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. More than 135 million Chinese, many in remote and resource-poor areas in the western and interior regions, still have consumption levels below a dollar per day, often without access to clean water, arable land, or adequate health and education services.

The rate of poverty reduction has fallen since the mid-1990s, as the country tackles remaining, and often more intractable, sources of poverty, including poverty concentrated in geographically disadvantaged regions and the emergence of increasing urban poverty. China also faces ongoing and emerging challenges related to its continued rapid growth – growing income inequality, economically lagging western and northeast regions, unsustainable resource exploitation, and issues related to growing regional and global economic integration.
Many of these challenges require action on complex systemic issues - like the financial sector and the state-owned enterprises (SOEs) - in order to spur greater efficiency and innovation while maintaining macroeconomic balances.

Addressing disparities in human development between regions and particular counties will also require better targeted and higher quality service delivery.

Further, while China's environmental program has had notable successes, for example, in reducing industrial air and water pollutant emissions and reversing deforestation, two decades of phenomenal growth have taken a serious toll on the rural natural resource base and the urban environment. China's rapidly growing and industrializing economy has increasing implications for the region and the globe, including China's export competitiveness, expanding trade integration, ability to attract foreign direct investment (FDI), and demand for imports of commodities and energy.

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.


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