Business

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: