YJC H1 ECONS P1 QP

1 YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE YISHUN JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATIONS 2017 H1 ECONOMICS 8819/01 PAPER 1 23 AUGUST 2017 0800 – 1100 hrs TIME 3 hours Additional materials: Writing papers, cover pages INSTRUCTIONS TO CANDIDATES Write your name and CTG on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for any diagrams, graphs or rough working. Do not use highlighters, glue or correction fluid. Answer questions 1, 2, and either 3 or 4 . Start a new question on a fresh piece of paper. At the end of the examinations, fasten all your work securely together. Tie a cover page to three separate questions: 1. Case Study Question 1, 2. Case Study Question 2, and 3. Either Essay Question 3 or 4. The number of marks is given in brackets [ ] at the end of each question or part question. You are reminded of the need for good English and clear presentation in your answers. This paper consists of 8 printed pages, including this cover page

2 Section A Answer all questions in this section. Question 1 The Market for Steel Figure 1: World price of steel Source: Bloomberg Extract 1: Global steel demand set to fall again in 2016: Worldsteel Global steel demand will continue to fall this year before a slight pick-up in 2017, the World Steel Association forecast on Wednesday. Falling demand has plunged the global steel market into crisis, with excess capacity taking a heavy toll on producers, including those in China - leading to plant closures and job losses. Global apparent steel use - deliveries minus net exports of steel industry goods - is expected to fall 0.8 percent in 2016 to 1.488 billion tonnes after a 3 percent fall last year, according to Worldsteel. China, which produces about half the world's steel, is under increasing international pressure to tackle a local supply glut that has led to accusations of China flooding markets with cheap steel. However, China is reluctant to do so as cutting industrial capacity will force China to lay off probably 1.8 million workers from steel and related sectors. "The key to this year's figure is the decline in demand from China, which is responsible for half of the global demand, where a surplus in residential properties is a problem, but also weaker demand from Brazil and Russia," Worldsteel Director General Edwin Basson said. Source: Reuters, 13 April 2016, the Straits Times, 8 March 2016

3 Extract 2: China tackles pollution woes Worried by the social and political impact of pollu tion, China has vowed to crack down on lawbreaking companies and the local governments tha t protect them. As part of its war on pollution, China's traditionally underpowered envir onment ministry was granted new powers to send inspection teams to local regions without warning, and was also given the authority to summon senior provincial officials to explain their conduct. During a nationwide investigation of 1,019 steel enterprises across the country, the Ministry of Environmental Protection inspectors found that 173 firms were found to have violated the country's environmental rules, with 62 firms involved in illegal construction and 35 exceeding state emission limits. 23 of the offending firms had been asked to cut production, while another 29 had been shut down temporarily to "rectify" their problems. Fines totaling 18.9 million yuan have been imposed and three officials have been detained. Source: Reuters, 10 Oct 2016, South China Morning Post, 2 Apr 2017, FORES Study 2012:1 Extract 3: UK and EU urged to act on Chinese steel dumping after US raises duty on imports Britain’s steel trade body and unions have called on the UK and the EU to take urgent action to stop Chinese steel dumping, after the US governm ent increased tariffs on imports of cold rolled steel from China to 522% from 266%. A spokesman for the Community trade union said that unfairly traded Chinese steel was hurting UK and European steel producers. China’s steel exports reached a record 112.4 millio n tonnes last year, up by 19% – but their value fell 10.5% to $62.8bn (£43.2bn) as a result of falling prices. This has led to a global steel glut, which has plunged European steel producers in to crisis. UK steel factories have also been put up for sale, putting thousands of jobs at risk across the country. In defiance of the US move, China, the world’s larg est steel producer, said it would push on with controversial tax rebates to steel exporters t o support the sector’s restructuring after a slowdown in demand at home. China’s ministry of finance said that the tax rebate policy on steel exports was to fund a costly capacity closure plan which it plans to eliminate 100 to 150 million tonnes of annual production – more than the amount US produces every year – over the next five years. The US commerce department said that Chinese-made s teel products, which totalled $272.3m in 2015 were being sold in the US at below cost with unfair subsidies. China, however, denies that its mills have been dumping their produ cts in other countries, arguing that its steelmakers are more efficient. Source: The Guardian, 18 May 2016

4 Questions (a) i) With reference to Figure 1, describe the trend in t he world price of steel between March 2009 and March 2016. [2] ii) With reference to the case material and use of a di agram, explain the change in world price of steel in 2015. [5] (b) i) Explain one example of negative externality which c ould result from steel production. [2] ii) With the use of a diagram, explain how negative ext ernality in steel production could lead to market failure. [5] iii) Explain the measure undertaken by the Chinese government (from Extract 3) in tackling the negative externalities associate d with steel production and discuss an alternative policy option the Chines e government could consider. [8] (c) Discuss if UK and EU should adopt protectionist mea sures against Chinese steel in circumstances described in the case material. [8] [Total: 30]

5 Question 2 Economic Growth of China and Japan Table 1: Annual real GDP growth rates (%) for China and Japan 2010 2011 2012 2013 2014 2015 China 10.6 9.5 7.9 7.8 7.3 6.9 Japan 4.2 -0.1 1.5 2.0 0.4 1.2 Table 2: Annual inflation rates (%) for China and Japan 2010 2011 2012 2013 2014 2015 China 3.3 5.4 2.6 2.6 2.0 1.4 Japan -0.7 -0.2 -0.1 0.4 2.8 0.8 Table 3: Components of GDP for China and Japan, 2015 China Japan Private Consumption Expenditure (% of GDP) 38 56 Gross Fixed Capital Formation (% of GDP) 45 23 Government Consumption Expenditure (% of GDP) 14 20 Exports of goods and services (% of GDP) 21 18 Imports of goods and services (% of GDP) 18 17 Source: Worldbank.org Extract 4: China economic growth slowest in 25 years After experiencing rapid growth for more than a decade, China's economy has experienced a painful slowdown in the last two years. It has come as the central government wants to move towards an economy led by