China’s Economic Landscape: Consumption, Trade, and Negotiations
China’s Economic Overview
Household spending in China accounts for just over one-third of the Chinese output, indicating that China has one of the lowest levels of consumption compared to its production. The Chinese government aims to raise middle-class incomes and is targeting a 7.5% growth rate for this year.
Contrary to some misconceptions:
- The level of consumption of the Chinese is not higher than the British and the Japanese.
- Chinese enterprises do borrow too much money compared with firms in other
Factors Influencing Gross Domestic Product
Elements Affecting GDP
Consumption
An increase in consumption will cause GDP to increase. This means there is an increase in living standards as more people can consume higher levels of goods and services. Income has a positive relation with consumption. An increase of consumption will immediately push up imports. An increase of domestic consumption might decrease exports, since at the same level of production, firms would prefer to sell inside the country.
Investment
GDP increases when businesses invest
Internal Financing: Self-Financing and Its Implications
Internal Financing or Cash Flow
Internal financing refers to the application of financial resources generated within the company itself, without resorting to external funding. Self-financing originates from the company’s profits and is intended for expansion or maintenance of its activities.
Classes of Self-Financing: Maintenance and Enrichment
Maintenance: Consists of retained profits aimed at preserving the company’s economic strength. It is formed through:
- Amortization of tangible and intangible
Key Business Concepts: Return, Value, and Financial Statements
Key Business Concepts
Return
Return is a measure of performance that we get because we apply resources during a period in order to obtain outputs.
- Return of Assets (Economic Analysis): Income before interest/Assets
- Return on Equity (Return for Stockholders): Net income/Equity
Management
Management is a process that includes a plan to make decisions, then implemented by making decisions happen and lastly, you must control and learn about your decision, if it was a good or a bad decision.
Value
Value is the
Privatization, Finance, and Economic Concepts
Privatization of Public Enterprises
Privatization of public enterprises involves selling state-owned enterprises to the private sector. This practice has become more common in recent years and is used as a rapid method of financing deficits. However, this sale deprives the state of permanent income from state welfare benefits provided by these companies.
Key Economic Concepts
- Bank Deposit: Contracts between economic-financial entities and operators where the latter provides a financial institution
Aggregate Demand and Supply, GDP, and Market Dynamics
Aggregate Demand and Supply
Aggregate Demand (AD): Definition & Components
AD: The total demand for goods and services in an economy at a given price level. It’s the sum of:
- Consumption (C): Household spending on goods and services. Advanced Note: This is influenced by factors like disposable income, consumer confidence, and interest rates.
- Investment (I): Business spending on capital goods (machinery, equipment, etc.) and changes in inventories. Advanced Note: Investment is sensitive to interest