Country Study: China

An Overview Until recently, a fastest-growing economy in Asia (10%) After 1978, China opened its ‘iron door’ for market- oriented reforms, in 2005, 70% of GDP from private sector Super performance in poverty reduction 53% of population below poverty line during Mao era to 12% in 1981 ‘One Child Policy’ – Population growth control

Economic Reforms Gradual pace Opened up trade with countries, Town and Village Enterprises were established In late 1980’s and early 1990’s, China reduced the number of state-owned enterprises, established a price system China attracted largest percentage of FDI in Asia (even though China is comparable to India)

Economic Profile GDP growth rate 9.8% GDP per capita $6,000 (PPP) Agriculture 43% of GDP Industry 25% Population below poverty line 8% Gini coefficient 47% Unemployment4% Foreign Exchange Reserves 2 trillion External Debt420 billion FDI759 billion

Development Model and Policies Transition to market Outward-looking orientation Foreign capital plays an important role Effective government policies – industry, agriculture, trade, population Undervalued currency and trade surplus as engine for growth Improvements in human resources – skills and health indicators

International Relations Entry into WTO Human rights Pressure to reduce Yuan Tensions with U.S. due to high deficit of U.S. with China Courting Europe Intellectual Property Protection

Bottlenecks Even with a gradual pace of reforms, China faces many bottlenecks; oil imports, high oil prices, ever increasing demand for energy & shortage of critical inputs – cement, fertilizers, electricity, Steel, power ‘blackouts’, labor costs rising Healthcare and Housing Barefoot doctors – 2 doctors per 1,000 people in village Out-patient clinics – 10,000 to 30,000 per clinic Hospital – 200,000 to 600,000 people per hospital

Inequalities 4% of Chinese families own 70% of total wealth Rural urban and coastal vs inland disparities In 2003, China surpassed Zimbabwe in unequal distribution of income Compared to India, a better record because of socialist government

Trade Policies and Problems Shrimp – ‘dumping’ issues taken to WTO MFN status Adversely affected by the end of textile quotas Signing regional trade agreement Eliminated most of the agricultural taxes Global recession affecting exports

Outlook High growth rate continues Stock market performing well Unequal distribution of income is a pressing problem A sound rural-urban balance policy in place Human rights and labor conditions still an issue Aggressive trade policy