I expect China’s growth will continue to decelerate over the next decade, for reasons we’ll explore this term, by the next decade China will be the world’s undisputed #1 economy.

GDP is abstract; rapid growth transforms lives. Forty years ago many Chinese ate poorly; today diabetes is epidemic. Thirty years ago almost all Chinese lived on the farm; today more than half are urban, with 100+ cities boasting a population over one million. Twenty years ago there were virtually no private cars in China; today it is the world’s largest market, and (at least until now) a major source of profits for the leading firms, VW and GM.

Analytics

Despite decades of growth, China remains a developing country, with PPP per capita GDP of $12,000. That’s about the level of South Africa or Columbia, and distinctly poorer than Thailand or Mexico. Contrasts abound; in the coastal metropolises of Shanghai and Guangzhou, incomes are twice those of the country’s interior. In the far west the dominant language is Turkic, not Chinese, and other language families are represented in minorities who speak Tajik (an Indo-European language), Korean and Mongol. Parts of the south are fully tropical; most of Tibet is an arid plateau 16,000 feet above sea level. There are vast deserts in the west, extensive grasslands in the middle and in the East fertile river deltas that grow stupendous amounts of rice. North China, however, subsists on wheat, and other regions on corn.

Institutions remain young. The formal financial system lacks the staff and management systems to lend to small firms. Many savers (you may call them “investors”) have never seen a market downturn, leaving them undiversified and gullible to get-rich-quick scams. As in much of the developing world, China remains a one-party state, though the “Communist” in the name of the ruling party is anachronistic, as market mechanisms and not government planning drive the economy. Similarly, despite images of a strong state, China is dominated by centrifugal forces, and while it has a longer reach than the emperors of old, Beijing remains remote. That is apparent in the treatment of pollution, where local commercial interests trump regional and national concerns.

Many of the themes of this course are those of development economics: household decision making, migration, the roles of infrastructure and education. If you’ve had Econ 280, however, you’ll find that we go into much greater depth on many topics, and leave out others, apropos to the issues China faces. As you’ll see, one group of growth models we utilize are applicable to any economy. Nor is China unique in the challenge of building a fiscal system that can finance education, healthcare and other local services. In short, this will be very much an economics course, built around a set of standard models.

Objectives:

• to instill basic background on China, including its large physical size, diverse population, and decentralized political economy, all legacies of the imperial structure inherited by the People’s Republic;
• the nature of the growth process at the macro level, including interactions with population dynamics and with dual-sector structures;
• the power (and limits) of incentives for producers and consumers, using rice agriculture during China’s transition away from socialism as an example;
• the complexity of rural-urban migration, including household-level decision-making, its impact on family dynamics and welfare, and the benefits and challenges of urbanization;
• aspects of China’s political economy, particularly the management of the rural-urban transition and the fiscal-political challenges created by a decentralized system
• select topical issues, such as pollution and the side effects of financial repression, all typical of developing countries.

Prerequisites / Expected Backgroun:

I assume that you have no background on China, but do expect you’ve had “Principles” (Econ 101 & Econ 102). I do let in the occasional (motivated) student who lacks these prerequisites. Given the presumption of little knowledge of China, I have chosen texts by a journalist/anthropologist, by a historian, by a business consultant and by a political scientist. Select videos add to this collection of vignettes and data on rural and urban life; class provides the models that help you analyze and organize this information. (There is no such thing as a “textbook” on China – in fact, there’s no “textbook” on the US, either.)

Format:

While I will devote part of some classes to the presentation of theory and basic background, most days will be devoted in part or in whole to the discussion of the readings, the four books we use and select academic papers that complement them. That requires doing the assigned readings in advance. On a periodic basis, tied to blogging duties, I will choose a class member to lead off class discussion of readings – what are the main points, is there a core underlying model, what jargon is used, and why is it important for understanding the Chinese economy. We will also devote class time to the discussion of the the topic of the (short) papers I assign, on the day they are due. Extenuating circumstances aside, I thus do not grant extensions.

Outside Speakers:

I have arranged for two outside speakers, and likely will add one more. Two will be on-campus; one via Skype. I really expect you to attend their talks and (for on-campus speakers) associated dinners. While I try to avoid evening classes, speakers may need that time slot. Please remember that both University and IFC policy is that a speaker “trumps” fraternity events.

Written Work:

I emphasize writing. You will be responsible for a blog post on a pre-specified topic or reading about once every two weeks, and to participating in the associated online discussion held via the commenting facilities of WordPress. I will ask you to write the occasional one-page memo on a reading or video. From time to time we’ll spend time on one of the blog topics in class.

In addition, you will be responsible for a four short papers on specific readings; I will provide detailed guidance in class. At present I specify all of the topics. If you want to write a paper on a topic of your choice, or do a longer term paper in lieu of two or more short papers, see me!

There will be no midterm exam, nor do I assign a paper post-Thanksgiving break. Instead, I give a final exam that asks you to reflect on the last book we read this term, which in fact pulls together much of what we cover this term.

Blogging:

On the basis of experiments with blogging the past few years I am changing how I approach using this communication tool, I particular, I will asking specific class members – about 3 each week- to write posts on preassigned topics.  The remainder of the class is responsible for commenting on those posts, including responses from the post author. I will of course participate actively in this online discussion, and will myself add an occasional post.

In terms of mechanics, I will make each of you an “author” for this W&L-hosted WordPress site, enabling you to both post and comment directly to the site. I will conduct an in-class tutorial on using WordPress, and occasionally demonstrate how to improve the visual impact of a post. WordPress is overwhelmingly the most popular software for blogging and basic web site development – Prof Ballenger uses it in his courses, because many businesses use it. So knowing a bit of WordPress may well prove useful in your career. You will surely be tasked with doing many memos with short turnaround. Blogging is good practice for that, too. Hopefully you will all have one or two posts you’re proud of; as you can see, there are now several years’ worth (500+) on the web site.

The course web site also hosts the syllabus, schedule, links to readings, links to China resources, paper guidelines and syllabi from previous years.

Written Work:

I ask that all written work be submitted in printed form, in a cover along with previous (graded) papers. Papers should be (i) double-spaced with 1″ margins in 11pt Times Roman, (ii) use in-line citations and a final bibliography, and (iii) be proofread. Writing well and concisely is important – papers should have a (single) clear introductory paragraph, should avoid the passive voice and indefinite modifiers (“some” “very”), should utilize economic jargon and provide concrete examples (ideally, both statistical data and quotes from readings), should indicate relevant models (hand-drawn graphs/equations are fine), and should have a conclusion that is not a mere repetition of the introduction. All work is presumed pledged.

I strongly urge you to take advantage of the professional writing consultants who staff the Williams School Communication Center. Note however that you need to make an appointment in advance, and take a draft with you.

To help you learn to write better, I provide you the option to rewrite one paper during the course of the term; I only record the grade of the revised paper. If you wish to do a revision – on occasion I mandate it – you must tell me that promptly, you must set a hard deadline for getting the revision to me, and you must attach your original paper.

Schedule:

The schedule for the course is available online on this WordPress site (as are all other course materials). I will update the schedule if we have a snow day (as happened last year) and with links to specific readings. Please refer to it regularly.

Attendance:

Because of the emphasis on discussion – and the lack of a “textbook” – I expect you to attend all classes.

Office Hours:

My preferred means of communication is email. In addition, I will give all of you my cell phone number, but please text only when necessary (eg if you’re running late, or if I’m running late = not [yet] there). Leave a voicemail if I don’t answer – I frequently don’t – but let me reiterate: all else equal, I prefer a voicemail or an email to a text.

I expect that all of you will avail yourselves of office hours at least once during the term. Note I have no fixed schedule. It is up to you to make an appointment (though if my office door is open, I’ve declared myself fair game). I will however suggest good time slots once the term is underway and I know more of my own schedule.

Texts

• Hessler, Peter. Country Driving. HarperCollins, 2010. ISBN 9780061804090
• Li, Huaiyin. Village China. Stanford, 2009. ISBN 9780804776578
• Miller, Tom. China’s Urban Billion: The Story Behind the Greatest Migration in Human History. Zed Books 2012. ISBN 9-781180-321417
• Wallace, Jeremy. Cities and Stability: Urbanization, Redistribution, and Regime Survival in China. Oxford University Press, 2014. ISBN: 978-0199378999

Downloadable supplements: there is a stream of publications each year; I’ll add others as the term progresses.

• Development Research Center of the State Council and The World Bank. Urban China: toward efficient, inclusive, and sustainable urbanization. Washington, DC: World Bank Group, 2014.
• IMF 2014 China Article IV Consulation.
• IMF 2015 China Article IV Consulation.

Films:

• All assigned films/documentaries appear to be available on YouTube. I will ask you to view them outside of class.

Grading:

Good attendance and regular participation are expected of everyone.

Class conduct:

Please have cell phones silenced and out of reach and your laptop put away. Chide me if I’m guilty at some point.

Honor Code:

All work is governed by the honor code. I do expect all of you to seek assistance on all your papers (peer editors, the Williams communications center), duly acknowledged. Writing should not be a solo effort!

Special Accommodations

As per university policy, please contact me in private regarding special accommodations for disabilities. Even if the final exam is the only instance where you might need accommodations, you should still approach me very early in the term.

8 Sept 2015