China's economy

Pages: 5 (1058 mots) Publié le: 26 septembre 2010
The economy of the People's Republic of China is the third largest in the world, after the United States and Japan. China has had the fastest growing economy for the past 30 years with an average annual GDP growth rate over 10%.
The fact of being at the same time one of the last communist countries of the planet and an economy which beats all the records of growth can seems to be paradoxical.But some people assert that if this country keeps its growth rate before 2020, China will have exceeded the USA and will be the first world power. So, the increase in power of China can worry some countries.
To understand the current economy of China, it is important to return at first on its evolution, since

In 1949, China followed a socialist heavy industrydevelopment strategy. Consumption was reduced while rapid industrialization was given high priority. The government took control of a large part of the economy, and entire new industries were created. Most important, economic growth was started. A tight control of budget reduced inflation by the end of 1950.
From 1958 to 1960, an economic and social plan is led by Mao Zedong: the “Great Leap Forward”. Itaimed to use China’s vast population to rapidly transform China from an agrarian economy into a modern communist society.

In 1978, started the Chinese economic reform. It refers to the program of economic reforms called "Socialism with Chinese characteristics ». During these years, the government emphasized on raising personal income and consumption. The government also hadfocused on foreign trade as a major vehicle for economic growth, while before, China lived almost in autarky, completely closed to the rest of the world.
A decision was made in 1978 to permit foreign direct investment in several small "special economic zones" along the coast. But the country lacked the infrastructure and the knowledge of international practices to make this prospect attractive formany foreign businesses. So in the early 1980s steps were taken to expand the number of areas that could accept foreign investment and related efforts were made to develop infrastructures necessary. This effort resulted in making 14 coastal cities and three coastal regions "open areas" for foreign investment. All of these places provide favored tax treatment and other advantages for foreigninvestment.
In the 1990s, the Chinese economy continued to grow at a rapid pace, at about 9.5%, accompanied by low inflation. However the Asian financial crisis affected China at the margin, mainly through decreased foreign direct investment and a drop in the growth of its exports. But China had huge reserves and remained insulated from the regional crisis.
Despite China's impressive economicdevelopment during the past two decades, reforming the state sector and modernizing the banking system remained major hurdles. So a policy is adopted in 1997: The “grasping the large and letting the small go” policy. The “grasping the large” component indicated that policy-makers should focus on maintaining state control over the largest state-owned enterprises. “Letting the small go” meant thatthe government should give up control over smaller state-owned enterprises

China's economy grew at an average rate of 10% per year during the period 2000–2004, the highest growth rate in the world.
The key of the insertion of China in the world economy was its membership to the World Trade Organization in 2002. To subscribe to the WTO, china had to make a commitment toliberalize its economy.
The membership of China to the WTO confirmed its growing place in the world economy, becoming a new economic center following the example of the United States, the European Union and Japan. Today, the Chinese exports are very competitive and constitute a big part of the American trade gap.
China's underdeveloped transportation system—combined with important differences in the...
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