Economie chine

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China’s Economic Conditions
Since the initiation of economic reforms
in 1979, China has become one of the world’s
fastest-growing economies. From 1979 to
2005 China’s real GDP grewat an average
annual rate of 9.6%. Many economists spec-
ulate that China could become the world’s
largest economy at some point in the near
future, provided that the government is able tocontinue and deepen economic reforms, par-
ticularly in regard to its inefficient state-
owned enterprises (SOEs) and the state bank-
ing system. In addition, China faces several
otherdifficult challenges, such as pollution
and growing income inequality that threaten
social stability.
Trade continues to play a major role in
China’s booming economy. In 2005, exports
rose by28.4% to $762 billion, while imports
grew by 17.6% to $660 billion, producing a
$102 billion trade surplus. China is now the
world’s third-largest trading economy after the
United States andGermany. China’s trade
boom is largely the result of large inflows of
foreign direct investment (FDI) into China,
which totaled $61 billion in 2004 and an
estimated $58 billion in 2005.Over half of
China’s trade is accounted for by foreign-
Many economists contend that China’s policy
of pegging its currency (the yuan), which
forces the government to trade yuan for dol-
lars(to keep the peg at about 8.3 yuan to the
dollar), could boost the level of inflation in
China at some point in the future. They also
contend that the sharp increase in the mone-
tary supply(due to the peg) may induce Chi-
nese banks to make bad loan decisions and
thus increase the level of non-performing
loans. Secretary of Treasury John Snow stated
that China’s currency pegposed a risk to its
economy and that of its trading partners. On
July 21, 2005, China announced that it would
appreciate its currency to the dollar from 8.28
to 8.11 and replace its dollar...