Chinesepod - Overview

Overview

     In the fifty years since the founding of the People's Republic of
China, especially in the two decades since the initiation of reform and
opening to the outside world, China's socialist construction has scored
great achievements that have attracted world attention. The national
economy showed a rapid and sustained growth, the overall strength of the
country expanded noticeably, the standard of living of the people
improved with the passage of time and unprecedented results have been
achieved in such undertakings as science and technology, education,
culture, health and physical culture.

     China's economic construction has experienced both smooth
development and severe setbacks. After the founding of the People's
Republic, China first went through three years of economic
rehabilitation. In 1953, the First Five-Year Plan for Economic and Social
Development was worked out and implemented. During this period, China
established more than 100 large industrial enterprises, some basic
industries which had remained weak links until then as well as some new
industrial sectors such as aircraft manufacturing, automobile, tractor,
power generating equipment, metallurgical equipment, mining machinery,
heavy and precision machinery, thus laying a preliminary foundation for
socialist industrialization.

     In the decade from 1956 to 1966 prior to the eruption of the
Cultural Revolution, socialist construction was carried out in an
all-round way. Despite severe setbacks, Chinese economy managed to score
illustrious results. New industries like electronics and petrochemical
engineering came into being and the industrial layout was improved. China
achieved complete self-sufficiency in oil supply from 1965 onwards. The
capital construction and technical upgrading of agriculture were launched
on a large scale and results were achieved gradually. Remarkable success
was also achieved in science and technology. However, the "Great Leap
Forward" in 1958 plus the then natural calamities severely affected the
development of national economy. In the winter of 1960, a policy of
readjusting, consolidating, filling in and raising standards for the
national economy was adopted and China's economic construction was
brought back to the right track. The Cultural Revolution, which began in
1966, resulted in a decade of social turmoil and China's economic
development experienced the most severe setback and biggest loss ever
since the founding of the People's Republic.

     Since the Third Plenary Session of the Eleventh CPC Central
Committee convened in December 1978, the central government made the
strategic decision of shifting the focus of work to socialist
modernization and defined the guiding policy of revitalizing the domestic
economy and opening up to the outside world. A fully fresh situation
appeared in economic development through vigorously balancing the
proportions of the national economy and reforming the outdated economic
system. The Twelfth National Congress of the Communist Party of China
worked out the overall objective for economic construction by the end of
this century: striving to quadruple China's annual industrial and
agricultural output value on the basis of increasing economic efficiency
constantly.

     The Fourteenth National Congress of the Communist Party of China set
the goal of establishing the system of socialist market economy.
Resolution of the CPC Central Committee on Certain Questions of
Establishing Socialist Market Economy adopted at the Fifth Plenary
Session of the Fourteenth CPC Central Committee defined the general
framework of China's economic reform. Thereafter, a series of important
reform measures were taken and positive effects were achieved. A major
step was made in the reform of the pricing system, public finance,
taxation, banking, foreign trade and foreign exchange and notable results
were achieved. A new mechanism for fixing the price by the market was
formed initially. A new taxation system began to operate in a normal
order and a system whereby tax revenue was shared by central and local
authorities was implemented in a full swing. People's Bank of China was
designated as the central bank implementing the monetary policy
independently while the separation of policy bank and commercial bank was
also under way. An operating mechanism for foreign trade that conforms to
the internationally accepted rules was established after carrying out a
series of measures for reforming the system of foreign trade and foreign
exchange. These measures include introducing a single exchange rate,
implementing the system of exchange settlement and sales by banks and
reforming the management of import and export. The reform of state-owned
enterprises, which is designed mainly to establish modern enterprise
system, progressed steadily. And the reform related to social security,
housing, education and science and technology also made new strides.

     The Eighth Five-Year Plan for Economic and Social Development
(1991-1995) marked a period during which, with slightest fluctuation,
China's economy developed at an all-time high speed. During the period,
the central government put forward the basic policy of "seizing the
opportunity to deepen the reform and open wider to the outside world,
promoting development and maintaining stability." As a result, the
national economy maintained a rapid and sustained development while
inflation was brought under effective control and the economy as a whole
began to get on a track of rapid and steady growth.

     During the period of the Eighth Five-Year Plan, the state increased
its investment in infrastructure and basic industries and established new
development mechanisms for these industries through reform. As a result,
great strides had been made in these areas, especially in railway,
highway, communication, port, airport and power industry. According to an
incomplete statistics, out of the nearly RMB 600 billion yuan of various
funds collected by the central government and local governments at all
levels, more than 60 percent were invested in capital construction. At
the same time, more decision-making rights were delegated to the local
governments with regard to communication and telecommunications and more
efforts were made to utilize foreign investment and collect funds through
many channels. All this had promoted the development of these basic
industries, strengthened Chinese economy for future development and
ensured a sustained, rapid and sound development of the national economy.

     Economic development is the basis on which foreign trade grows. At
the same time, the growing foreign trade also constitutes a major element
in promoting economic development. During the Eighth Five-Year Plan,
China's foreign trade expanded considerably and managed to become one of
the ten major export countries in the world and China's percentage in the
total volume of world commodity trade rose very fast. During the period
from 1989 to 1991, economic readjustment narrowed the gap between demand
and supply within the country , the amount of exports increased rapidly
while that of imports plummeted. As a result, a favorable balance of
trade appeared continuously and China's foreign exchange reserve
increased at a high speed.

     In the two decades after the initiation of reform and opening to the
outside world, China's economy has undergone a fundamental change from
planned economy to market economy. The economic strength of the country
was intensified constantly. The standard of living of the people improved
gradually. The annual growth rate of GDP averaged around 10 percent and
the target of quadrupling the annual industrial and agricultural output
vale of the year 1980 by the end of the century was fulfilled ahead of
schedule.

     In 1996, China worked out the Outline of the Ninth Five-Year Plan
for National Economy and Social Development and the Long-range Objectives
Through the Year 2010. Through the engineering efforts of all the people
in the country, new achievements were made in reform, opening up and
modernization in the beginning of the Ninth Five-Year Plan. With the goal
of macro control being attained, China's economy realized "soft land".
This was a sign that China's economy had entered a period of sound
operation and thus laid a solid foundation for the fulfillment of the
Ninth Five-Year Plan.

     In 1997, adhering to the principle of "seeking progress in the midst
of stability" and the macro control policies, China continued to develop
at a moderately high speed.

     In the face of the complicated and grim economic environment at home
and abroad in 1998, the people of all ethnic groups in China worked hard
together, surmounted numerous difficulties and scored great achievements
in carrying out the reform and opening up policy and in the socialist
modernization drive. The objectives for reform and development defined at
the beginning of the year were basically attained. The national economy
maintained a relatively rapid development. The gross domestic product for
1998 increased by 7.8 percent over the previous year. The increase was
slightly lower than the targeted figure of 8 percent, but attaining 7.8
percent was not easy given the impact of the Asian financial crisis and
the catastrophic floods that hit China last year. To protect China
against the adverse effects of the Asian financial crisis, we adopted a
policy of increasing investment and boosting domestic demand at the
beginning of last year. However, the crisis became broader and deeper
than it had been anticipated and exerted more of an impact on China than
the country had expected. In the first half of 1998, China's economic
growth rate slowed down due to a sharp decline in the growth rate of
export volume and inadequate domestic demand to keep the economy growing.
To address this problem, the central authorities resolutely made a
decision to adopt a pro-active fiscal policy. After the National People's
Congress approved the necessary changes in the budget for 1998, the State
Council issued an additional 100 billion yuan of treasury bonds for
investment in infrastructure development. As a result, the growth of
fixed-asset investment in state-owned enterprises was much more rapid in
the second half of the year, increasing by 19.5 percent for the year as a
whole. Total investment in fixed assets of all segments of the economy
increased by 14.1 percent. This considerable increase in investment
played a prominent role in fueling economic growth.

     The Second Plenary Session of the Ninth National People's Congress
was held in March 1999. It stressed that the general requirement for the
work of the government in the year was as follows continue to promote
reform and opening up, step up our efforts to implement the strategy of
developing the country by relying on science and education and the
strategy of working for sustainable development, promote economic growth
mainly through the expansion of domestic demand, stabilize and strengthen
agriculture, deepen the reform of state-owned enterprises, restructure
the economy, make great efforts to open up more urban and rural markets,
do everything possible to increase exports, take precautions against and
obviate financial risks, rectify economic order, maintain a sustained,
rapid and sound development of the national economy, conscientiously
strengthen democracy and the legal system and promote cultural and
ethical progress, work for all-round social progress, further improve the
balance of reform, development and stability, ensure social and political
stability and greet the fiftieth anniversary of the founding of New China
with outstanding achievements in reform, opening up and the socialist
modernization drive.

     The session stressed that the year 1999 was a crucial year for
achieving the objective of getting most of the large and medium-sized
state-owned enterprises operating at a loss out of their plight and
accomplishing the initial steps in the establishment of a modern
enterprise system in most of the large and medium-sized state-owned key
enterprises. In 1999, governments at all levels must put a stop to
redundant development and quicken the pace of industrial restructuring
and reorganization; continue to guarantee the basic needs of workers laid
off from state-owned enterprises and help them find new jobs; promote the
separation of the functions of the government from those of the
enterprises, improve the supervisory system and consolidate and improve
the leadership of enterprises. People in China should continue to relax
control over and invigorate small state-owned enterprises in various
ways. China should adopt policies and measures to encourage, support and
guide the sound development of individual proprietorship, privately-owned
and other non-public sectors of the economy. Since the founding of the
People's Republic and especially the adoption of the policy of reform and
opening up, China's economy has shown a sustained and rapid growth,
various social undertakings developed fast, the overall strength of the
country was intensified constantly and the standard of living of the
people improved notably. China's gross domestic product (GDP), which came
to only RMB 362.41 billion yuan in 1978, amounted to 7955.3 billion yuan,
20-fold increase over 1978. China ranks No.7 in terms of total supply and
demand and No.1 in terms of economic growth rate.

     According to the data provided by State Statistical Bureau, China's
GDP in 1997 amounts to US$902 billion if calculated by the average
exchange rate between RMB yuan and US dollars of the year. This figure
ranks No.7 behind USA (US$7819.3 billion), Japan (US$4223.4 billion),
German (US$2115.4 billion), France (US$1393.8 billion), Britain
(US$1278.4 billion) and Italy (US$ 1146.2 billion). From 1979 to 1997,
China's average annual growth rate is 9.8 percent, 6.5 percentage points
higher than that of the world.

    China's output of main industrial and agricultural products occupy
the front ranks of the world:

     From 1978 to 1997, China's output of coal and cloth had remained
No.1; the output of cereal, cotton, rapeseeds, pork, beef, mutton, steel,
cement, coal and television sets rose to No.1 in the world respectively
from No.2 to No.16; the power generated and the output of chemical
fertilizers climbed to No.2 respectively from No.7 and No.4; the output
of crude oil increased to No.5 from No.8. Of course, the average per
capita level of the country still remains fairly low.

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