Cigarette consumption between genders

According to The Economist smoking is in the decline in Western Europe by 26% between 1990 to 2009 due to taxes, smoke-free policies and education. Whereas in the Middle East and Africa consumption of cigarettes increased by 57%. In emerging markets 800 million men are smokers whereas only 200 million are women. Moreover, 80% of this male cigarettes consumers are from low-income and middle-income countries. This problem is most apperent in China where 50% of men smoke compared to only 2% of women. In total China consumes 1/3 of world's cigarettes.

The hidden side of China's economic growth

The Economist posted an interesting article where the author Mr. Arvind Subramanian portrays the picture of world economy in the next 20 years. The auther combined the index of economic dominance by considering three dominant factors: country's share of world GDP, trade and foreign investment. The index predicts a rapid increase in China's share of world GDP and a perpetual decline of America's economic leadership. According to his calculations by 2030, China will account for over 23 percent of world GDP. Although the author warns against big changes in geopolitical and economic landscape in the coming decades, the role of demography in these prediction has been overlooked. In fact, the author did not pay sufficient attention to the dynamics of ageing that will occur in the coming decades.

Although China's impressive growth record of last decades is result of its low level of income per capita compared to Western economies, its demographic prospects undermine China's long-run growth potential. China pursued strict birth-control policies and contoversial one-child policy, supposedly to prevent overcrowding of the population, particulary in densely-populated urban areas. China has been characterized by low fertility rate even though countries in the same income ladder enjoy disproportionely higher total fertility rate. In 2010, China's total fertility rate of 1.54 children per woman was surpassed by the majority of Western countries such as U.S. 2.06, France 1.97, UK 1.92, Norway 1.77, Netherlands 1.66 and Canada 1.58 childern per woman. As a consequence, one should not overlook the possibility of rapidly ageing Chinese population in spite of plenty of space to sustain robust catch-up growth.

As a country with abundant workingage population, Chinese policymakers might sooner or later introduce universal social security schemes that would in the long run jeopardize fiscal obligations and net financial liabilities from social security. The cost of ageing should not be underestimated even though current demographic projections do not capture the extent of policy changes therein that will eventually enter the couse of China's economic development.



The slow down of China's growth shoul be expected, in spite of current rapidity of growth - the situation that Japanese economy resembled in early 1980s when it rapid growth exhausted it potential.

Foreign direct investment in China's manufacturing industry

The biggest foreign direct investor in China's manufacturing industy in 2005 was Hong Kong where a lot of multinational firms are located, mostly because Hong Kong is one of China's special administrative regions due to Hong Kong's high degree of political and economic autonomy. In fact, Hong Kong enjoys the status of the freest economy in the world. The second foreign direct investor is Latin America followed by South Korea and other countries.
Source: China Statistical Yearbook (2005)

Foreign auto producers in China

Here is a graph showing the distribution of US, European and Japanese auto producers across location in Chinese manufacturing centres. As can be seen in the graph, Shanghai is the most popular manufacturing destination for US and Eurorean auto producers, followed by Jiangsu and Hubei. The most atractive destinations for Japanese auto producers are Jiangsu, where more than 70 producers are located, the next one is Guangdong followed by Shanghai and Tianjin.

Source: European Commission (2009)

Tariffs and China's trade

In 2001 China became the 143rd member of World Trade Organization (WTO). Since then, the country boosted trade liberalization in all sectors. Till the 1st of July 2006 tariffs on imported vehicles were in the range from 70 to 80 percent, which is a prohibitive level. When becoming the member of WTO, tariffs on imported vehicles, on average, dropped to 25 percent. After China became the member of WTO, import quotas and domestic content requirements were eliminated. In addition, now there are no restrictions on distribution and financing by foreign companies. Here is a link to the working paper published by the European Commission.