China in the World Economy
China in the World Economy
Since the foundation of the People's Republic in 1949, China has made great achievements in the fields of economic and social development. The poor, backward old China has been marching into the initial stage of a prosperous and modern new China. China has witnessed tremendous changes especially after the reform and opening policy commencing in early 1979, thanks to the further emancipation and development of social production force. From 1979 to 2005, China's Gross Domestic Products had been growing at the annual rate of over 9%. In the past three years, China's GDP maintained growth around 8%, making China one of the fastest growing economies in the world. China's GDP grew up to 13.65 trillion RMB Yuan (equal to 1.65 trillion US dollars) in 2004, up 9.5% over 2003. Among countries in the world, China now ranks the third in GDP, only after the United States and the European Union.
The reform and opening policy has also enhanced the economic exchange and cooperation between China and the rest of the world.
China's trade volume reached 419.9 billion US dollars after only four months at the beginning of 2005, while total 2004's volume had reached almost 1,1 trillion US$. With this outstanding performance China has replaced Japan as the third largest trading nation in the world, and stands second only to the United States and Germany. This is an average annual increase of over 30 percent since 1978, when China's trade volume was barely US$20.6 billion, ranking 32nd in the world, in the meantime, the ratio of export in its GDP rose from 5% to almost 40%.
China now has trade ties with 227 countries and areas in the world. It is also worth noting that foreign funded enterprises are playing a bigger role in China's foreign trade. In 2002, import and export volume of these enterprises (approximately 400,000) reached 766.5 billion US dollars. It is indicated, that with further opening and more market mechanism in its economy, China is getting more and more interdependent with the world economy.
China's foreign exchange reserve also increased by large with the rapid growth of visible and invisible trade. By the end of 2005, China's foreign exchange reserve should increase to a total amount of 913 billion US dollars. Foreign investment in China has been playing an important role in the past 25 years in the country's rapid economic development. In 2002, China became the world's largest recipient of total foreign direct investment (FDI), attracting nearly $53 billion. That performance comes thanks to China's progress on structural reforms, its accession to the World Trade Organization, and efforts to bring regulations in line with international standards. FDI poured into China at record levels in 2004, totaling more than $153 billion in new agreements, up by one-third over 2003.
In 2001, a total of 26,139 new foreign investment projects were approved, up 16.0 percent over the previous year. The contracted foreign investment reached 69.2 billion US dollars, up by 10.4 percent, and the foreign direct investment actually utilized were 46.8 billion US dollars, up 14.9 percent. Besides Hong Kong and Taiwan, investors from the United States, Japan, South East Asia and Europe are very active in the field.
China's reform and opening policies have not only facilitated the country's economic growth, but also produced substantial benefit for foreign partners and made constructive contribution to trade and economic development in Asia and Pacific in particular and across the world in general.
The Chinese government will continue and perfect those policies in the foreseeable future. In recent years, China has taken a series of significant reform measures in the fields of fiscal and taxation system, banking, investment, foreign exchange, foreign trade, etc. Early in 2002, China's state council published the Provisions on Guiding Foreign Investment Direction and the Guide Catalogue of Industries for Foreign Investment in China. These documents not only included the newly expanded industries open to foreign investment, but also listed each kind of projects to be encouraged. According to these policies, a number of industries are put on top priority in future economic development, namely, infrastructures such as, transportation, telecommunications, energy industry and environmental protection; pillar industries such as machinery, electronics, petrochemical, automobile, and construction industry. The Chinese government grants financing, legislative and administrative support to the development of these industries. Foreign investments are also encouraged and supported in these fields. Whit the accession to the WTO, imports and exports volume are expected to grow as well as the amount of Foreign Direct Investment accepted in the country.
The grand economic development plans and projects in China will create huge demand for commodities, technologies and capital from abroad, and present good opportunities for the business communities in the rest of the world.
Although China is among the top economic powers with its GDP of over 1300 billion US dollars, ranking the third in the world, the per capita economic possession in China is still very low due to its huge population (over 1.3 billion). China is now still among the low income countries with its average GDP per Capita of 1,268 US dollars in 2004. China has 900 million of agricultural population, 90 million of which lives under poverty line. With insufficient capital supply and growing market mechanism to be perfected, China is still fighting to get rid of the typical low-added -value economic structure of a low-income country. In another word, China now is a developing country. There is a long way to go and a hard work to do on its road toward a developed country.
Right now, there are also some problems that must be solved in the course of China's economic development. For example, the high inflation rate dogging its fast economic growth, the weak position of agriculture sector in the economy, the inefficiency of large state-owned enterprises, the non-efficient use of energy and the problems resulting from the uneven developments of its east coast and the west inner land. The Chinese government is making every effort to find solutions for these problems.
In view of general situation, China has been able to maintain political stability, social prosperity and order. The market of 1.3 billion consumers is fascinating to any entrepreneur of deep insight with its economic development and growing living standard. The optimism for China's economy and market has encouraged many to participate in the country's development and also resulted in the continued growth of its foreign trade and absorption of foreign investment. It is my deep belief that, China will have a bright future on the way to the 21st century with a steady and admirable fast pace, and those active participants in the cause will get rewards for their efforts.
This article is brought to you courtesy of Ms. Xue-chun Shan, Commercial Consul at the Consulate General of People's Republic of China in Los Angeles.