China. What’s it to you as an importer?
To fully grasp the fundamental importance of that question, you
need background.
The economy of the People’s Republic of China is the fourth
largest in the world when measured by nominal GDP. Its economic
output for 2006 was $2.68 trillion USD. Its per capita GDP in
2006 was approximately US $2,000 (US $7,600 with PPP), still low
by world standards (110th of 183 nations in 2005), but rising
rapidly. As of 2005, 70% of China’s GDP is in the private
sector. The smaller public sector is dominated by about 200
large state enterprises concentrated mostly in utilities, heavy
industries, and energy resources.
Since 1978 the People’s Republic of China (PRC) government has
been reforming its economy from a Soviet-style centrally planned
economy to a more market-oriented economy while remaining within
the political framework provided by the Communist Party of
China. This system has been called “Socialism with Chinese
characteristics” and is one type of mixed economy. Since being
introduced in 1978, these reforms have helped lift millions of
people out of poverty, bringing the poverty rate down from 53%
in 1981 to 8% in 2001.
To this end, authorities have shifted agricultural work (in
which approx half of the work force is engaged) to a system of
household responsibility in place of the old collectivization,
increased the authority of local officials and plant managers in
industry, permitted a wide variety of small-scale enterprise in
services and light manufacturing, and opened the economy to
increased foreign trade and foreign investment. The government
has emphasized raising personal income and consumption and
introducing new management systems to help increase
productivity. The government also has focused on foreign trade
as a major vehicle for economic growth. While the accuracy of
official PRC figures remain the subject of much debate, Chinese
officials claim the result has been a tenfold increase in GDP
since 1978. Some international economists believe that Chinese
economic growth has been in fact understated during much of the
1990s and early 2000s, failing to fully factor in the growth
driven by private enterprises.
Current GDP per capita grew a paltry 17% in the Sixties, rising
to 70% in the Seventies, and China surged ahead of India
registering a remarkable growth of 63% in the turbulent Eighties
and finally reaching a peak growth of 175% in the Nineties.
However, Chinese prosperity still remains concentrated in the
coastal and southern provinces and efforts have been made in
recent years to expand the prosperity to the inner provinces and
the industrial Northeast rust belt.
In the 1980s, the PRC tried to combine central planning with
market-oriented reforms to increase productivity, living
standards, and technological quality without exacerbating
inflation, unemployment, and budget deficits. The PRC pursued
agricultural reforms, dismantling the commune system and
introducing the household responsibility system that provided
peasants greater decision-making in agricultural activities. The
government also encouraged non agricultural activities, such as
village enterprises in rural areas, and promoted more
self-management for state-owned enterprises, increased
competition in the marketplace, and facilitated direct contact
between mainland Chinese and foreign trading enterprises. The
PRC also relied more upon foreign financing and imports.
During the 1980s, these reforms led to average annual rates of
growth of 10% in agricultural and industrial output. Rural per
capita real income doubled. Industry posted major gains
especially in coastal areas near Hong Kong and across the strait
from Taiwan, where foreign investment helped spur output of both
domestic and export goods. China became self-sufficient in grain
production; rural industries accounted for 23% of agricultural
output, helping absorb surplus labor in the countryside. The
variety of light industrial and consumer goods increased.
Reforms began in the fiscal, financial, banking, price setting,
and labor systems.
China’s economy regained momentum in the early 1990s. Deng
Xiaoping’s Chinese New Year’s visit to southern China in 1992
gave economic reforms new impetus. The 14th Communist Party
Congress later in the year backed up Deng Xiaoping’s renewed
push for market reforms, stating that the PRC’s key task in the
1990s was to create a “socialist market economy.” Continuity in
the political system but bolder reform in the economic system
were announced as the hallmarks of the 10-year development plan
for the 1990s.
