China's Economy

Ancient China was one of the earliest centers of human civilization Archaeological evidence suggests that the earliest hominids in China date from 2.24 million to 250,000 years ago The earliest evidence of a fully modern human in China comes from Liujiang County, Guangxi, where a cranium has been found and dated to approximately 67,000 years ago.

Nationality: Chinese Population growth rate (2007 est.): 0.606%. Ethnic groups: Han Chinese--91.9%; Zhuang, Manchu, Hui, Miao, Uygur, Yi, Mongolian, Tibetan, Buyi, Korean, and other--8.1%. Religions: Officially atheist; Taoism, Buddhism, Christianity, Islam. Language: Mandarin (Putonghua), plus many local dialects Education: Years compulsory--9. Literacy--90.9%.

GDP (2007): $3.249 trillion Per capita GDP (2007): $2,458 GDP real growth rate (2007): 11.4% Natural resources: Coal, iron ore, crude oil, mercury, tin, tungsten, antimony, manganese, molybdenum, etc. Agriculture: Products--Among the world's largest producers of rice, wheat, potatoes, corn, peanuts, tea, millet, barley; commercial crops include cotton, other fibers, apples, oilseeds, pork and fish; produces variety of livestock products Industry: Types--mining and ore processing; iron; steel; aluminum; coal, machinery; textiles and apparel, etc. Trade (2007): Exports--$1.221 trillion: electronics; machinery; apparel; optical, photographic, and medical equipment; and furniture, etc. Imports--$917.4 billion: electronics, machinery, mineral fuel and oil, chemicals, plastic

GDP (purchasing power parity): $7.8 trillion (2008 est.) $7.104 trillion (2007) $6.475 trillion (2006) GDP (official exchange rate): $4.222 trillion (2008 est.) GDP - real growth rate: 9.8% (2008 est.), 13% (2007 est.), 11.6% (2006 est.) GDP - per capita (PPP): $6,000 (2008 est.) $5,500 (2007 est.) $4,900 (2006 est.) GDP - composition by sector: agriculture: 10.6% industry: 49.2% services: 40.2% (2008 est.) Labor force: 807.7 million (2008 est.)  Labor force - by occupation agriculture: 43%, industry: 25%, services: 32% (2006 est.) Unemployment rate: 4% officially in urban areas, but including migrants may be as high as 9%; Household income or consumption by lowest 10%: 1.6% highest 10%: 34.9% (2004)

Type: Communist party-led state Constitution: December 4, 1982 Independence: Unification under the Qin (Ch'in) Dynasty 221 BC Branches: Executive--president, vice president, State Council, premier. Legislative--unicameral National People's Congress Administrative divisions: 23 provinces ; 5 autonomous regions, including Tibet; 4 municipalities directly under the State Council Political parties: Chinese Communist Party, 70.8 million members; 8 minor parties under Communist Party supervision Suffrage: Universal at 18

Legal System The government's efforts to promote rule of law are significant and ongoing. After the Cultural Revolution Since 1979, when the drive to establish a functioning legal system began, more than 300 laws and regulations Legal reform became a government priority in the 1990s Human Rights The China country reports in the State Department's 2007 Human Rights Practices and International Religious Freedom Reports noted China's well-documented and continuing abuses of human rights in violation of internationally recognized norms , China's economic growth and reform since 1978 has dramatically improved the lives of hundreds of millions of Chinese, increased social mobility, and expanded the scope of personal freedom

China's economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector Annual inflows of foreign direct investment rose to nearly $84 billion in 2007 development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work The Chinese government seeks to add energy production capacity from sources other than coal and oil

Economic Reforms Agriculture Industry Energy Environment Science and Technology Shortcomings of Science and Technology Trade Foreign Investment

Since 1979, China has reformed and opened its economy. The Chinese leadership has adopted a more pragmatic perspective on many political and socioeconomic problems In the 1980s, China tried to combine central planning with marketoriented reforms to increase productivity, living standards, and technological quality During the 1980s, these reforms led to average annual rates of growth of 10% in agricultural and industrial output By the late 1980s, however, the economy had become overheated with increasing rates of inflation China's economy regained momentum in the early 1990s Following the Chinese Communist Party's Third Plenum, held in October 2003, Chinese legislators unveiled several proposed amendments to the state constitution

Over 40% of China's labor force is engaged in agriculture, even though only 10% of the land is suitable for cultivation China is among the world's largest producers of rice, corn, wheat, soybeans, vegetables, tea, and pork. Major non-food crops include cotton, other fibers, and oilseeds lack of warehousing and cold storage facilities impede both domestic and international agricultural trade

Industry and construction account for about 46% of China's GDP Major industries are mining and ore processing; iron; steel; aluminum; coal, machinery; textiles and apparel; armaments; petroleum; cement; chemicals; fertilizers, etc China has become a preferred destination for the relocation of global manufacturing facilities

Together with strong economic growth, China's demand for energy is surging rapidly Coal makes up the bulk of China's energy consumption (70% in 2005), and China is the largest producer and consumer of coal in the world The 11th Five-Year Program, announced in 2005, calls for greater energy conservation measures Since 1993, China has been a net importer of oil In May 2004 U.S.-China Energy Policy Dialogue was launched

The U.S. trade deficit with China reached $256.3 billion in 2007 U.S. goods exports to China in 2007 accounted for 5.7% of total U.S. goods exports, up from 1.9% in 1997 China formally joined the WTO in December 2001 China is now one of the most important markets for U.S. exports Export growth continues to be a major driver of China's rapid economic growth The United States is one of China's primary suppliers of power generating equipment, etc

Science and technology have always preoccupied China's leaders Chinese science strategists see China's greatest opportunities in newly emerging fields such as biotechnology and computers The U.S.-China Science and Technology Agreement remains the framework for bilateral cooperation in this field

China's investment climate has changed dramatically in a quarter-century of reform As part of its WTO accession, China undertook to eliminate certain trade-related investment measures and to open up specified sectors that had previously been closed to foreign investment Opening to the outside remains central to China's development

 In the early 1970s, Beijing was recognized diplomatically by most

world powers. After the founding of the P.R.C., China's foreign policy initially focused on solidarity with the Soviet Union and other communist countries In the 1960s, Beijing competed with Moscow for political influence among communist parties and in the developing world generally China has likewise improved ties with Russia, with Presidents Putin and Hu exchanging visits to Beijing and Moscow While in many ways Sudan's primary diplomatic patron, China has played a constructive role in support of peacekeeping operations in Southern Sudan

Armed Forces: In 1987 combined strength of combat support units of People's Liberation Army (PLA) just under 3 million Military Budget: Officially announced for 1987 at -Y20.4 billion Police Agencies and Paramilitary Forces: Police organized under Ministry of Public Security

targets were set for both administrative units and individual families The one-child policy was a highly ambitious population control program Under the one-child program, a sophisticated system rewarded those who observed the policy and penalized those who did not

Increase in the food supply in China's cities, made it possible for more people to come in from rural areas and survive without food ration cards the authorities temporarily relaxed the enforcement of migration restrictions The problem of too-rapid urbanization was exacerbated by the agricultural sector.

Chinese elite, often referred to in English as the gentry, had no peers in other societies The national elite, who comprised perhaps 1 percent of China's population, had a number of distinctive features They achieved their highest and most prestigious titles by their performance on the central government's triennial civil service examinations The combination of partible inheritance and the competition for success in the examinations meant that rates of mobility into and out of the elite were relatively high for a traditional agrarian society

Decollectivization increased the options available to individual households and made household heads increasingly responsible for the economic success of their households it was legally possible to leave the village and move into a nearby town to work in a small factory During the early 1980s, the pace of economic and social change in rural China was rapid

fundamental long-range goals were to transform China into a modern, powerful, socialist nation objectives meant industrialization, improvement of living standards, narrowing of income differences, and production of modern military equipment But the economic policies formulated to achieve them were dramatically altered on several occasions in response to major changes in the economy, internal politics, and international political and economic developments

Before 1949 the Chinese economy was characterized by widespread poverty, extreme income inequalities, and endemic insecurity of livelihood In 1987 the standard of living in China was much lower than in the industrialized countries, but nearly all Chinese people had adequate food, clothing, and housing In addition, there was a positive trend toward rapid improvements in living conditions in the 1980s as a result of the economic reforms Chinese consumers suddenly were able to buy more than enough to eat from a growing variety of food items

The defense industries produced a wide range of military materiel had upgraded Soviet aircraft and was developing nuclear-powered ballistic-missile submarines, intercontinental ballistic missiles, and tanks equipped with infrared night-vision gear and laser rangefinders.

The chinese economic strategy emphasizes an explosion of production and jobs outside the state enterprise sector. The fruits of rising productivity are then used to manage the problems of debt, state enterprise deficits, security threats, unemployment, infrastructure scarcity, and discontent over unequal degrees of progress by different sectors of society. This emphasis on construction produces more rapid growth, less inflation, and a greater sense of common interest than the Eastern European approach, which gives priority to destruction of the institutions of socialism rather than to construction of a productive market economy. The absence of a plan is not the same thing as the existence of a market.

In China's burgeoning retail-banking industry, the credit card market represents one of the most enticing opportunities for foreign banks. Credit cards are already the fastest-growing consumer credit product in China, and all signs point to explosive growth in card usage and profitability over the next decade. Despite the market's attractiveness, however, it poses significant challenges for foreign credit card issuers. A recent McKinsey survey of Chinese cardholders shows that certain dynamics in China's market tend to favor large domestic banks, with their extensive branch networks and ready-made customer relationships. Foreign providers also face some problems arising from economic factors, such as the high percentage of unprofitable customers and a downward trend in interchange fees. By 2013, China's consumer credit market—encompassing credit cards, mortgages, and other personal loans—will account for 14 percent of profits in the banking sector, up from just 4 percent today. Credit cards, today barely a break-even business in China, will be second only to mortgages as the most important consumer credit product, representing 22 percent of consumer credit profits, or about $1.6 billion.

China is slowly coming to terms with the enormous stock of bad loans that burden its banking system. Its financial regulators—the People's Bank of China and the Chinese Banking Regulatory Commission—have upgraded the country's loan classification system to uncover problem loans more quickly and consistently, established asset-management companies to help banks dispose of their nonperforming loans, and used billions of dollars from China's vast foreign reserves to sustain insolvent banks until the problems can be resolved. Actively managing the current stock of nonperforming loans—especially cleaning them up more quickly—is a critical first step in righting China's banking system. The Chinese regulators must, however, go beyond merely fixing the mistakes of the past and confront an additional source of instability: a flow of new bad debt. Our frontline experience tells us that Chinese banks continue to make astounding numbers of questionable loans atop the existing pile. Any failure by regulators to control these bad lending practices may put China's future prosperity at risk. China's banking system can safely sustain annual loan growth of only 5 to 7 percent.