China & japan

Compare Standard of living

Qiaoling Bai Yihua PuLiyao Jin Yubei Tu

GINI INDEX

JAPAN CHINA

Gini index

A measure of statistical dispersion intended to represent the income distribution of a nation's residents.

Also measures the inequality among values of a frequency distribution (for example levels of income) and inequality of income or wealth.

The Gini coefficient is defined as a ratio with values between 0 and 1.

The higher the Gini coefficient, the greater the inequality.

Results of China

A general unfair wealth distribution

• rich-poor gapGaps in access to educationBarriers to employment Inequality between rural and urban areas

Why?

Kuznets Curve-inverted U curveThe law of developmentPolitics

Redistribution in Japan

Tax system

• Income tax

• Tax on capital

• Consumption taxSocial security system

• Welfare law

• Pensions-a three-stories building

*Neo-Confucianism

Redistribution in China

National budgetBank creditCharges for servicesPrice change

Need to be perfected!Example: French revolution

National economic

development

Price

ExpectationPreference

Disposable income

Consumption

Nation’s economic development

Disposable income

US$ 2862 (2009)US$ 3140 (2013)

US$ 25060 (2009)US$ 25147 (2013)

Price

CPI 2008 2009 2010 2011 2012 2013 2014

China 107 100.8 102 104.5 103 102 102.5

Japan 101 100.8 100 99.5 99 99.2 100.5

Inflation Rate (Annual change on consumer price index)

2008 2009 2010 2011 2012 2013 2014

China 7 1 2 5 4.2 2 2.5

Japan 0.8 0 -1.3 -0.5 0 -0.2 1.3

Source: www.tradingeconomics.com

Year Food Price Index

Cereals Meet Aquatic Product

Vegetable

2009, Dec 105.3 108.6 98.3 105.7 136.2

2010,June 105.7 111.73 101.81 106.47 114.55

2010, Dec 109.55 115.57 110.23 110.89 94.28

2011, June 114.44 112.41 132.26 113.9 107.32

2011, Dec 111.93 111.59 126.11 112.38 93.18

1. Long-term trade surplus which leads to the inflation pressure.2. Non-staple food prices demonstration effect. In 2011, the rocketing price of

pork directly push the price level rapid rise.3. Low interest rates. China always use low exchange rate in an effort to

enhance the competitiveness of the products until now. it’s can not be for a long time.

Chinese Food Price Index during 2009 to2011

Migrant labor riot in china

Workers near an entrance of Foxconn's troubled industry park in Taiyuan, China.

Japanese kids rank sixth

Measured by 5 factors

Education （ No.1)

Risk in daily life(low)

Accommodation and environment(quit good)

Health and safety(pretty good)

Materials level(low)

Endogenous growth model: Social capital

China

-Actually, China characteristic people's democratic dictatorship system make china has strong social

Cohesion. Especially when face natural or man-made disasters, government has hard power to handle it

Japan

-Compared with china, Japan has narrow wealth gap. Especially in social harmony part, Japan do better than China

Compare welfare between China and japan

Social security system

－ endowment insurance system

－ unemployment insurance system

－ health care systemWelfare culture

－ sense responsibility

－ value of social equity

Difference in social security system

1.Retirement pension system for urban employeesChina-it does not include different level and security have huge difference for region and occupy which intensified social contradictions

Japan- It is the dual construction of pensions: first level is national pension insurance （ provide a common "basic pension" to all residents ） , second level is Employees' pension insurance(mainly for those who are employed by private business corporations)

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Difference in social security system

2. unemployment insurance system China

－ the government do not offer fixed fees and just provide urgent assistance when it is short of funds

-it use the uniformity of a single fees that enterprise pay 2% of the individual salary, individual pay 1% of salary as unemployment insurance premium

Japan

-it us labor insurance system instead of unemployment insurance system, and the expenses being paid by the government, the enterprise and the individual.

－ the fees is different depend on riskiness of unemployment

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Difference in social security system

3. health care systemChina

-it just stays at health care not health service, and only include urban workers. Rural workers and unemployment nearly have no health care （ there is heavy burden for individual and family）－ it does not include mental healthJapan

-it has been moved towards securing universal health care and cover many parts （ include mental health）

Welfare culture

1. Responsibility China

－ Some Executive department consider welfare plan as a temporary work and not do well in accordance benefits costs

Japan

- People have a sense of responsibility which increasing welfare do not affect successful development of enterprise

Welfare culture

2.Value of social equityChina

－ there is no mature public facilities and good employment environment for the disabled, and people are more or less have discrimination for them

Japan

－ Government aimed to construct happy life for the disabled and popularize the social independency idea that the disabled and everyone else live together normally

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Happiness planet index

An important factor to reflect standard of living

the extent to which countries deliver long, happy, sustainable lives for the people that live in them

The Index uses global data on life expectancy, experienced well-being and Ecological Footprint to calculate

Japan vs. china

Source ： happiness report 2013

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Happiness planet index

Japan rank higher than china in terms of happiness index. However, it is not a absolute advantage because all East Asian countries have low happiness index

Therefore, there is a debate-If China changes welfare policies, and becomes like Japan, would the Chinese people get happier?

• Yes, to some extent. And no more pressure of discontented people inside of China for riots or revolution.

• No, not very much. Japan ranks very low in the Happiness Index, compared to the level of income and the size of economy

• Consumption• Pricing, disposable in come, preference,

expectation

• Social Welfare• Pension, unemployment, working injury

• Wealth Inequalities• Gini index

Domestic Demand Exchange Rate

Import

Export

EXCHANGE RATE THEORIES

Exchange Rate

• Benefits of Avaluation of Chinese Yuan: making Chinese Yuan more valuable.

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What can we do to improve China’s situation?

Factors that matter in improving quality of life in china

•Distribution of income• -Private consumption accounts for only about 36 percent of

China’s GDP.• -Half of what it is in the U.S, two-thirds of what it is in

Europe. -Boost private consumption by distributing income fairly.

• Independence of the current“U.S supply Chain”• -Shift focus from export-driven to consumption• -Focus on internal prosperity. Try to Maintain low costs for

domestic consumers not the U.S.

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Factors that matter in improving quality of life in china

Total factor productivity-Krugman’s argument-Technological progress, input prices, human capital

• Exchange rate-Chinese people are facing the rapid increasing on commodity

prices.-why?

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Benefits of Avaluation of Chinese Yuan: making Chinese Yuan more valuable.

• As a lot of Chinese goods are made with imported materials;

• If Chinese currency value goes up

• The import price of materials goes down

• Thus the price of Chinese goods made with imported materials will go down

• The Chinese can afford to buy more of Chinese goods at lower prices.

• They become happier.

Cost of avaluation of Chinese Yuan

• The price of Chinese exports will become more expensive, not in Yuan, but in U.S. dollars.

• Thus Foreigners will buy less of Chinese goods

• Exports falls

• Export Industry Company’s profits may or may not fall

• Less jobs and less national income

conclusion

To some extent, Japan has a better living standard than China’s in terms of welfare system, redistribution system, and consumption .

But China still can improve standard of living by learning from Japanese experience and making it our own .

THANKS