Comparative Case Study between China and Indonesia
经济学assignment代写 In the first quarter of 2016, China has experienced an annual growth of 6.7 percent in its real Gross Domestic Product.
In the first quarter of 2016, China has experienced an annual growth of 6.7 percent in its real Gross Domestic Product. In 2015, China had experienced a growth of 6.8 percent. Thus the growth rate of real GDP in the first quarter of 2016 is the slowest growth for china. However, despite the economic slowdown, the fixed asset investment . Industrial output and retail sales have increased more than what is anticipated during the first quarter of 2016 (International Monetary Fund, 2016). This fact signifies that the Chinese economy is accelerating. Table 1 and Figure 1 reflect the fact.
2016年第一季度，中国的实际国内生产总值（GDP）每年增长6.7％。 2015年，中国的经济增长率为6.8％。 因此，2016年第一季度的实际GDP增长率是中国最慢的增长率。 但是，尽管经济增速放缓，固定资产投资仍然存在。 工业产值和零售额的增长超过了2016年第一季度的预期（国际货币基金组织，2016年）。 这一事实表明中国经济正在加速发展。 表1和图1反映了这一事实。
Table 1: Percentage change in real GDP for China 经济学assignment代写
|Year||Real GDP (USD Billion)||Percentage change (%)|
(Trading Economics, 2016)
Figure 1: The value of real GDP for China between 2012 and 2016 经济学assignment代写
(Source: Table 1)
It is observed that the growth rate in real GDP has fallen significantly in 2015. However, in 2016, this rate has increased to some extent.
Table 2: Percentage change in real GDP for Indonesia 经济学assignment代写
|Year||Real GDP (USD Billion)||Percentage change|
(Focus Economics, 2016)
Figure 2: The value of real GDP for Indonesia between 2012 and 2016 经济学assignment代写
From table 2 and figure 2 it is observed that the growth rate of real GDP has reduced continuously till 2015 from 2012. However, it has increased by 8.58 percent to $ 936 billion in 2016.
Comparing the real GDP between China and Indonesia, it is observed that for both the nations, the growth rate of real GDP has fallen till 2015. However, both the nations experience boom period in 2016. The rate of increase in real GDP for Indonesia is higher than that of China.
Two important determinants of aggregate demand for China is consumer spending by the households and government expenditure. In 2015, retail sales have grown at a slower rate in March compared to January and February of the same year. From the data revealed by the National Bureau of Statistics, it is observed that retail sales have increased to 10.20 percent by the end of first quarter of 2015 from 10.70 percent in January and February of the same year.
Therefore, the overall first quarter growth in consumption expenditure becomes 10.60 percent in 2015. In the subsequent quarters of 2015, this rate of consumption expenditure has increased continuously and finally account for $2.5 trillion by the end of 2015 (Johnson, 2016). Continuous growth in consumer spending pattern is observed from figure 3.
对中国总需求的两个重要决定因素是家庭的消费者支出和政府支出。 与同年的1月和2月相比，2015年3月份的零售销售增速有所放缓。 根据国家统计局公布的数据，可以看出，到2015年第一季度末，零售额已从同年1月和2月的10.70％增长到10.20％。
Figure 3: Consumer spending pattern in 2015 for China 经济学assignment代写
(Trading Economics, 2016); (National Bureau of Statistics of China, 2016)
The expenditure made by Chinese government has increased till June month of 2015. However, from July the expenditure has fallen significantly. In September month of 2015, an increase in government expenditure can be observed which has further fallen in October. After a small rise, another fall is observed in December month of 2015. This is reflected in figure 4 and table 3.
Table 3: Government expenditure pattern in 2015 for China 经济学assignment代写
(National Bureau of Statistics of China, 2016)
Figure 4: Government expenditure pattern in 2015 for China 经济学assignment代写
The consumer spending pattern in Indonesia has also increased significantly in 2015. The consumer expenditure has increased in the subsequent quarters of 2015 and it is showed in figure 5.
Figure 5: Consumer spending pattern in 2015 for Indonesia 经济学assignment代写
(Trading Economics, 2016)
In terms of government spending, a continuous rise is observed for Indonesia. It is reflected in figure 6.
Figure 6: Government spending in 2015 and 2016 for Indonesia 经济学assignment代写
Two important components of aggregate supply are labor cost and producer price index. Labor cost in China has reduced significantly in all quarters of 2015. The index point has fallen to 103.9 in August, 2015 from 105.9 in January of 2015 (Figure 7).
Figure 7: China Labor cost
In terms of producer price index, a sharp fall is observed during 2015. It has fallen from – 4.6 point in May, 2015 to – 5.9 point in December, 2015 (Figure 8).
Figure 8: Change in producer price index for China 经济学assignment代写
The labor force for Indonesia has been observed. From figure 9, it is observed that unemployment rate has increased significantly in July, 2015. This has increased from January, 2015. Higher unemployment growth rate signifies lower labor cost for Indonesia.
Figure 9: Unemployment rate in Indonesia in 2015 经济学assignment代写
One sharp increase in producer price is observed in December month of 2015 at 146.14 point. Over the rest of the months in 2015, a moderate growth is observed (figure 10).
Figure 10: Producer price index for Indonesia 经济学assignment代写
The rise in determinants of aggregate demand for both the nations have increased the level of aggregate demand while the fall in labor cost and rise in producer price index also increases the aggregate supply of the nation. However, the rate of increase in aggregate demand for China is higher than aggregate supply. As a result, an inflationary economic growth has been observed for China and this is reflected in figure 11.
Figure 11: Aggregate demand and aggregate supply framework for China 经济学assignment代写
From figure 11, it is observed that rise in both the determinants of aggregate demand supply has led to inflationary growth in real GDP. Initially, the economy was in equilibrium at E1. However, in 2015, both curves have shifted to right and make a new equilibrium at E2. Therefore, real GDP has increased but price level also has increased for China.
Now the impact of those factors on economic condition of Indonesia can be observed as follows:
Figure 12: Aggregate demand and aggregate supply framework for Indonesia 经济学assignment代写
It is observed that Indonesia has experienced a real growth in GDP. As both the aggregate demand and supply has increased proportionately, the economy growth has achieved. The output level has increased from Y1 to Y2. However, the price level has not changed.
For China, demand pull inflation can be observed as the aggregate demand has increased on account of rise in consumer expenditure and government spending. As the rate of increase in aggregate demand is higher, it leads to inflation. The consumer price index for China is given below:
Figure 13: Consumer price index for China 经济学assignment代写
The consumer price index has increased in August, 2015 and furthers it falls to 101.3 point and then again it rises in 2016. Continuous rise in CPI signifies cost push inflation.
For Indonesia, the CPI given in figure 14:
Figure 14: Consumer price index for Indonesia 经济学assignment代写
In 2014 and 2015, a moderate growth in CPI can be observed for Indonesia. This signifies cost push inflationary pressure. A shortage in labor force and supply of raw materials has increased the price level and thus it leads to cost push inflation.
The total number of employed person in China has increased from 77253000 in 2014 to 77451000 in 2015 (Figure 15).
Figure 15: Labor force in China
Thus labor force participation increases by 0.25 percent in 2015 as compared to the previous year. For Indonesia, the number of employee person has also increased significantly in 2015 as compared to 2014.
Figure 16: Labor force in Indonesia 经济学assignment代写
Now observing the unemployment rate for both the nations, it is observed that the unemployment rate has fallen significantly in the second quarter of 2015 as compared to 2014 (figure 17).
Figure 17: China unemployment rate 经济学assignment代写
For Indonesia, the unemployment rate has increased significantly in the second quarter of 2015 as compared to the second quarter of 2014 (figure 9).
Now to determine the relationship between the unemployment rate and the level of economic activity, Okun’s law has been considered. According to Okun, a positive relationship exists between output and employment. This means if unemployment rate falls then the growth of real GDP will increase.
To verify this proposition, a regression analysis has been conducted by considering the real GDP as dependent variable and unemployment rate as independent variable. For China, a negative relationship is observed between real GDP growth rate and unemployment rate growth rate as depicted in figure 18.
Figure 18: Result of regression analysis between GDP growth rate and unemployment rate for China 经济学assignment代写
The coefficient value is -0.254 which signifies that if unemployment level increases by 1 percent then real GDP will fall by 25 percent. For Indonesia also, a negative association is observed between unemployment rate and the growth rate in real GDP. Moreover, the goodness of fit of the regression model for Indonesia is higher as compared to China. Therefore, a strong and negative association is evident in both the cases. This supports the proposition of Okun’s law which states that a negative relationship exists between unemployment rate and real GDP growth rate.
Figure 19: Result of regression analysis between GDP growth rate and unemployment rate for Indonesia 经济学assignment代写
The coefficient value is -0.047 which signifies that if unemployment level increases by 1 percent then real GDP will fall by 5 percent in Indonesia.
For China, it is observed that the exchange rate between Yuan and USD has fallen till 2014. However, the exchange rate starts to rise from 2015 (figure 20).
Figure 20: Exchange rate fluctuation between Yuan and USD
For China, the exchange rate has fallen mainly for the fall in interest rate set by central bank. Lower interest rates have discouraged the foreign capital and cause the exchange rate to fall. Secondly a lower level of inflation in 2015 s compared to 2016 also appreciates the Chinese currency.
For Indonesia, a sharp rise in the exchange rate has been observed from 2014. In July, 2015, the exchange rate has increased significantly (figure 21).
Figure 21: Exchange rate fluctuation between Rupiah and USD
The interbank interest rate in Indonesia was comparatively higher and this has increased the exchange rate. This is because it attracts foreign capital and cause the exchange rate to rise. As opposed to China, the inflation rate has increased for Indonesia in 2015 as compared to 2014. This has depreciated Rupiah against USD.
After comparing the economic performance between China and Indonesia, Indonesia has been selected as a better economic performer than China. In 2016, the growth rate of real GDP is higher for Indonesia as compared to China. China has experienced a growth of 6.08 percent in real GDP in 2016 while the same for Indonesia is 8.58 percent.
For Indonesia, the consumer confidence index is much higher than that of China (Gong & Li, 2010). This means that people of Indonesia has positive approach towards job availability and income level. Sharp rise from 2015 can be observed for Indonesia corresponding to consumer confidence index (figure 22 and 23).
Figure 22: Consumer confidence index for China 经济学assignment代写
Figure 23: Consumer confidence index for Indonesia
Thirdly, the producer price index for Indonesia is higher as compared to China. This signifies average change in price of goods and services sold by manufacturers and producers in the wholesale market during a given period are higher for Indonesia. This can maintain continuous supply in the market and maintain the economic growth.
Focus Economics. (2016). Economic Forecasts from the World’s Leading Economists. Indonesia Economic Outlook.
Gong, M., & Li, W. (2010). Assessing the role of aggregate demand and supply shocks in China’s macroeconomic fluctuation. Frontiers of Economics in China , 5 (3), 464–488.
International Monetary Fund. (2016). Report for Selected Countries and Subjects. World Economic Outlook Database.
Johnson, S. (2016). China workers ‘to account for 12% of global consumption’. Financial Times.
National Bureau of Statistics of China. (2016). Consumer Price Index (The same month last year=100). Retrieved September 20, 2016, from http://data.stats.gov.cn/english/easyquery.htm?cn=A01
Trading Economics. (2016). China GDP. Retrieved September 20, 2016, from http://www.tradingeconomics.com/china/gdp
Trading Economics. (2016). Indonesia Consumer Spending . Retrieved September 20, 2016, from http://www.tradingeconomics.com/indonesia/consumer-spending