About China : China in Brief

Economic Achievements and Current Challenges

Since initiating the reforms and open policy, China has achieved tremendous success. Growth of about 9% per annum since the late 1970s has helped to lift several hundred million people out of absolute poverty, with the result that China alone accounted for over 75% of poverty reduction in the developing world over the last 20 years.

Between 1990 and 2000 the number of people living on a dollar per day fell by 170 million, while total population rose by over 125 million. Besides raising incomes, China's market-oriented reforms over the last two decades also dramatically improved the dynamism of both the rural and urban economies and resulted in substantial improvements in human development indicators. Official estimates of the adult illiteracy rate fell by more than half, from 37% in 1978 to less than 5% in 2002, and, indicative of health indices, the infant mortality rate fell from 41 per 1,000 live births in 1978 to 30 in 2002.

Nevertheless, substantial challenges remain.

China in 2009

The World Bank recently reported that the rate of growth in China is expected to decline to 7.5% in 2009 the lowest level since 1990. The global economic slowdown has had a major affect on Chinese exports and the Chinese manufacturing sector. As the credit crisis intensifies and banks around the world freeze, slow the pace of lending, and begin to deal with toxic assets the effect on global demand will intensify. The subsequent economic impact on China will also intensify. Exports represent roughly 40% of China’s GDP. The slowdown of exports and manufacturing output has had an immediate impact on other Chinese industries including real estate, construction, and related heavy industries. This sequence of events has moved the Chinese government to take action.

In November 2008, China announced the largest economic stimulus effort ever undertaken by the Chinese government.  The $586 billion program identified ten (10) key areas of focus including:

• Public housing projects
• Rural infrastructure investment (rural roads, irrigation)
• Transport infrastructure (railways, highways, airports, urban power)
• Health and education
• Environment (sewage projects, pollution treatment, energy efficiency)
• High tech innovation
• Earthquake reconstruction
• Household income (farm subsidies, minimum wage)
• Tax reforms
• Increased bank lending

The result is that the World Bank expects growth in China to hover just below a key economic baseline: 8% GDP growth.  Government economic models suggest that GDP growth below 8% will create corresponding unemployment levels that have the potential for serious social unrest. The massive stimulus program includes low-income housing, rural development, and other programs that are intended to offset the decline in demand and unemployment and incite consumer spending.

In addition, China has a number of additional positive elements at work that may mitigate the impact of a global economic meltdown.  Chinese consumer consumption has held-up reasonably well.  Inflationary pressures from a hyper-growth Chinese economy have receded.  This corresponds with lower raw materials costs as commodity prices around the world including energy and metals have fallen sharply.  While it is unclear whether huge global debt taken on to fund stimulus national programs may drive inflationary pressures in the near future, the experience thus far has been dramatically lower costs.

Lastly, stimulus programs that build rural infrastructure will provide cleaner water, more arable land, and better health and education services for poverty-stricken areas within China.

China's 11th Five Year Plan (2006-2010)

China's 11th Five Year Plan (2006-2010) forms the current basis for the Government's economic and social development efforts. In continuity with the 10th Five Year Plan, the 11th Plan aims to sustain the rapid and steady development of China's "socialist market economy" while in addition achieving the "five balances" (between rural and urban development, interior and coastal development, economic and social development, people and nature, and domestic and international development) and making economic and social development more people-oriented, comprehensive, balanced and sustainable.

The 11th Plan includes two key quantitative targets:

• First, it aims to achieve annual GDP growth of 7.5%, with the goal of doubling 2000 GDP per capita by 2010.
• Second, it aims to reduce energy consumption per unit of GDP by 20%, and the total discharge of major pollutants by 10%, by 2010.
  
  

It also includes a number of strategic priorities and major tasks, including:

1. rebalancing China's pattern of growth;
2. deepening reforms and opening further to the outside world;
3. constructing a "new socialist countryside;"
4. promoting more balanced development among the different regions; and
5. increasing the capacity for independent innovation