A Brief Introduction of China’s Economic Development
China, economically extremely backward before 1949, has become one of the world’s major economic powers with the greatest potential, and the overall living standard has reached that of a fairly well-off society. In the 22 years following reform and opening-up in 1979 in particular, China’s economy developed at an unprecedented rate, and that momentum has been held steady into the 21st century. In 2004, the government further strengthened and improved its macro control, and the economy entered its best ever development period of recent years. The gross domestic product (GDP) for 2004 amounted to 13,687.59 billion yuan, 9.5% higher than the previous year.
China adopts the “five-year-plan” strategy for economic development. The 9th Five-Year Plan (1996―2000) was outstandingly successful, and the 10th Five-Year Plan (2001―2005) mapped out the first plan for the new century, setting these main targets:
—Sustaining fairly rapid growth, strategic restructuring, improving the quality and benefits of economic growth so as to lay firm foundations for doubling the 2000 GDP by 2010; substantial perfection of the socialist market economy and putting state-owned enterprises on a modern enterprise footing, thus allowing greater participation in international cooperation and competition. —GDP to reach some 12,500 billion yuan, and per capita GDP 9,400 yuan by 2005 (at 2000 prices assuming annual economic growth of around 7%). A marked improvement in quality of life, with 5% annual growth in the disposable income of urban residents and in the net income of rural residents; keeping the registered urban unemployment rate stable at around 5%; maintaining generally stable prices and basically balancing international revenue and expenditure.
—Optimizing and upgrading the industrial structure to sharpen China's competitive edge. By 2005, the added value of the primary, secondary and tertiary industries will account for 13%, 51% and 36%, respectively, of GDP; employing 44%, 23% and 33%, respectively, of the labor force. Further improvement to infrastructure; increased urbanization and bringing the widening development disparity between regions under effective control.
Most of these targets have already been achieved ahead of schedule. At present, the government is drafting the 11th Five-Year Plan (2006―2010).
2) Economic System
Economic restructure is one of the most crucial elements of China's reform and opening-up policy. For the first 30 years of the PRC, the government practiced a planned economy system, whereby industrial production, agricultural production, and the stocking and selling of goods in commercial departments were all controlled by state plan. The variety, quantity and prices in every sphere of the economy were fixed by state planners. While this contributed to the planned, focused and steady development of China’s economy, it also sapped its vitality and limited its growth. Economic reforms began with the rural areas in 1978, and were extended to the cities in 1984. In 1992, after some ten years of reform in the clear direction of the establishment of a socialist market economy, the government set out the main principles of economic restructuring: encouraging the development of diversified economic elements whilst retaining the dominance of the public sector; creation of a modern enterprise system to meet the requirements of the market economy; a unified and open market system across China, linking domestic and international markets, and promoting the optimization of resources; transformation of government economic management in order to establish a complete macro-control system; encouraging certain lead groups and areas to become rich first, enabling them to help others towards prosperity, too; the formulation of a China-appropriate social security system for both urban and rural residents, so as to promote overall economic development and ensure social stability. In 1997, the government stressed the importance of the non-public sector to China’s national economy, in which profitability is encouraged for such essential factors of production as capital and technology, so as to further progress economic reforms.
A socialist market economic system has now taken shape, and the basic role played by the market has been improved in the sphere of resource allocation. At the same time, the macro-regulation system continues to be perfected. The pattern has basically been formed in which the public sector plays the main role alongside non-public sectors such as individual and private companies to achieve common development. According to the plan, China is forecast to have a relatively complete socialist market economy in place by 2010 and it will become comparatively mature by 2020.
3)The Three-Step Development Strategy China’s overall economic construction objectives were clearly stated in the Three Step Development Strategy set out in 1987:
Step One—to double the 1980 GNP and ensure that the people have enough food and clothing —attained by the end of the 1980s;
Step Two—to quadruple the 1980 GNP by the end of the 20th century—achieved in 1995 ahead of schedule;
Step Three—to increase per-capita GNP to the level of the medium-developed countries by the mid-21st century—at which point, the Chinese people will be fairly well-off and modernization will be basically realized.
4) Key National Projects
The “West-to-East Electricity Transmission”, the “West-to-East Gas Transmission”, and the “South-to-North Water Diversion” are the government’s three key strategic projects, aimed at realigning overall economic development and achieving rational distribution of national resources across China. The “West-to-East Electricity Transmission” project is in full swing, involving hydropower and coal resources in western China and the construction of new power transmission channels to deliver electricity to the east. The southern power grid line, transmitting three million kw from Guizhou to Guangdong, was completed in September 2004. The “West-to-East Gas Transmission” project includes a 4,000-km trunk pipeline running through ten provinces, autonomous regions or municipalities, conveying natural gas to cities in northern and eastern China. This was finished in October 2004 and has a design capacity of 12 billion cu m per year. Construction of the “South-to-North Water Diversion” project was officially launched on 27th December 2002 and completion of Phase I is scheduled for 2010; this will relieve serious water shortfall in northern China and realize a rational distribution of the water resources of the Yangtze, Yellow, Huaihe, and Haihe river valleys.
In 2003, after a decade of hard work, another key national project—the Three Gorges Dam— began to impound water, opened its permanent locks to navigation and sent power to the grid from its first generating units. It is designed to install 26 sets of generators, each with a generating capacity of 700,000 kw. When fully operational, the annual output of the Three Gorges Power Plant will reach 84.7 billion kw, produced from 26 sets of generators, each set able to meet the needs of a 1,000,000 population city.
Another key national project, the 1,142 km-long Qinghai—Tibet Railway, the highest railway in the world, will be completed in 2006.
5)Development of Energy-Efficient Economy
Energy consumption keeps increasing along with rapid economic growth, and although China over the last 20 years has successfully met half its energy needs through development and the other half through conservation, its energy conservation is still below the world average. On the whole, China’s pattern of extensive economic development with high rates of growth, of energy consumption and of pollution remains unchanged.
Statistics reveal that energy consumption was 4.1% higher than that of the GDP in 2004, and there are severe coal and electricity shortages in many places resulting from multiplied investment in iron and steel, cement, electrolytic aluminum, and real estate.
China’s Medium and Long-Term Energy Development Program for 2004-2020 prioritizes energy conservation, and adjustment and optimization of the energy structure. The Law on Renewable Energy Development and Utilization, originally slated to become law after 2005, went to the NPC Standing Committee for approval in December 2004.
China’s first Medium and Long-Term Energy Conservation Plan was published at the end of 2004. This lays down specific regulations for indices of energy consumption, covering thermal power generation, electricity supply and coal consumption, for major products. By 2010, these indices as a whole will reach or approach the international advanced level of the early 1990s. By 2016 the energy efficiency of important energy-consuming equipment, such as the coal-fueled industrial boiler, must reach or approach international advanced level. The indices of some automobiles, electro-motors and household appliances should also be up to the international advanced level by 2010.
6）Development of Agriculture and Industry
China is a country with a large population and less arable land. With only 7% of the world’s cultivated land, China has to feed one fifth of the world’s population. Therefore, China’s agriculture is an important issue and draws wide attention of the world. Some foreigners once raised the question, “Who will feed China?” China’s leaders and agriculture experts' reply was, "We Chinese will feed ourselves."
This sector has developed rapidly since reforms in the rural areas begun in 1978. The major reforms were: the household contract responsibility system, which restored to the farmers the right to use land, arrange farm work, and to dispose of their output; canceling the state market monopoly of agricultural products, and of price controls over most of agricultural and ancillary products; abolishing many restrictive policies, allowing farmers to develop diversified business and set up township enterprises so as to fire their enthusiasm for production. The reforms emancipated and developed rural productive forces, promoted the rapid growth of agriculture—particularly in grain production — and the optimization of agricultural structure. The achievements have been remarkable.
In the 1990s, China’s agriculture and rural economy faced unprecedented difficulties and challenges. But development momentum maintained fairly good nonetheless, with most products in surplus and supply and demand basically in balance every year. The year 2004 was a turning point; with grain production of 469.47 million tons, reversing a five year decline. Now China leads the world in output of grain, cotton, oil plants, fruit, meat, eggs, aquatic products and vegetables.
Output per capita has risen significantly. In 2004, grain output was 362 kg per capita; per capita figures for meat (pork, beef, and mutton), milk, and aquatic products were above world averages, reaching 44.6 kg, 17.4 kg, and 37.8 kg, respectively.
In 2004, state-owned industrial enterprises and non-state enterprises with annual turnover exceeding five million yuan achieved industrial added value of 5,480.5 billion yuan and realized profits of 1,134.2 billion yuan, representing 16.7% and 36% year-on-year rises respectively, and revealing a gratifying simultaneous improvement in speed, quality and benefit. Since 1996, China has led the world in the production of steel, coal, cement, farm-use chemical fertilizer and television sets.
7) China’s Middle Class China’s middle class may be booming, but a majority of respondents to a recent survey said they do not feel so wealthy. Only 12.7% of a poll conducted by China Youth Daily and Sina.com said they think they are living a middle-class life. The poll, entitled “Who will become the middle-class in ten years?” found that about 83% percent of the 7,313 people interviewed think a typical middle-class Chinese needs to have a good and steady income, a house and a car. Nearly 70% think the middle class needs higher education and good manners. About 60% think a decent profession is a crucial feature that defines the middle class.
The survey follows a similar study released earlier this month by HSBC, Fudan University and MasterCard Worldwide. That survey, which interviewed 1,736 people in Beijing, Shanghai and Guangzhou from February to May, researched spending patterns of the country’s increasingly affluent middle class. It found that the number of middle-class consumers in the country is expected to increase to 100 million in the ten years from 35 million in 2006. A Chinese middle class is defined by the survey as someone whose annual income ranges from $7,500 to $25,000 and who is between 20 to 49 years of age. However, the latest survey found that only 2.2% of respondents agree with that definition. More than 30% of those surveyed chose investment and finance as the best paths to becoming middle class. Nearly 20% think a good collection of social networks and resources will make people richer and 15% believe in diligence at work. The speed at which people join the middle class varies between professions. The survey found Chinese think those in the science and technology and IT industries are the quickest to get rich, followed by those in the banking, finance and investment industries.