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

Challenges

From 1995-1999 inflation dropped sharply, reflecting tighter monetary policy of central banks and stronger measures to control food prices. At the same time, the government struggled to (a) collect revenues due from provinces, businesses, and individuals; (b) reduce corruption and other economic crimes; and (c) keep afloat the large state-owned enterprises, most of which had not participated in the vigorous expansion of the economy and many of which had been losing the ability to pay full wages and pensions. From 50 to 100 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time low-paying jobs. Popular resistance, changes in central policy, and loss of authority by rural cadres have weakened the PRC's population control program. Another long-term threat to continued rapid economic growth is the deterioration in the environment, notably air pollution, soil erosion, and the steady fall of the water table especially in the north. China continues to lose arable land because of erosion and economic development.

Related Topics:
1995 - 1999 - Monetary policy - Provinces - Pension - PRC's population control program - Air pollution - Soil erosion - Water table

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Despite mainland China's impressive economic development during the past two decades, reforming the state enterprise sector and modernizing the banking system remain major hurdles. Over half of mainland China's large state-owned enterprises are inefficient and reporting losses. During the 15th National Congress of the Chinese Communist Party that met in September 1997, President Jiang Zemin announced plans to sell, merge, or close the vast majority of SOEs in his call for increased "public ownership" (privatization in euphemistic terms). The 9th National People's Congress endorsed the plans at its March 1998 session. The next few years will witness increasing tensions between a highly centralized political system and an increasingly decentralized economic system.

Related Topics:
15th National Congress of the Chinese Communist Party - 1997 - Jiang Zemin - Privatization - National People's Congress - 1998 - Centralized - Decentralized

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Another main hurdle in the Chinese economy is actually the rapid growth that has occurred in the last 10 years. Some economists fear that China's economy is over-heating which means that inflation will become a serious issue in the Chinese economy and that due to China's global economic expansion an over-heating could have major repercussions among other nations. Chinese officials deny that the economy is over-heating, although they do admit that certain areas are "heating up" in that they have weak infrastructures that contribute to the lack of economic control.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Taxation has also proved to be a problem in stabilizing the Chinese economy. Officials are now planning on implementing tax cuts to certain economic sectors and industries in hopes that the tax cuts will help to regulate the economy. Officials are using the example of Ronald Reagan's tax polices of the 1980s in the United States as a guideline for the new Chinese policy. A primary goal of the tax cuts will be to assist in decreasing the investment disparity between rural and urban areas and to encourage government owned corporations to compete with foreign corporations.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

By 2005, there were signs of a labor shortage with workers being able to choose employment which offered higher wages and better working conditions, enabling some to move away from the restrictive dormitory life and boring factory work which characterize export industries in Guangdong and Fujian. Minimum wages began rising toward the equivalent of 100 U.S. dollars a month as companies scrambled for employees with some paying as much as an average 150 a month. The labor shortage was partially driven by the demographic trends as the proportion of people of working age falls as the result of strict family planning.

Related Topics:
Guangdong - Fujian - Demographic trends

~ ~ ~ ~ ~ ~ ~ ~ ~ ~