Chinas Economics

For various reasons, China has always been an important country in the world.

With its increasing large population, it was determined by other countries that
is has a lot of economic potentials. In just one decade and a half, China has
transformed itself from a giant that use to live in poverty into a wealthy
powerhouse to the world economy. With one-fifth of the world・s population,

China is now producing 4% of world merchandise and a proportion of global
production. It has also one of the world・s oldest and most influential
civilizations. China has established three approaches to the world economy and
they are establishing an alternative socialist system (1950s); isolating itself
from the system (the 1960s to mid 1970s); and participating in the system again
from the 1970s. China・s economic system was quite similar to Soviet Union・s
because it is central planning system. However, after the 1950s, this central
planning is broken into regional planning by different provinces in China. In
another words, China has changed from a centrally based country in a regionally
based country, in which different provinces produces different goods and servies.

This change has encouraged the development of small enterprises, which are the
main driving forces of Chinese growth. In 1978, China has liberalised its
economy and start participating in the world economy. With its new market
reforms in every sector, China・s door has opened its economic door to foreign
investors and freer trade in special economical zones. Beginning in 1994,

China\'s economic structural reforms have begun new breakthroughs. Major changes
have been made to sectors like personal enterprises, taxation, finance, foreign
investment and foreign trade. At the same time, the Chinese government is
speeding up its establishment of a socialist market economy system. Hopefully,
this socialist market economic system can be in place by 2010. (Roy 1-5) Major

Structural Reforms Reforms already launched: 1. Reform of the state-owned
enterprises has been furthered. h Some adjustment and reorganisation have
been carried out in industries like textile, coal, oil and weapon-makings. 2.

The social security system has made huge changes. h People established
re-employment centres that can help laid off workers to find jobs in other
economic sectors. Almost 99% of the laid-off staff and workers who were fired
from the state-owned enterprises are using this re-employment service centre.

Reforms to be launched: 1. Financial reforms will be undertaken h To achieve
the perfect management system, sectors like banks, securities, insurance and
trust businesses are becoming independent from each other for clearer financial
supervisions. h Government is speeding up the reform of state-owned
commercial banks, in order for the banks to operate independently. h In case
when companies have bad credit and unpaid debts, banks are reinforcing strong
policies to ensure the quality of bank loans. h To safeguard financial assets
and eliminate corruption of people who have political positions. 2. To increase
export to maximize the economy h People are expanding export productions.
h People are improving the development of international tourism to increase
non-trade exchange earnings. (Online) Economic Activity GDP/GNP China must have
annual GDP growth greater than 5% to maintain social stability and political
survival. Economic freedom has increased China・s prosperity. With its Real

GDP of US$960.91 billion, it seems that is has increased its output by 7.8% from

1997. Within the GDP, primary industry increased by 3.5%, secondary industry up
by 9.2%, and tertiary industry enlarged by 7.6%. The social labour productivity
rose by 6.9% over 1997. In the first half of 1999, GDP grew at the rate of 7.6%.
(Morrison) Beginning in 1979, China launched several economic reforms. To
improve the standard of living of farmers, government is now allowing them to
sell a portion of their crops on the free market. The government also
established four special economic zones to attract foreign investment and boost
exports and imports. The decentralisation of economic control of various
enterprises was given to provincial and local governments. This allowed
enterprises to operate more freely and competitively, rather be controlled by
the central government. Some coastal regions and cities were designated as open
cities and development zones, which allowed people to experience free market
reforms and to attract foreign investment. Therefore, the state price controls
on good and services were gradually eliminated. Starting from the introduction
of economic reforms, China\'s economy has grown proportionately faster than
during the pre-reform period (see Table 1). This Chinese statistic shows the
growth of real GDP from 1979 to 1998, which is making China one the world\'s
fastest growing economies. According to the World Bank, China\'s rapid
development has driven 200 million people out of poverty. Table 1. China\'s

Average Annual