Continuing our look at China with a background overview critical
for importers…
During 1993, output and prices were accelerating, investment
outside the state budget was soaring, and economic expansion was
fueled by the introduction of Special Economic Zones (SEZs) and
the influx of foreign capital that the SEZs facilitated. Beijing
approved additional long-term reforms aimed at giving still more
play to market-oriented institutions and at strengthening the
center’s control over the financial system; state enterprises
would continue to dominate many key industries in what was now
termed “a socialist market economy”. The PRC government called
in speculative loans, raised interest rates, and reevaluated
investment projects. The growth rate was thus tempered, and the
inflation rate dropped from over 17% in 1995 to 8% in early
1996. The economy slowed in the late 1990s, influenced in part
by the Asian Financial Crisis of 1998-99, with official growth
of 7.8% in 1998, and 7.1% for 1999. Growth accelerated again
early in the new century, reaching 9.1% in 2003, 9.5% in 2004
and 9.8% in 2005.
In December 2005, China’s National Bureau of Statistics
revised its 2004 nominal GDP upwards by 16.8% or Rmb2,336.3
billion (US$281.9 billion), making China the 6th largest economy
in the world. (overtaking Italy, with a GDP of almost $2 trillion
USD.) At the start of 2006, the PRC officially announced itself
as the 4th largest economy, measured by USD-exchange rate
overtaking France and the United Kingdom. At the beginning of
2007 China stands as the second largest economy in the world
measured by domestic PPP (purchasing power) measure, at about
$10 trillion USD, although such estimates must be taken with a
great deal of caution as PPP calculation is very rough,
especially in a country as huge as China, Chinese purchasing
power varies drastically between Shanghai and Sichuan, and PPP
is irrelevant for imported goods and overseas purchases. By the
end of 2008, China is predicted (measured by exchange rate) to
overtake Germany as the third largest economy, and to overtake
Japan by 2020. It would then overtake the United States by 2040
to become the world’s largest economy.
Despite China’s notable economic growth, its per capita and
absolute GDP growth has been outpaced by some nations. From 1999
to 2006, Russia’s nominal per capita GDP increased from $1334 to
$6879 (515 percent), while PR China increased from $870 to $2000
(229 percent) [1] Similarly spectacular are some Middle Eastern
and oil producing nations such as Qatar, Bahrain, United Arab
Emirates, Kuwait, and Brunei. Kazakhstan, Turkmenistan,
Azerbaijan, and Angola have managed to outpace China harnessing
vast energy reserves in the same period. However, Equatorial
Guinea, Africa is the star, having recorded 79% percent real GDP
growth in 2004. Even nations in Asia such as Vietnam have managed
to triple GDP between 1999 and 2006 in nominal per capita dollar
terms, more than China. The reason for this is mainly due to
China’s large labor pool, which helps to contain inflation, and
its refusal to increase the value of the Chinese yuan, which
would have led to faster growth statistically, but may have
sacrificed some stability in growth.
In addition, it must be noted that per capita income in absolute
dollars (not percentage) GDP per capita is rising much faster in
most of the developed world than China, because of China’s very
low base income. However, what China has going for it is that it
may be able to continue this percentage of growth for decades to
come, statistically spiraling growth in absolute dollar terms if
its pace is maintained!!
