The economy of the People's Republic of China was the 4th largest
in the world in 2005, measured at approximately US $2.22 trillion,
which is approximately 18% of the US economy. China has kept its
economic growth rate at aroung 10% for several years. It is the
world's fastest growing major economy, and its continued growth
is critical to the overall health of the world economy and to the
welfare of its population of 1.3 billion. Its per capita GDP in
2005 was approximately US $1,529, still low by world standard, but
rising rapidly. As of 2005, 70% of China's GDP is in the private
The smaller public sector is dominated by about 200 large state
enterprises concentrated mostly in heavy industries and energy resources.
The government has a goal of quadrupling the gross domestic product
(GDP) by 2020 and more than doubling the per capita GDP. Central
planning has been curtailed, and widespread market economy mechanisms
and a reduced government role have prevailed since 1978.
The government fosters a dual economic structure that has evolved
from a socialist, centrally planned economy to a socialist market
economic system, or a “market economy with socialist characteristics.”
Industry is marked by increasing technological advancements and
productivity. People’s communes were eliminated by 1984— after more
than 25 years—and the system of township-collective-household production
was introduced to the agricultural sector. Private ownership of
production assets is legal, although some nonagricultural and industrial
facilities are still state-owned and centrally planned. Restraints
on foreign trade were relaxed when China acceded to the World Trade
Organization in 2001. Joint ventures are encouraged, especially
in the coastal special economic zones and open coastal cities.
A sign of the affluence that the reformed economy has brought to
China might be seen in the number of its millionaires (measured
in USD): a reported 236,000 millionaires in 2004, an increase of
12 percent over two years earlier.
Chinese officials cite two major trends that have an effect on China’s
market economy and future development: world multipolarization and
regional integration. In relation to these trends, they foresee
the roles of China and the United States in world affairs and with
one another as very important. Despite successes, China’s leaders
face a variety of challenges to the nation’s future economic development.
They have to maintain a high growth rate, deal effectively with
the rural workforce, improve the financial system, and continue
to reform the state-owned enterprises, foster the productive private
sector, establish a social security system, improve scientific and
educational development, promote better international cooperation,
and change the role of the government in the economic system. Despite
constraints the international market has placed on China, it nevertheless
became the world’s third largest trading nation in 2004 after only
the United States and Germany.
The Fifth Plenum of the Sixteenth CCP Central Committee took place
in October 2005. The Fifth Plenum approved the new Eleventh Five-Year
Plan (2006–10), which emphasizes a shift from extensive to intensive
growth in order to meet demands for improved economic returns; the
conservation of resources to include a 20-percent reduction in energy
consumption by 2010; and an effort to raise profitability. Better
coordination of urban and rural development and of development between
nearby regions also is emphasized in the new plan.
China's Gross Domestic Product (GDP)
In 2005 China had a GDP of US$2.2 trillion. Based on official Chinese
data, the estimated GDP growth rate for 2005 was 9.9 percent. The
proportion between the first sector, secondary sector and the tertiary
industry is around 13.1: 46.2:40.7.
China's State Budget
The state budget for 2004 was US$330.6 billion in revenue and US$356.8
billion in expenditures. The overall budget deficit in 2004 was
approximately US$26 billion, an amount equivalent to about 1.5 percent
of gross domestic product (GDP).
Inflation Rates in China
China’s estimated inflation rate in 2005 was 1.8 percent.
Import and export in China
China’s imports rose by 36 percent in 2004, totaling US$561.4 billion.
Of these imports, the major components were machinery and equipment,
mineral fuels, plastics, and iron and steel. The major trading partners
were Japan (16.8 percent), Taiwan (11.4 percent), South Korea (11.1
percent), and the United States (8 percent).
China’s exports rose by 35.4 percent in 2004, totaling US$593.4
billion. Machinery equipment, textiles, clothing, footwear, toys,
and mineral fuels are the major commodities. The primary trading
partners were the United States (21.1 percent), Hong Kong (trading
as a separate economy, mostly for re-export purposes, 17 percent),
Japan (12.4 percent), and South Korea (4.7 percent).
China had an overall favorable trade balance of US$32 billion in
2004 and US$38.7 billion in 2003.
China's External Debt
According to United Nations statistics for 2001, China’s external
and public, or publicly guaranteed, long-term debt had reached US$91.7
billion. China’s debt had grown steadily during the 1990s, peaked
at US$112.8 billion in 1997, and then declined annually thereafter.
By 2004 China had US$618.5 billion in its international reserve
account, 98.6 percent of which was from foreign exchange, not including
the Bank of China’s foreign exchange holdings.
China's Special Economic Zones and foreign investment
As part of its economic reforms and policy of opening to the world,
between 1980 and 1984 China established special economic zones in
Shantou, Shenzhen, and Zhuhai in Guangdong Province and Xiamen in
Fujian Province and designated the entire island province of Hainan
a special economic zone. In 1984 China opened 14 other coastal cities
to overseas investment (listed north to south): Dalian, Qinhuangdao,
Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo,
Wenzhou, Fuzhou, Guangzhou, Zhanjiang, and Beihai. Then, beginning
in 1985, the central government expanded the coastal area by establishing
the following open economic zones (listed north to south): Liaodong
Peninsula, Hebei Province (which surrounds Beijing and Tianjin),
Shandong Peninsula, Yangzi River Delta, Xiamen-Zhangzhou-Quanzhou
Triangle in southern Fujian Province, Zhujiang (Pearl River) Delta,
and Guangxi Zhuang Autonomous Region.
In 1990 the Chinese government decided to open the Pudong New Zone
in Shanghai to overseas investment, as well as more cities in the
Yangzi River Valley.
Since 1980 foreign businesses from more than 170 countries and regions
have invested in Chinese joint-venture enterprises. Most joint-venture
activities are located in coastal cities and increasing numbers
in inland cities as well. Some 300 of the 500 top transnational
companies in the world have invested in China, and foreign investments
have become an important capital source for China’s economic development.
Contracted FDI reached nearly US$82.8 billion in 2002, US$115 billion
in 2003, US$153.48 in 2004, and US$130.33 billion in the first nine
months of 2005.
Banking and Finance in China
The major banks in China are the People’s Bank of China, which is
the central bank of China. Some other major commercial banks in
China are the Bank of China, the China Construction Bank, the Industrial
and Commercial Bank of China, the Agricultural Bank of China and
the Communication Bank of China. At the same time there are other
private commercial banks in China. Commercial banks are supervised
by the China Banking Regulatory Commission, which was established
in 2003. In 2005 the commission announced the launching of a new
postal savings bank to replace the old system and its more than
36,000 outdated outlets nationwide.
When first permitted in the mid-1980s, foreign banks were restricted
to designated cities and could deal only with transactions by foreign
companies in China. After those restrictions were loosened following
China’s accession to the World Trade Organization in 2001, some
foreign banks have been allowed to provide services to local residents
and businesses. In 2004 there were some 70 foreign banks with more
than 150 branches in China.
There are stock exchanges in Beijing, Shanghai (the third largest
in the world), and Shenzhen and futures exchanges in Shanghai, Dalian,
and Zhengzhou. They are regulated by the China Securities Regulatory