Economy of the People's Republic of China

:The economies of Hong Kong and Macau are separate from the rest of the People's Republic of China. This article is on the economy of mainland China. See also: Economy of Hong Kong and Economy of Macau

Background

In the 1980s, the PRC tried to combine central planning with market-oriented reforms to increase productivity, living standards, and technological quality without exacerbating inflation, unemployment, and budget deficits. The PRC pursued agricultural reforms, dismantling the commune system and introducing the household responsibility system that provided peasants greater decision-making in agricultural activities. The government also encouraged nonagricultural activities, such as village enterprises in rural areas, and promoted more self-management for state-owned enterprises, increased competition in the marketplace, and facilitated direct contact between mainland Chinese and foreign trading enterprises. The PRC also relied more upon foreign financing and imports.

Related Topics:
1980s - Inflation - Unemployment - Budget deficit - State-owned enterprise - Competition - Import

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During the 1980s, these reforms led to average annual rates of growth of 10% in agricultural and industrial output. Rural per capita real income doubled. Industry posted major gains especially in coastal areas near Hong Kong and across the strait from Taiwan, where foreign investment helped spur output of both domestic and export goods. China became self-sufficient in grain production; rural industries accounted for 23% of agricultural output, helping absorb surplus labor in the countryside. The variety of light industrial and consumer goods increased. Reforms began in the fiscal, financial, banking, price setting, and labor systems.

Related Topics:
Real income - Hong Kong - Taiwan - Export - Grain - Bank - Price setting

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On the darker side, the leadership has often experienced in its hybrid system the worst results of socialism (bureaucracy, lassitude, political corruption, disrespect of personal property) and of capitalism (windfall gains, a huge and widening gap between rich and poor, stepped-up inflation). Beijing thus has periodically backtracked, retightening central controls at intervals. At the end of 1988, in reaction to a surge of inflation caused by accelerated price reforms, the leadership introduced an austerity program.

Related Topics:
Hybrid - Socialism - Bureaucracy - Political corruption - Capitalism - Beijing - 1988 - Austerity program

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China's economy regained momentum in the early 1990s. Deng Xiaoping's Chinese New Year's visit to southern China in 1992 gave economic reforms new impetus. The 14th Communist Party Congress later in the year backed up Deng's renewed push for market reforms, stating that the PRC's key task in the 1990s was to create a "socialist market economy." Continuity in the political system but bolder reform in the economic system were announced as the hallmarks of the 10-year development plan for the 1990s.

Related Topics:
1990s - Deng Xiaoping - Chinese New Year - 1992 - 14th Communist Party Congress - Socialist market economy

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During 1993, output and prices were accelerating, investment outside the state budget was soaring, and economic expansion was fueled by the introduction of more than 2,000 Special Economic Zones (SEZs) and the influx of foreign capital that the SEZs facilitated. Beijing approved additional long-term reforms aimed at giving still more play to market-oriented institutions and at strengthening the center's control over the financial system; state enterprises would continue to dominate many key industries in what was now termed "a socialist market economy". The PRC government called in speculative loans, raised interest rates, and reevaluated investment projects. The growth rate was thus tempered, and the inflation rate dropped from over 17% in 1995 to 8% in early 1996. The economy slowed in the late 1990s, influenced in part by the Asian Financial Crisis of 1998-99, with official growth of 7.8% in 1998, and 7.1% for 1999. Growth accelerated again early in the new century, reaching 9.1% in 2003 and 9.5% in 2004.

Related Topics:
1993 - Special Economic Zone - Interest rate - 1996 - Asian Financial Crisis of 1998-99

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The executive vice prime minister of China, Huang Ju, speaking at the World Economic Forum at Davos, Switzerland in January, 2005 projected growth of economic output to $4 trillion by 2020, up from $1.6 trillion in 2005, with output per capita tripling to $3,000 per person.

Related Topics:
Huang Ju - World Economic Forum - Davos, Switzerland

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