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China at a Glance (Figures from 1996 World Development Report and 1997Information Please Almanac) Area (including Manchuria and Tibet): 3,691,521 square miles Population (est. 1996): 1,210,004,956 What is the population now? Capital Beijing Literacy rate 78% Gross national product per capita (1994 dollars, est.): $530 Average annual growth rate (1990-1994): 12.9% Inflation (from Dec. '93 to Dec. '94): 25.5% Unemployment (in urban areas): 2.7% Labor force in agriculture (1990): 72% Labor force in industry (1990): 15% Principal agricultural products rice, wheat, grains, cotton Major industrial products iron and steel, textiles, armaments, petroleum Exports(1994) $124.6 billion: textiles, garments, footwear, toys, machinery and equipment, weapon systems Imports(1994) $118.3 billion: rolled steel, motor vehicles, textile machinery, oil products, aircraft Major trading partners Japan, Hong Kong, U.S., Germany, Taiwan Background There was a major split within the ranks of the Chinese Communist Party in the 1960s; Maoist China is the third-largest country in the world in "radicals" wanted to work for a classless society and area, and it has the world's largest population. China "moderates" wanted to emphasize modernization boasts the world's oldest civilization, with a written and development. Young Maoists led a "Red Guard history going back more than 3,500 years. The Revolution" in 1966, resulting in widespread Chinese empire was ruled by a series of dynasties for more than 2,000 years, beginning in about 221 brutality. Control was restored to some extent in 1967, although the conflict within the Chinese B.C. Although invaders were sometimes successful Communist Party continued. in conquering parts of China, Chinese culture and Mao died in 1976. After a brief power struggle, civilization survived these conquests. Until the end Deng Xiaoping, a moderate, became China's most of the 18th century, the Chinese government important leader. Sweeping ideological changes severely restricted foreign trade and other foreign took place, and these changes led to economic contact. The Chinese empire began to weaken in the 19th century, and in 1911 revolutionaries led by changes. Although China today remains a repressive Dr. Sun Yat-sen overthrew the empire and communist country in many respects, under Deng's established a republic. leadership many significant and successful The Nationalist Party which ruled the republic economic reforms were initiated was overthrown by the Chinese. Communist Party, China's Gradual led by Mao Zedong, in 1949. Military and economic aid from the U.S.S.R. helped to support the Approach to Reform communist government, although friendly relations China's transition to a market-based economy began with the U.S.S.R. did not last. Many changes in 1978; it has been characterized by gradual or occurred in China under communist rule. All major phased changes and localized experiments rather industries, including agriculture, were placed under than dramatic, radical changes. Deng Xiaoping stare ownership and control. Peasants were forced to described this approach as "feeling the stones to combine their land holdings into rural communes or cross the river." huge agricultural cooperatives, with the goal of The emphasis in Chinese reform has been on improving efficiency. Under the planned economic gradual decentralization-spreading decision-making system China made advances in industrial authority away from the central government. Initially, development, health care, and education. the government maintained control of large firms, but sought to decentralize ownership of smaller progressively eased on trade. Trade policies now firms. Market forces of supply and demand have permit more foreign investment, helping Chinese been allowed to replace many government decisions industries to grow and modernize. Export growth about production and pricing. State- owned in China has been phenomenal since these reforms enterprises are slowly being exposed to market were instituted. forces. The number of prices set by the government In 1995 the Chinese government instituted a has fallen dramatically. tax reform program designed to raise new revenue Most early reforms focused on the rural to address future problems. For example, as the economy. Large collective farms were broken up, inefficient state-owned enterprises are made more and responsibility for agricultural decisions was given efficient, many workers may be temporarily back to households. The government raised rural unemployed and in need of government assistance. incomes by relaxing severe price controls on The Chinese program of gradual reform looks agricultural products. New rural businesses were spectacular. Unlike the former Soviet Union, China permitted to open, and they were encouraged to did not disintegrate as it under took reform. operate on market principles. Many of these new Resources from reforms in agriculture cushioned the businesses were owned by local governments, but transition. Gross domestic product has grown at an some were privately owned. average rate of over 9 percent a year since reforms Because the agricultural sector had been so began. This growth has resulted in many repressed, freeing it up produced immediate payoffs. improvements in the lives of the Chinese people. Between 1981 and 1984, agriculture grew by about According to World Bank reports, consumption 10 percent per year, largely because the shift to levels have doubled, and the number of people living family farming improved incentives. The increased below the poverty line has declined by about 60 incomes in the agricultural sector built momentum percent. The infant mortality rate has fallen from 48 for further, more difficult reforms. The increased per 1,000 live births in 1978 to about 35 per 1,000 income and savings from the improvement in today. agriculture were used to ease the transition in other Although China's gradual approach to sectors of the economy. transition has resulted in impressive growth, many By 1984 reforms had spread to urban areas. economic problems remain. Many Chinese people Local governments were granted more authority, remain stuck in poverty, in rural and urban areas. and the banking system took over part of the China still has many state-owned enterprises_which government's role as a source of finance. High will require exposure to market forces and savings rates occurred, along with gains in incentives if they are to become efficient. Public productivity that followed as labor moved from spending as well as private spending is probably inefficient to more efficient jobs. Small firms, many needed to stimulate the growth of the Chinese privately owned, have been responsible for much of infrastructure. Transportation shortages cause China's economic growth since 1990. In 1995, state- bottlenecks and contribute to urban congestion and owned firms accounted for 40 percent of China's energy shortages-because of heavy reliance on coal gross industrial output, down from 66 percent in transported by rail. Additionally, China's rapid 1985. growth has led to environmental problems, Reforms also emphasized Chinese involvement especially in the areas of water pollution, with the rest of the world. Restrictions were atmospheric contamination, soil erosion, deforestation, and damage to wetlands. This article is obviously old. China's growth in the 21" century has been spectacular. 2. (5) What have the Chinese had to overcome? 3. (2) List some issues in the United States that might be like some Chinese problems. 4. (5) What good economic things are happening in China now