China Facts And Figures

I. Economy 

     China's economy during the last quarter century has transformed from a centrally planned system that was largely closed to international trade to a more market-oriented economy with a rapidly growing private sector, recently becoming a major player globally. The average annual GDP growth rate since the 1978 reform has been 9.8% (GDP growth rate was 11.4% in 2007 and 10.6% in the first quarter of 2008). The government’s priority this year is to both maintain a steady growth rate in order to continue creating job opportunities, while on the other hand controlling the soaring inflation (an annual rate of 7.1% in 2007 and 8.3% in the first quarter 2008). Concurrently with its high inflation rates, the value of the Chinese currency, the RMB has been skyrocketing since China revalued its currency in July 2005 moved to an exchange rate system that references a basket of currencies. Cumulative appreciation of the RMB against the US dollar since the end of the dollar peg reached 15% in January 2008 (At the time of compiling this information, the rate was hovering around RMB6.97 to USD 1).

     Growth in China is highly dependent on exports and export-related investment (external trade accounted for 66.9% of GDP in 2006). Since the early 1990s, China has allowed foreign investors to manufacture and sell a wide range of goods on the domestic market, and authorized the establishment of wholly foreign-owned enterprises, now the preferred form of FDI. However, the Chinese government's emphasis on guiding FDI into manufacturing has led to market saturation in some industries, while leaving China's services sectors underdeveloped. China is now one of the leading FDI recipients in the world, receiving over $80 billion in 2007 according to the Chinese Ministry of Commerce. The Chinese government is anxious to bring more institutional investment into the Chinese stock markets. It approved Qualified Foreign Institutional Investors (QFII) in 2007 to start allowing investors qualified by the State Administration of Foreign Exchange to invest in China’s “A” shares on China’s stock markets. (Until 2003, only the much rarer ”B” shares could be traded by foreign companies.) Major remaining barriers to foreign investment include opaque, inconsistently enforced laws and regulations and the lack of a rules-based legal infrastructure.

     Rapid economic expansion has had a disastrous impact on the environment in China. Global warming and pollution are huge and complex problems that China is beginning to acknowledge ownership of, though change is just beginning. The climate, which used to be extreme in its differences north/south/east and west, is becoming even more extreme to the point where some people, for instance those living in the semi-desert of northwest China, may have to be moved. As a result there have been increasing numbers of natural disasters, creeping desertification, uncontrollable viruses, possible problems from Three Gorges Dam. Water is a huge problem, with at least 50% of all water in China is too polluted for use by humans. In light of this, China is committing itself visibly to the promotion of renewable energy.

INDICATORS ON NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT 

II. Politics

     The Chinese Government is subordinate to the Chinese Communist Party (CCP); its role is to implement party policies. The primary organs of state power are the National People's Congress (NPC), the State Council and the President (the head of state).

In all important governmental, economic and cultural institutions in China, party committees work to see that party and state policy guidance is followed and that non-party members do not create autonomous organizations that could challenge party rule.

III. Development Overview

     Measured on a purchasing power parity (PPP) basis, China, in 2007, stood as the second-largest economy in the world after the USA. However, in per capita terms, the country is still lower middle-income. More than 128 million Chinese, many in remote and resource-poor areas in the western and interior regions, still have consumption levels below a dollar per day, often without access to clean water, arable land, or adequate health and education services. The rate of poverty reduction has fallen since the mid-1990s, as the country seeks to assist the poor concentrated in geographically disadvantaged regions and new challenges such as the emergence of urban poverty.

     China’s 11th Five Year Plan (2006-2010) forms the basis for the Government's current economic and social development efforts. In continuity with the 10th Five Year Plan, the 11th Plan aims to sustain the rapid and steady development of China's "socialist market economy" while achieving the "five balances" (between rural and urban development, interior and coastal development, economic and social development, people and nature, and domestic and international development) and making economic and social development more people-oriented, comprehensive, balanced and sustainable. The next 5 years represent a critical period in China's development. To investors, China currently represents a vast market that is still somewhat untapped and a low-cost base for export-oriented production.

     The Chinese government faces several development challenges: sustaining adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; implementing a real social welfare system to cope with the growing class inequalities; to reduce corruption and other economic crimes; to restrain environmental damage and social strife related to the economy's rapid transformation; to rebalance China’s pattern of growth and increase the capacity for independent innovation; and to create a reliable legal framework.