The Economy
Foreign trade was focused upon as a major vehicle of
growth for China, which led to the creation of
Special Economic Zones (SEZs) first in Shenzhen
(near Hong Kong) and then in other Chinese cities.
Inefficient state-owned enterprises (SOEs) were
restructured by introducing western-style management
system and the unprofitable ones were closed,
resulting in massive job losses. By the latter part
of 2010, China was reversing some of its economic
liberalization initiative whereby state-owned
companies were buying up independent businesses in
the steel, auto and energy industries.
Since economic liberalization began in 1978, the
PRC's investment- and export-led economy has grown
90 times bigger and is the fastest growing major
economy in the world. According to IMF that PRC's
annual average GDP growth for the period of
2001–2010 was 10.5 percent and predicted to grow
with 9.5 percent for the period of 2011–2015. From
2007 to 2011 China global economic growth is same as
G7 growth combined together. As Global Growth
Generators countries announced by Citigroup at
February 2011, China has high 3G Index. It now has
the world's second largest nominal GDP at 39.8
trillion yuan (US$6.05 trillion), although its GDP
per capita of US$4,300 is still low and puts the PRC
behind roughly a hundred countries. The primary,
secondary, and tertiary industries contributed
10.6%, 46.8%, and 42.6% respectively to the total
economy in 2009. If PPP is taken into account, the
PRC's economy is second only to the US at $10.085
trillion corresponding to $7,518 per capita.
The inaugural Global Wealth Report by Credit Suisse
Research Institute collects data across more than
200 countries in mid-2010 stated China is expected
to overtake Japan as the second wealthiest country
in the world by 2015 ($35 trillion) on the back of
rapid economic growth and strong domestic
consumption. Ten years ago, China was the seventh
largest country in global wealth and China currently
holds $16.5 trillion, 35 percent ahead of the
wealthiest European country, France.
The PRC is the fourth most visited country in the
world with 50.9 million inbound international
visitors in 2009. It is a member of the WTO and is
the world's second largest trading power behind the
US with a total international trade of US$2.21
trillion – US$1.20 trillion in exports (#1) and
US$1.01 trillion in imports (#2). Its foreign
exchange reserves have reached US$2.85 trillion at
end of 2010 and it means increased by 18.7 percent
from last year, making it by far the world's largest
for the last few years. The PRC owns an estimated
$1.6 trillion of US securities. The PRC, holding
US$1.16 trillion in Treasury bonds, is the largest
foreign holder of US public debt. It is the world's
third largest recipient of inward FDI by attracting
US$92.4 billion in 2008 alone, while the country
itself increasingly invests abroad with a total
outward FDI of US$52.2 billion in 2008 alone
becoming the world's sixth largest outward
investor. FDI inward in 2010 was $106 billion rose
16 percent from 2009.
China is the world's second largest economy
(IMF, 2010)
The PRC's success has been primarily due to
manufacturing as a low-cost producer. This is
attributed to a combination of cheap labor, good
infrastructure, relatively high productivity,
favorable government policy, and some say, an
undervalued exchange rate. The latter has been
sometimes blamed for the PRC's bulging trade surplus
(US$262.7 billion in 2007) and has become a major
source of dispute between the PRC and its major
trading partners – the US, EU, and Japan – despite
the yuan having been de-pegged and risen in value by
20% against the US$ since 2005.
The state still dominates in strategic "pillar"
industries (such as energy and heavy industries),
but private enterprise (30 million private
businesses) now accounts for anywhere between 33%
(People's Daily 2005) to 70% (BusinessWeek, 2005) of
GDP in 2005, while the OECD estimate is over 50% of
China's national output, up from 1% in 1978. Its
stock market in Shanghai (SSE) is raising record
amounts of IPOs and its benchmark Shanghai Composite
index has doubled since 2005. SSE's market
capitalization reached US$3 trillion in 2007 and is
the world's fifth largest exchange.
China now ranks 29th in the Global Competitiveness
Index and ranked 135th among the 179 countries
measured in the Index of Economic Freedom. 46
Chinese companies made the list in the 2010 Fortune
Global 500 (Beijing alone with 30). Measured using
market capitalization, four of the world's top ten
most valuable companies are Chinese. Some of these
include first-ranked Petro China (world's most
valuable oil company), third-ranked Industrial and
Commercial Bank of China (world's most valuable
bank), fifth-ranked China Mobile (world's most
valuable telecommunications company) and
seventh-ranked China Construction Bank.
Although a middle income country by the world's
standard, the PRC's rapid growth managed to pull
hundreds of millions of its people out of poverty
since 1978. Today, about 10% of the Chinese
population (down from 64% in 1978) live below the
poverty line of US$1 per day (PPP) while life
expectancy has dramatically increased to 73 years.
More than 93% of the population is literate,
compared to 20% in 1950. Urban unemployment declined
to 4 percent in China by the end of 2007 (true
overall unemployment might be higher at around 10%).
Its middle class population (defined as those with
annual income of at least US$17,000) has now reached
more than 100 million, while the number of
super-rich individuals worth more than 10 million
yuan (US$1.5 million) is estimated to be 825,000
according to Hurun Report. China's retail market is
worth RMB 8.9 trillion (US$1.302 trillion) in 2007
and growing at 16.8% annually. It is also now the
world's second biggest consumer of luxury goods
behind Japan with 27.5% of the global share.
The economy is also highly energy-intensive and
inefficient – it uses 20%–100% more energy than OECD
countries for many industrial processes. It has now
become the world's largest energy consumer but
relies on coal to supply about 70% of its energy
needs. Coupled with a lax environmental regulation,
this has led to a massive water and air pollution
(China has 20 of the world's 30 most polluted
cities). Consequently, the government has promised
to use more renewable energy with a target of 10% of
total energy use by 2010 and 30% by 2050. In 2010,
China became the largest wind energy provider
worldwide, with the installed wind power capacity
reaching 41.8 GW. On January 1, 2011, Russia said
it had begun scheduled oil shipments to China, with
the plan to increase the rate up to 300,000 barrels
per day in 2011.
