1. 1Introduction:In the worlds china is the second largest economy by nominal GDP and by purchasing afterthe United States. It is the worlds fastest-growing major economy, with growth rates averaging10% over the past 30 years. China is also the largest exporter and second largest importer ofgoods in the world. On a per capita income basis, China ranked 87th by nominal GDP in 2012,according to the International Monetary Fund (IMF). The provinces in the coastal regions ofChina tend to be more industrialized, while regions in the hinterland are less developed. AsChinas economic importance has grown, so has attention to the structure and health of theeconomy. Chinas economic system before the late-1990s, with state ownership of certainindustries and central control over planning and the financial system, has enabled thegovernment to mobilize whatever surplus was available and greatly increase the proportion ofthe national economic output devoted to investment. Technological development proceededgradually, and outdated equipment continued to be used as long as possible. Agriculture receiveda smaller share of state investment than industry and remained at a much lower average level oftechnology and productivity. Despite a significant increase in the availability of tractors, trucks,electric pumps, and mechanical threshers, most agricultural activities were still performed bypeople or animals. The comparative advantages of each locality by expanding transportationcapacity. The communications and transportation sectors were growing and improving but stillcould not carry the volume of traffic required by a modern economy because of the scarcity ofinvestment funds and advanced technology. The Production grew substantially between 1800and 1949 and increased fairly rapidly after 1949. Before the 1980s, however, production gainswere largely matched by population growth, so that productive capacity was unable tooutdistance essential consumption needs significantly, particularly in agriculture. Grain output in1979 was about twice as large as in 1952, but so was the populationEconomic policies1950-80When the Communist Party of China came to power in 1949, its leaders fundamental long-rangegoals were to transform China into a modern, powerful, socialist nation. In economic terms theseobjectives meant industrialization, improvement of living standards, narrowing of incomedifferences, and production of modern military equipment. As the years passed, the leadershipcontinued to subscribe to these goals. But the economic policies formulated to achieve themwere dramatically altered on several occasions in response to major changes in the economy,internal politics, and international political and economic developments. An important distinctionemerged between leaders who felt that the socialist goals of income equalization and heightenedpolitical consciousness should take priority over material progress and those who believed thatindustrialization and general economic modernization were prerequisites for the attainment of asuccessful socialist order. Among the prominent leaders who considered politics the primeconsideration were Mao Zedong, Lin Biao, and the members of the Gang of Four. Leaders whomore often stressed practical economic considerations included Liu Shaoqi, Zhou Enlai,and Deng Xiaoping. For the most part, important policy shifts reflected the alternating emphasison political and economic goals and were accompanied by major changes in the positions of
2. 2individuals in the political power structure. An important characteristic in the developmentof economic policies and the underlying economic model was that each new policy period, whilediffering significantly from its predecessor, nonetheless retained most of the existing economicorganization. Thus the form of the economic model and the policies that expressed it at anygiven point in Chinese reflected both the current policy emphasis and a structural foundationbuilt up during the earlier periods.First Five-Year Plan, 1953-57the leadership under Mao Zedong, Zhou Entail, and other revolutionary veterans was prepared toembark on an intensive program of industrial growth and socialization. For this purpose theadministration adopted the Soviet economic model, based on state ownership in the modernsector, large collective units in agriculture, and centralized economic planning. The Sovietapproach to economic development was manifested in the First Five-Year Plan (1953–57). As inthe Soviet economy, the main objective was a high rate of economic, with primary emphasis onindustrial development at the expense of agriculture and particular concentration on heavyindustry and capital-intensive technology. Soviet planners helped their Chinese counterpartsformulate the plan. Large numbers of Soviet engineers, technicians, and scientists assisted indeveloping and installing new heavy industrial facilities, including many entire plants and piecesof equipment purchased from the Soviet Union. Government control over industry was increasedduring this period by applying financial pressures and inducements to convince owners ofprivate, modern firms to sell them to the state or convert them into joint public-privateenterprises under state control. By 1956 approximately 67.5 percent of all modernindustrial enterprises were state owned, and 32.5 percent were under joint public-privateownership. No privately owned firms remained. During the same period, the handicraftindustries were organized into cooperatives, which accounted for 91.7 percent of all handicraftworkers by 1956.Agriculture also underwent extensive organizational changes. To facilitate the mobilization ofagricultural resources, improve the efficiency of farming, and increase government access toagricultural products, the authorities encouraged farmers to organize increasingly large andsocialized collective units. From the loosely structured, tiny mutual aid teams, villages were toadvance first to lower stage, agricultural producers cooperatives, in which families still receivedsome income on the basis of the amount of land they contributed, and eventually to advancedcooperatives, or collectives. In the advanced producers cooperatives, income shares were basedonly on the amount of labor contributed. In addition, each family was allowed to retain a smallprivate plot on which to grow vegetables, fruit, and livestock for its own use.The collectivization process began slowly but accelerated in 1955 and 1956. In 1957 about 93.5percent of all farm households had joined advanced producers cooperatives. In terms ofeconomic growth the First Five-Year Plan was quite successful, in those areas emphasized by theSoviet-style development strategy. A solid foundation was created in heavyindustryincluding iron and steel manufacturing, coalmining, cement production, electricity generation, and machine building were greatly expanded and were put on a firm, modern technologicalfooting. Thousands of industrial and mining enterprises were constructed, including 156 major
3. 3facilities. Industrial production increased at an average annual rate of 19 percent between 1952and 1957, and national income grew at a rate of 9 percent a yearReadjustment and recovery: "Agriculture First," 1961-65The economy and devised a new set of economic policies to replace those of the Great LeapForward. Top priority was given to restoring agricultural output and expanding it at a rate thatwould meet the needs of the growing population. Planning and economic coordination were to berevived- -although in a less centralized form than before the Great Leap Forward—so as torestore order and efficient allocation of resources to the economy. The rate of investment was tobe reduced and investment priorities reversed, with agriculture receiving first consideration, lightindustry second, and heavy industry third. In a further departure from the emphasis on heavyindustrial development that persisted during the Great Leap Forward, the government undertookto mobilize the nations resources to bring about technological advancement in agriculture.Organizational changes in Faced with economic collapse in the early 1960s, the governmentsharply revised the immediate goals of agriculture mainly involved decentralization ofproduction decision making and income distribution within the commune structure. The role ofthe central commune administration was greatly reduced, although it remained the link betweenlocal government and agricultural producers and was important in carrying out activities thatwere too large in scale for the production brigades. Production teams were designated the basicaccounting units and were responsible for making nearly all decisions concerning production andthe distribution of income to their members. Private plots, which had disappeared on somecommunes during the Great Leap Forward, were officially restored to farm families. Economicsupport for agriculture took several forms. Agricultural taxes were reduced, and the prices paidfor agricultural products were raised relative to the prices of industrial supplies for agriculture.There were substantial increases in supplies of chemical fertilizer and various kinds ofagricultural machinery, notably small electric pumps for irrigation. Most of the modern supplieswere concentrated in areas that were known to produce "high and stable yields" in order toensure the best possible results. In industry, a few key enterprises were returned to central statecontrol, but control over most enterprises remained in the hands of provincial-level and localgovernments. This decentralization had taken place in 1957 and 1958 and was reaffirmed andstrengthened in the 1961-65 period. Planning rather than politics once again guided productiondecisions, and material rewards rather than revolutionary enthusiasm became the leadingincentive for production. Major imports of advanced foreign machinery, which had come to anabrupt halt with the withdrawal of Soviet assistance starting in 1960, were initiated with Japanand West European countries.
4. 4Reform of the economic system, beginning in 1978At the milestone Third Plenum of the National Party Congresss 11th Central Committee which opened onDecember 22, 1978, the party leaders decided to undertake a program of gradual but fundamental reformof the economic system. They concluded that the Maoist version of the centrally planned economy hadfailed to produce efficient economic growth and had caused China to fall far behind not only theindustrialized nations of the West but also the new industrial powers of Asia: Japan, South Korea,Singapore, Taiwan, and Hong Kong. In the late 1970s, while Japan and Hong Kong rivaled Europeancountries in modern technology, Chinas citizens had to make do with barely sufficient food supplies,rationed clothing, inadequate housing, and a service sector that was inadequate and inefficient. All ofthese shortcomings embarrassed China internationally. The purpose of the reform program was not toabandon communism but to make it work better by substantially increasing the role of marketmechanisms in the system and by reducing not eliminating government planning and direct control. Theprocess of reform was incremental. New measures were first introduced experimentally in a few localitiesand then were popularized and disseminated nationally if they proved successful. By 1987 the programhad achieved remarkable results in increasing supplies of food and other consumer goods and had createda new climate of dynamism and opportunity in the economy. At the same time, however, the reforms alsohad created new problems and tensions, leading to intense questioning and political struggles over theprograms future.Period of readjustment, 1979-81:The first few years of the reform program were designated the "period of readjustment," duringwhich key imbalances in the economy were to be corrected and a foundation was to be laid for awell-planned modernization drive. The schedule of Hue Gauteng’s ten-year plan was discarded,although many of its elements were retained. The major goals of the readjustment process wereto expand exports rapidly; overcome key deficiencies in transportation, communications, coal,iron, steel, building materials, and electric power; and redress the imbalance between light andheavy industry by increasing the growth rate of light industry and reducing investment in heavyindustry. Agricultural production was stimulated in 1979 by an increase of over 22 percent in theprocurement prices paid for farm products. The central policies of the reform program wereintroduced experimentally during the readjustment period. The most successful reform policy,the contract responsibility system of production in agriculture, was suggested by the governmentin 1979 as a way for poor rural units in mountainous or arid areas to increase their incomes. Theresponsibility system allowed individual farm families to work a piece of land for profit in returnfor delivering a set amount of produce to the collective at a given price. This arrangementcreated strong incentives for farmers to reduce production costs and increase productivity. Soonafter its introduction the responsibility system was adopted by numerous farm units in all sorts ofareas.Reform and opening, beginning in 1982]The period of readjustment produced promising results, increasing incomes substantially; raisingthe availability of food, housing, and other consumer goods; and generating strong rates of
5. 5growth in all sectors except heavy industry, which was intentionally restrained. On the strengthof these initial successes, the reform program was broadened, and the leadership under Xiaopingfrequently remarked that Chinas basic policy was "reform and opening," that is, reform of theeconomic system and opening to foreign trade. In agriculture the contract responsibility systemwas adopted as the organizational norm for the entire country, and the commune structure waslargely dismantled. By the end of 1984, approximately 98 percent of all farm households wereunder the responsibility system, and all but a handful of communes had been dissolved. Thecommunes administrative responsibilities were turned over to township and town governments,and their economic roles were assigned to townships and villages. The role of free markets forfarm produce was further expanded and, with increased marketing possibilities and risingproductivity, farm incomes rose rapidly. In industry the complexity and interrelation ofproduction activities prevented a single, simple policy from bringing about the kind of dramaticimprovement that the responsibility system achieved in agriculture. Nonetheless, a cluster ofpolicies based on greater flexibility, autonomy, and market involvement significantly improvedthe opportunities available to most enterprises, generated high rates of growth, and increasedefficiency. Enterprise managers gradually gained greater control over their units, including theright to hire and fire, although the process required endless struggles with bureaucrats and partycadres. The practice of remitting taxes on profits and retaining the balance became universal by1985, increasing the incentive for enterprises to maximize profits and substantially adding totheir autonomy. A change of potentially equal importance was a shift in the source of investmentfunds from government budget allocations, which carried no interest and did not have to berepaid, to interest-bearing bank loans. As of 1987 the interest rate charged on such loans was stilltoo low to serve as a check on unproductive investments, but the mechanism was in place.China GDP:In 1985, the State Council of China approved to establish a SNA (System of NationalAccounting), use the GDP to measure the national economy. China started the study oftheoretical foundation, guiding, and accounting model etc., for establishing a new system ofnational economic accounting. In 1986, as the first citizen of the Peoples Republic of China toreceive a Ph.D. in economics from an overseas country, Dr. Fengbo Zhang headed ChineseMacroeconomic Research - the key research project of the seventh Five-Year Plan of China, aswell as completing and publishing the China GDP data by Chinas own research. The summaryof the above has been included in the book "Chinese Macroeconomic Structure and Policy" (June1988) edited by Fengbo Zhang, and collectively authored by the Research Center of the StateCouncil of China. This is the first GDP data which was published by China. The research utilizedthe World Bank’s method as a reference, and made the numerous appropriate adjustments basedon China’s national condition. The GDP also has been converted to US based data by utilizingthe moving average exchange rate. The research systematically completed China’s GDPand GDP per capita from 1952 to 1986 and analyzed growth rate, the change and contributionrates of each component. The research also included international comparisons. Additionally, theresearch compared MPS (Material Product System) and SNA (System of National Accounting),looking at the results from the two systems from analyzing Chinese economy. This achievementcreated the foundation for Chinas GDP research. The State Council of China issued ―The notice
6. 6regarding implementation of System of National Accounting‖ in August 1992, theWestern SNA system officially is introduced to China, replaced Soviets MPS system, Westerneconomic indicator GDP became China’s most important economic indicator. Based on Dr.Bengbu Zhangs research, in 1997, the National Bureau of Statistics of China, in collaborationwith Hitotsubashi University of Japan, estimated China’s GDP Data from 1952 up to 1995 basedon the SNA principal.Industrial history in China:In 1985, industry employed about 17 percent of the labor force but produced more than 46percent of gross national product (GNP). It was the fastest growing sector with an average annualgrowth of 11 percent from 1952 to 1985. There was a wide range of technological levels. Therewere many small handicraft units and many enterprises using machinery installed or designed inthe 1950s and 1960s. There was a significant number of big, up-to-date plants, including textilemills, steel mills, chemical fertilizer plants, and petrochemical facilities but there were also someburgeoning light producing consumer goods. China produced most kinds of products madeby industrialized nations but limited quantities of high-technology items. Technologytransfer was conducted by importing whole plants, equipment, and designs as an importantmeans of progress. Major industrial centers were in Liaoning Province, Beijing-Tianjin-Tangshan area, Shanghai, and Wuhan. Mineral resources included huge reserves of iron ore andthere were adequate to abundant supplies of nearly all other industrial minerals. Outdated miningand ore processing technologies were gradually being replaced with modern processes,techniques and equipment.GDP by industry in china:Industries by GDP value added 2012. CNY was converted using the 6.19 CNY/USD exchangerates as of April 12, 2013.IndustryGDP value added $ billions2012% of totalGDPIndustry and manufacturing 3,229 38.5%Other 1,427 17.0%Farming, forestry, animal husbandry andfishery846 10.1%Wholesale and retail trade 812 9.7%
7. 7Construction 573 6.8%Real estate 469 5.6%Financial intermediation 462 5.5%Transport, storage and postal 403 4.8%Hotel and catering services 169 2.0%Total 8,389 100%History of agriculture in China:In 1985, the agricultural sector employed about 63 percent of the labor force and its proportionof GNP was about 33 percent. There was low worker productivity because of scant supplies ofagricultural and other modern inputs. Most agricultural processes were still performed by hand.There was very small arable land area (just above 10 percent of total area, as compared with 22percent in United States) in relation to the size of the country and population. There wasintensive use of land; all fields produced at least one crop a year, and wherever conditionspermitted, two or even three crops were grown annually, especially in the south. Grain was themost the important product, including rice, wheat, corn, sorghum, barley, and millet. Otherimportant crops included cotton, jute, oilseeds, sugarcane, and sugar beets. Eggs were also amajor product. Pork production increased steadily, and poultry and pigs were raised on familyplots. Other livestock were relatively limited in numbers, except for sheep and goats, whichgrazed in large herds on grasslands of the Inner Mongolia Autonomous Region and thenorthwest. There was substantial marine and freshwater fishery. Timber resources were mainlylocated in the northeast and southwest, and much of the country was deforested centuries ago. Awide variety of fruits and vegetables were grown.Energy resources:China was self-sufficient in nearly all energy forms. Coal and petroleum were exported sinceearly the 1970s. Its coal reserves were among the worlds largest and mining technology wasinadequately developed but steadily improved in the late 1980s. Petroleum reserves were verylarge at the time but of varying quality and in disparate locations. Suspected oil deposits in thenorthwest and offshore tracts were believed to be among the worlds largest. Exploration and
8. 8extraction was limited by scarcity of equipment and trained personnel. Twenty-seven contractsfor joint offshore exploration and production by Japanese and Western oil companies weresigned by 1982, but by the late 1980s only a handful of wells were producing oil. Substantial gasreserves were in the north, northwest, and offshore. The hydroelectric potential of the countrywas the greatest in the world and sixth largest in capacity, and very large hydroelectric projectswere under construction, with others were in the planning stage. Thermal power, mostly coalfired, produced approximately 68 percent of generating capacity in 1985, and was increased to72 percent by 1990. Emphasis on thermal power in the late 1980s was seen by policy makers as aquick, short-term solution to energy needs and hydroelectric and nuclear power was seen as along-term solution. Petroleum production growth continued in order to meet the needs ofnationwide mechanization and provided important foreign exchange but domestic use wasrestricted as much as possible until the end of the decade.Foreign trade:Foreign trade was small by international standards but was growing rapidly in size andimportance, as it represented 20 percent of GNP in 1985. Trade was controlled by the Ministry ofForeign Economic Relations and Trade and subordinate units and by the Bank of China, theforeign exchange arm of the central bank. Substantial decentralization and increased flexibility inforeign trade operations occurred since the late 1970s. Textiles were leading the export category.Other important exports included petroleum and foodstuffs. Leading importsincluded machinery, transport equipment, manufactured goods, and chemicals. Japan was thedominant trading partner, and accounted for 28.9 percent of imports and 15.2 percent of exportsin 1986. Hong Kong was a leading market for exports (31.6 percent) but a source of only 13percent of imports. In 1979 the United States became Chinas second largest source of importsand in 1986 was the third largest overall trade partner. Western Europe, particularly the FederalRepublic of Germany, was also a major trading partner. Tourism was encouraged and growing.
9. 9Principles of Chinas Foreign PolicyChina portrays itself as a Third World country that pursues "an independent foreign policy ofpeace." Third World means that China is a poor, developing country and not part of any powerbloc such as that around the United States or the socialist bloc formerly associated with theSoviet Union. "Independence" means that China does not align itself with any other majorpower. Chinese spokesmen say that their country seeks peace so that it can concentrate ondevelopment.China says its decisions on foreign policy questions derive from the Five Principles of PeacefulCoexistence: mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each others internal affairs, equality and mutual benefit, and peacefulcoexistence. The Chinese leadership originally enumerated these principles in 1954 when China,with a communist government, was trying to reach out to the non-communist countries of Asia.Economic performance:Impact on world growth:China is widely seen as an engine of world and regional growth. Surges in Chinese demandaccount for 50, 44 and 66 percent of export growth of Hong Kong, Japan and Taiwanrespectively, and Chinas trade deficit with the rest of East Asia helped to revive the economiesof Japan and Southeast Asia.Asian leaders view Chinas economic growth as an "engine ofgrowth for all Asia"Trade and foreign investment:. Scholars find that China has attained a degree of openness that is unprecedented among largeand populous nations", with competition from foreign goods in almost every sector of theeconomy. Foreign investment helped to greatly increase quality, knowledge and standards,especially in heavy industry. Chinas experience supports the assertion that globalization greatlyincreases wealth for poor countries. Throughout the reform period, the government reducedtariffs and other trade barriers, with the overall tariff rate falling from 56% to 15%. By 2001, lessthan 40% of imports were subject to tariffs and only 9 percent of import was subject to licensingand import quotas. Even during the early reform era, protectionist policies were oftencircumvented by smuggling. When China joined the WTO, it agreed to considerably harsherconditions than other developing countries. Trade has increased from under 10% of GDP to 64%of GDP over the same period. China is considered the most open large country; by 2005, China’s
10. 10average statutory tariff on industrial products was 8.9 percent. For Argentina, Brazil, India, andIndonesia, the respective percentage figures are 30.9, 27.0, 32.4, and 36.9 percent.External Trade:Growth (in nominal US dollar terms) of Chinas foreign trade during the reform era.Two-way trade Exports Imports1981–85 +12.8% +8.6% +16.1%1986–90 +10.6% +17.8% +4.8%1991–95 +19.5% +19.1% +19.9%1996–2000 +11.0% +10.9% +11.3%2000–05 +24.6% +25.0% +24.0%2006-10 +15.9% +15.7% +16.1%2011 +22.5% +20.3% +24.9%Services:In the 1990s, the financial sector was liberalized. After China joined the World TradeOrganization (WTO), the service sector was considerably liberalized and foreign investment wasallowed. Restrictions on retail, wholesale and distribution were ended. Banking, financialservices, insurance and telecommunications were also opened up to foreign investment. Chinasbanking sector is dominated by four large state-owned banks, which are largely inefficient andmonopolistic. Chinas largest bank, ICBC, is the largest bank in the world. The financial sector iswidely seen as a drag on the economy due to the inefficient state management.Non-
11. 11performing loans, mostly made to local governments and unprofitable state-owned enterprisesfor political purposes,are a big drain on the financial system and economy, reaching over22% of GDP by 2000, with a drop to 6.3% by 2006 due to government recapitalization of thesebanks. In 2006, the total amount of non-performing loans was estimated at 160 billion USD.[Government financesIn the pre-reform era, government was funded by profits from state-owned enterprises, much likethe Soviet Union. As the state sector fell in importance and profitability, government revenues,especially that of the central government in Beijing, fell substantially and the government reliedon a confused system of inventory taxes. Government revenues fell from 35% of GDP to 11% ofGDP in the mid-1990s, excluding revenue from state-owned enterprises, with the centralgovernments budget at just 3% of GDP. The tax system was reformed in 1994 when inventorytaxes were unified into a single VAT of 17% on all manufacturing, repair, and assemblyactivities and an excise tax on 11 items, with the VAT becoming the main income source,accounting for half of government revenue. The 1994 reform also increased the centralgovernments share of revenues, increasing it to 9 percent of GDP.Special Economic Zone After 1980Special economic zones located in mainland China. The government of the Peoples Republic ofChina gives SEZs special (more free market-oriented) economic policies and flexiblegovernmental measures. This allows SEZs to utilize an economic management system that ismore conducive to doing business than in the rest of mainland China.The China Price:The "China Price" refers to the pricing pressure placed on developing economies by Westernbrands and companies seeking the lowest possible product unit price. "Dreaded by competitors,the China price became the lowest price possible the hallmark of China’s incredibly cheap,ubiquitous manufacturers." (2007) As Chinas economy, working conditions and therefore laborcosts improved, Bangladesh special export zone could offer even lower prices than China,making it the "new China." (McKinsey 2011) In his chapter entitled Li & Fung, Ltd.: An agentof global production (2001), Cheng used Li & Fong Ltd as a case study in the internationalproduction fragmentation trade theory through which producers in different countries areallocated a specialized slice or segment of the value chain of the global production Allocationsare determined based on "technical feasibility" and the ability to keep the lowest final pricepossible for each product, this case "the China Price". In 1995 Li & Fong, following itsacquisition of an established British trading company, Inchcape Buying Services, expanded itscustomer network in Europe and its producer network in South Asia, including Bangladesh,India, Pakistan, and Sri Lanka.
12. 12Ready-Made Garment (RMG):China is the worlds second-largest exporter of Western brands ready-made garments (2013) andBangladesh is the second. McKinsey & Company predicts that Bangladesh will become thelargest ready-made garments (RMG) manufacturer by 2016 as China extends production fordomestic consumption.Hainan Special Economic Zone:*Hainan became a special economic zone in 1988 after the other 4 zones had already establishedthemselves as being successful and scalable.*For current foreign investment regulations for the Hainan zone please see Hainan SpecialEconomic Zone, Foreign Investment Regulations.Economic policies of SEZs:1. Special tax incentives for foreign investments in the SEZs.2. Greater independence on international trade activities.Economic characteristics are represented as "4 principles":1. Construction primarily relies on attracting and utilizing foreign capital2. Primary economic forms are Sino-foreign joint ventures and partnerships as well as whollyforeign-owned enterprises3. Products are primarily export-oriented4. Economic activities are primarily driven by market forcesReform and opening, beginning in 1982:The availability of food, housing, and other consumer goods; and generating strong rates ofgrowth in all sectors except heavy industry, which was intentionally restrained. On the strengthof these initial successes, the reform program was broadened, and the leadership under Xiaopingfrequently remarked that Chinas basic policy was "reform and opening," that is, reform of theeconomic system and opening to foreign trade.In agriculture the contract responsibility system was adopted as the organizational norm for theentire country, and the commune structure was largely dismantled. By the end of 1984,approximately 98 the period of readjustment produced promising results, increasing incomes
13. 13substantially; raising percent of all farm households were under the responsibility system, and allbut a handful of communes had been dissolved. The communes administrative responsibilitieswere turned over to township and town governments, and their economic roles were assigned totownships and villages. The role of free markets for farm produce was further expanded and,with increased marketing possibilities and rising productivity, farm incomes rose rapidly.1990–2000:In the 1990s, the Chinese economy continued to grow at a rapid pace, at about 9.5%,accompanied by a rapidly increasing inflation, which reached over 20 percent in 1994. The Asianfinancial crisis affected China at the margin, mainly through decreased foreign directinvestment and a sharp drop in the growth of its exports. However, China had huge reserves, acurrency that was not freely convertible, and capital inflows that consisted overwhelmingly oflong-term investment. For these reasons it remained largely insulated from the regional crisis andits commitment not to devalue had been a major stabilizing factor for the region. However,China faced slowing growth and rising unemployment based on internal problems, including afinancial system burdened by huge amounts of bad loans, and massive layoffs stemming fromaggressive efforts to reform state (SOEs). Despite Chinas impressive economicdevelopment during the past two decades, reforming the state sector and modernizing the systemremained major hurdles. Over half of Chinas state-owned enterprises were inefficient andreporting losses. During the 15th National Communist Party Congress that met in September1997, President Jiang Zemin announced plans to sell, merge, or close the vast majority of SOEsin his call for increased "non-public ownership" (feigongyou or privatization.) The 9th NationalPeoples Congress endorsed the plans at its March 1998 session. In 2000, China claimed successin its three-year effort to make the majority of large state owned enterprises (SOEs) profitable.Economic planning:Until the 1980s the economy was directed and coordinated by means of economic plans thatwere formulated at all levels of administration. The reform program significantly reduced therole of central planning by encouraging off-plan production by state-owned units and bypromoting the growth of collective and individual enterprises that did not fall under the planningsystem. The government also endeavored to replace direct plan control with indirect guidance ofthe economy through economic levers, such as taxes and investment support. Despite thesechanges, overall direction of the economy was still carried out by the central plan, as wasallocation of key goods, such as steel and energy. When Chinas planning apparatus was firstestablished in the early 1950s, it was patterned after the highly centralized Soviet system. Thatsystem basically depended on a central planning bureaucracy that calculated and balancedquantities of major goods demanded and supplied. This approach was substantially modifiedduring the Great Leap Forward (1958–60), when economic management was extensivelydecentralized. During the 1960s and 1970s, the degree of centralization in the planning systemfluctuated with the political currents, waxing in times of pragmatic growth and waning under theinfluence of the Cultural Revolution and the Gang of Four.At the national level, planning began in the highest bodies of the central government. Nationaleconomic goals and priorities were determined by the partys Central Committee, the StateCouncil, and the National Peoples Congress. These decisions were then communicated to the
14. 14ministries, commissions, and other agencies under the State Council to be put into effect throughnational economic plans. he State Planning Commission worked with the State EconomicCommission, State Statistical Bureau, the former State Capital Construction Commission,Peoples Bank of China, the economic ministries, and other organs subordinate to the StateCouncil to formulate national plans of varying duration and import.2000–2010:Following the Chinese Communist Partys Third Plenum, held in October 2003, Chineselegislators unveiled several proposed amendments to the state constitution. One of the mostsignificant was a proposal to provide protection for private property rights. Legislators alsoindicated there would be a new emphasis on certain aspects of overall government economicpolicy, including efforts to reduce unemployment (now in the 8–10% range in urban areas), torebalance income distribution between urban and rural regions, and to maintain economic growthwhile protecting the environment and improving social equity. The National Peoples Congressapproved the amendments when it met in March 2004. The Fifth Plenum in October 2005approved the 11th Five-Year Economic Program (2006–2010) aimed at building a "socialistharmonious society" through more balanced wealth distribution andimproved education, medical care, and social security. On March 2006, the National PeoplesCongress approved the11th Five-Year Program. The plan called for a relatively conservative45% increase in GDP and a 20% reduction in energy intensity (energy consumption per unit ofGDP) by 2010. Chinas economy grew at an average rate of 10% per year during the period1990–2004, the highest growth rate in the world. Chinas GDP grew 10.0% in 2003, 10.1%, in2004, and even faster 10.4% in 2005 despite attempts by the government to cool the economy.Chinas total trade in 2010 surpassed $2.97 trillion, making China the worlds second-largesttrading nation after the U.S. Such high growth is necessary if China is to generate the 15 millionjobs needed annually roughly the size of Ecuador or Cambodia to employ new entrants into thenational job market.On January 15, 2009, as confirmed by the World Bank the NBS published the revised figures for2007 fiscal year in which growth happened at 13 percent instead of 11.9 percent. Chinas grossdomestic product stood at US$3.38 trillion while Germanys GDP was USD $3.32 trillion for2007. This made China the worlds third largest economy by gross domestic product. Based onthese figures, in 2007 China recorded its fastest growth since 1994 when the GDP grew by13.1 percent. China launched its Economic Stimulus Plan to specifically deal with the Globalfinancial crisis of 2008–2009. It has primarily focused on increasing affordable housing, easingcredit restrictions for mortgage and SMEs, lower taxes such as those on real estate sales andcommodities, pumping more public investment into infrastructure development, such as the railnetwork, roads and ports. By the end of 2009 it appeared that the Chinese economy was showingsigns of recovery. At the 2009 Economic Work Conference in December managing inflationexpectations was added to the list of economic objectives, suggesting a strong economic upturnand a desire to take steps to manage it.
15. 15Bibliographyhttp://en.wikipedia.org/wiki/Regulationhttp://en.wikipedia.org/wiki/Economy_of_China#1990.E2.80.932000http://en.wikipedia.org/wiki/Economic_history_of_China_(1949%E2%80%93present)http://en.wikipedia.org/wiki/Economic_history_of_China_%281949%E2%80%93present%29#Reform_of_the_economic_system.2C_beginning_in_1978First of all our sincere gratefulness is to the Almighty Allah most benign benevolent for keeping uscompetent to conduct the report within scheduled time.We would like to express our heartfelt thanks to our Course Instructor Abdullah Al Yousuf Khan who hashelped us a lot, though he had scarcity of time & for providing the valuable guidelines related to theframework of the total report.We are very much grateful to the following persons for their cordial help in preparing our Report on“Renata Company”.