2024 MI Prelims H1 Econs (QP)

Class Adm No Candidate Name: This question paper consists of 8 printed pages. [Turn over 2024 End-of-Year Exams Pre-University 2 H1 ECONOMICS 8843/01 Paper 1 10 September 2024 3 hours Additional Materials: Answer Booklet READ THESE INSTRUCTIONS FIRST Write your name and class on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. You are reminded of the need for clear presentation in your answers. An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional paper, ask the invigilator for a continuation booklet. The number of marks is given in brackets [ ] at the end of each question or part question. H

MI/8843/01/PU2/EOY2024 Answer all questions. Question 1: The Chinese Air Travel Industry Extract 1: Tourism Development in China As China transitions into a new stage of high -quality development, it has adopted the implementation of the new development concept of “innovation, coordination, green, openness, and sharing”. China’s tourism industry is of significant importance for promoting this transition towards a more sustainable, innovative, and inclusive tourism within China and globally. Thus, as a pillar of China’s new-era economy, the tourism industry plays a crucial role in meeting the growing expectations of people regarding the quality of life. As a result, environmental supervision, ecological protection, green technology and technological innovations have been embraced by some of the provincial authorities such as the Yangtze River Delta. They exhibit superior development, influencing neighbouring regions through spillover effects. The emergence of virtual experiences, smart guides, promotion of spiritual and cultural tourism, development of high-speed rail and the upgrading of airports has spurred interest in domestic tourism. However, the heav y subsidies offered to the provincial and city governments and travel related industries including airlines has cost China over 500 billion dollars. Adapted from: www.mpdi.com, June 2024 Extract 2: The State of the Chinese Airline Industry The Chinese domestic air travel industry is the second largest in the world and in 2023 has already surpassed pre -pandemic levels. Its international traffic on the other hand, is still lagging and full recovery to pre-pandemic levels is only expected beyond 2025. Figure 1: China’s passenger traffic recovery (2023 vs 2019) (Note: The dotted line at 100% represents the 2019 levels) Source: IATA Sustainability and Economics, DDS, February 2024 Domestic International

3 MI/8843/01/PU2/EOY2024 [Turn over Extract 3: The Drivers of China’s Tourism Industry’s Revival China remained under very strict travel policies for three years, while the rest of the world closely watched for its reopening and the effects it would have on the global economy and air traffic numbers. There were periods within the three years when the strict travel policies were tightened more due to the outbreak of further Covid variants such as delta and omicron variants. However, when restrictions were lifted in January 2023, pent -up travel demand surged in the country mainly propelled by a renaissance of domestic tourism and the timing of Lunar New Year seasonal travel period. Air travel benefitted more as compared to high-speed rail as the latter was relatively pricier while travel time was longer. Chinese airlines, which managed to keep most of their pre -pandemic staff and flying crews ready to operate, were quick to answer to the sudden increase in demand. Seat capacity levels were also reinforced by the more frequent use of widebody aircraft in domestic operations. By April 2023, China had fully recovered its pre -pandemic levels of origin -destination domestic passengers. Any further pressure from the demand side will inevitably raise costs as capacity building activities such as purchasing new aircraft is a very expensive affair. International passenger traffic, however, reached a more modest 58% recovery by December 2023. Challenges such as geopolitical rifts, closure of Russian airspace due to the Ukraine war, visa difficulties imposed by many foreign countries, depreciation of t he Chinese Yuan, high inflation in destination countries have all added to the woes and dampened international flight capacity. The lag in international traffic growth is not only driven by the lower numbers of foreign tourist arrivals but also by the national economy’s current state, linked to the property crisis and high unemployment notably among the younger generation, a situation that arguably contributes to the preference for domestic travel destinations rather than overseas. Travel industry experts have commented that the revival of the domestic travel sector will eventually lead to higher fares for air tickets, but consumers may benefit with lower prices for hotel rooms and restaurant as these sectors remain competitive. Source: www.iata.org/economics, February 2024 Extract 4: The High-Speed Rail Alternative China’s high-speed rail launched in 2008 has become the world’s most extensive network in less than two decades. During the 2008 global financial crisis, China ramped up investments in this sector to stimulate the economy and create jobs. Initially, China relied on technology transfer agreements with foreign companies such as Alstom, Siemens and Kawasaki Heavy Industries. Over time, China developed significant domestic expertise and innovation, becoming a leader in high -speed rail technolog y. The dense and connected network has reduced travel times and boosted connectivity between regions. As part of the Belt and Road Initiative a line connects China’s Kunming with the Laotian capital Vientiane. Besides increasing regional transportation links the network serves as an effective form of Chinese soft power. Despite the benefits, however, the high-speed rail network has not generated enough revenue to cover its substantial initial investment and ongoing maintenance costs. China State Railway Group, the state-owned operator, is heavily indebted, with about $900 billion in liabilitie s by the end of 2021. This has prompted an increase in ticket prices, a rare move in the country. Often, for comparable connections high-speed rail tickets are more expensive than air tickets. Source: Newsweek, July 2024

MI/8843/01/PU2/EOY2024 Extract 5: Consequences Of Flying Unlike the greener and cleaner mode of high-speed rail, air travel has a more sinister impact on the environment. Aviation fuel is highly polluting, and the sector accounts for about 4 percent of the world’s carbon emissions. This is one of the toughest sectors to tackle due to a lack of alternative technologies to drive jet fuelled engines. However, since 2021, a new kind of fuel known as sustainable aviation fuel (SAF) has been approved as an alternative to jet fuel. First blended by Shell for the European market, SAF is made from waste products and sustainable feedstocks and is blended at an approved ratio of up to 50 per cent with conventional jet fuel. According to Shell, in its neat form, SAF can reduce carbon emissions by up to 80 per cent compared with conventional jet fuel. Shell, whose customers include SIA Engineering Company and the Republic of Singapore Air Force, has also completed an upgrade of its Singapore facility, which will enable it to blend it here and aims to test the supply chain it is establishing for SAF in Asia. Shell Aviation’s global president, Jan Toschka, said that they are als