Winter 2016 Syllabus

Updating. For a general sense of the structure of the course see the Fall 2015 Syllabus under the Fall 2015 Archive.

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China’s Modern Economy
Economics 274 Winter 2016

MWF 1:25 pm – 2:20 pm Center for Global Learning 203

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 largest in the world; it’s now a bit bigger that those of the EU or the US. In comparison, 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 – but at over 6% growth there remains the envy of most of the world. At that rate, China’s economy will double by 2025, while the US and Europe will expand by a mere 25%. Now that’s a naive forecast. China’s growth will continue to decelerate over the next decade, for reasons we’ll explore this term. Nevertheless, by the end of the decade China will be by far the world’s largest 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 200-odd 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 in terms of both sales and production. It’s thus a major source of profits for the two leading firms, VW and GM.

Analytics

Despite decades of growth, China remains a developing country, with PPP per capita GDP of $13,000. 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, where there are still villages without roads. 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, while most of Tibet is an arid plateau 16,000 feet above sea level, and the north of Manchuria is at the latitude of Hudson’s Bay. There are vast deserts in the west where nothing lives, extensive grasslands in the middle that until recently supported nomadic peoples, and fertile river deltas in the east that grow stupendous amounts of rice. North China, however, subsists on wheat, while other regions rely on corn. In short, China today reflects its origins as a geographically extensive multiethnic empire.

Institutions remain young. Thirty years ago China had no banks, as we understood the term. Even today, “shadow” finance is pervasive, as the formal financial system lacks the experienced staff and management systems required to lend to small firms. Many savers (you may call them “investors”) have until the past few months never seen a market downturn, leaving them undiversified in their portfolios and gullible to get-rich-quick scams. Finally, while over half the population is now urban, a third of the population still works the land. But as in the US, agriculture is fading as a source of jobs and as a share of the economy.

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. While Beijing has a longer reach than under the emperors of old, in practice provincial and local governments exercise substantial autonomy. That is apparent in policies to address the country’s environmental challenges, where local commercial interests prove stronger – even in Beijing itself – than national policies.

Most of the analytic tools upon which we draw 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. The growth models we utilize are applicable to any economy, while China is unique in the challenge of building a fiscal system that can finance education, healthcare and other local services. We still need a knowledge of the shadow of history, particularly the still incomplete transition of China from an empire to a nation-state, and the reverberations of its period under Mao as a “planned” economy. In the end, this will be very much an economics course, built around 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 Background:

I assume that you have no background on China, but that you are familiar with the jargon of economics and have been exposed to simple models at the level of “Principles” (Econ 101 & Econ 102). We use simple models this term, all of which we develop in class. I therefore do let in motivated students who have not had “Principles”. Given my presumption that you have 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 with vignettes of rural and urban life.
Format:

While I will devote part of some classes to the presentation of theory and basic background, most days will be devoted to the discussion of the readings, the four books we use and select academic papers that complement them. That requires doing the readings in advance. On a periodic basis I will choose a class member to lead off our discussion – 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 you turn them in.

Outside Speakers:

I have arranged for two outside speakers. One will be on-campus, one via Skype. I 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” Greek 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 for commenting (and replying to comments on your comments) on all posts. 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. I specify the topics for all four papers, but if you want to write a longer “term paper” on a topic that particularly interests you, please see me! I will reduce the number of short papers you write in line with that.

There will be no midterm or final exam. However, the last paper will ask you to reflect on the Wallace book, which in fact pulls together much of what we cover this term.

Blogging:

On the basis of experiments with blogging the past few years, each week I will assign topics to specific class members. You are welcome to write additional blog posts, and to “pitch” topics to me. I (of course!) participate actively in this, commenting on each post and commenting on comments. I will myself add an occasional post.

In terms of mechanics, I 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 exposure may come in handy. In your career you will surely be tasked with writing 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.

Paper:

I ask that you submit all written assignments in class in hard copy. Papers should be (i) double-spaced with 1″ margins in 11pt Times Roman, (ii) use in-line citations (more on this in class) 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 the jargon of economics, and should provide concrete examples (ideally, statistical data and quotes from readings, supplemented as appropriate with graphs), should indicate relevant models (hand-drawn S&D diagrams and equations are fine), and should have a conclusion that is not a mere repetition of the introduction. All work should be pledged.

I strongly urge you to take advantage of the professional writing consultants who staff the Williams School Communication Center. Note 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 by the class day after you’ve gotten your paper back, you must set a hard deadline for getting the revision to me, and you must attach your original paper. Duh: I won’t accept a rewrite of your first paper coming to me unannounced on the last day of the term!

Schedule:

The schedule for the course is available online on this WordPress site (as are all other course materials). I will update the schedule periodically. We aren’t tied to a text, and so can adjust what we do as the term progresses. Assignments in our books and links to outside readings will be on the schedule, as well as various due dates. 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:

I will in general be in my office 2:30 pm – 3:45 pm MWF. I can be available TuTh as well, in which case I will often specify Lexington Coffee Shop on Washington Street as the location. In such cases, coffee is on me; just tell the staff to put it on my tab.

My preferred means of communication is email. I don’t like texting, but feel free to use it to confirm where we’re meeting and other simple logistics.

I expect that all of you will avail yourselves of office hours at least once during the term. However, W&L is not like Amherst College, which mandates that attending office hours is part of you grade!

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 are a stream of publications each year from the World Bank, the IMF and the Asian Development Bank. You can also find data online in the China Statistical Yearbook. See the links on the right of the web site. Recent examples include:

• 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.

Grading:

Good attendance and regular participation are expected of everyone.

Class conduct:

Please silence your cell phone and put your laptop away. Chide me when I’m the guilty one.

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