China's Growing Economy Section: Economics Essays
In feeling for the stones, China's already realized economic transformations have vastly improved the lives of hundreds of millions of people (The Economist 26)- Chinese people. Economic measures instituted by Deng Xiaoping have been grouped together, under the general term of gradualism, but many observers now say that in order for China to continue its double-sized growth over the long term and to rectify the problem of the state industries that are losing billions of dollars, economic shock therapy needs to be administered, and quickly. But the current plan of China's President Jiang Zemin and his advisors includes no such shock therapy. It does include, however, divesting the government of all but one thousand of the more than three hundred thousand state-owned businesses that have cost the Chinese government $85 billion in looses over the past ten years. The following chart shows the distinctions of several of China's economic indicators, and their changes since 1987. Table 1. Selected Economic Indicators (Billions of dollars) Factor 1987 1997 Change Gross Domestic Product 300 610 610 Merchandise Exports 30 180 150 Foreign Investment 2 48 46 Hard Currency Reserves 25 128 103 Losses of State-Owned Industries 3 88 85 (Business Week, Sept. 1997) From the preceding chart, the growth in China's GDP over the past ten years in nearly indefinable.
Other indicators are highly favorable, with the economy's only apparent problem being that of the losses of the state-owned industries. The losses incurred over the past ten years could have served extremely well in furthering the quality of life of the Chinese people, rather than simply supporting the workers in those industries. Those workers represent no small percentage of the Chinese population- there are 100 million workers in those state supported industries that have lost so much money (Clifford et al.). The plan of action proposed by Jiang Zemin in rebuilding the Chinese economy includes: ' Restructuring state enterprises. Already responsible for a third of the country's industrial output, these could be converted to public corporations. When these companies become shareholder-owned companies, it opens the door to foreign competition. Government holdings can be at the level of minority shareholder. '
Strengthening financial markets. Set up the equivalent of our SEC and allow annual capital-generating stock listings in Shanghai and Shenzhen. (China already has a start on regulating securities exchanges (Reuter's).) ' Selling state assets. Currently, there are 305.000 state-owned businesses. The government would retain 1,000; the remaining would be sold. Those that cannot be sold will be allowed to go bankrupt. ' Building social services. Literally millions of Chinese citizens stand to lose their jobs through the sale and conversion of state-owned businesses. This action is intended to both replace some of those state-owned enterprises and provide assistance to those affected in the form of training, housing, and pensions design. ' Cutting trade tariffs. Though China is not a member of ASEAN, the country does aspire to join the World Trade Organizations (WTO) by the year 2000. Tariffs must be reduced to 15 percent by that time in order for China to be eligible for WTO membership (Business Week).
Even while concentrating on internal adjustments, the government apparently intends to work toward that end. Jiang's objective is to build a complete market system which will give China a chance to grow at an average of 6.5 percent annually for about 25 years and come forth as a $5 trillion modern industrial superpower (Clifford et al.). If the President is able to succeed with his plan of action, the impact will be tremendous for the global economy of the 21st century. Hong Kong, the center of the Chinese capitalism, could have the opportunity to be side-by-side with London, Tokyo, and New York as financial centers.
As long as Chinese individuals move in on global bonds and stock markets to help finance everything, like superhighways to steel mills, China could take part in even more parts of the world's capital. The main goal for China's modern foreign policies is the development of the Chinese infrastructure. The significance of improved communication and transportation cannot be over-stressed. Economically, enhanced means of communication and transportation allows more expedient supply of demand scheduling. Two of the latest Chinese reform measures to aid in the development of the country are the Provisional Regulations on Direction Guide to Foreign Investment and the Catalogue Guiding Foreign investment in China. Both these policies place specific industries including telecommunications, machinery, and electronics on top priority.
Funding for these projects come from foreign investments and appropriations from the Chinese government in the form of grant financing, and legislative or administrative support. Yet another example of the Chinese emphasis on industrial based growth is far reaching goal of having just under 100 million telecommunication lines by the year 2000. China's Central Ministry of Posts and Communication said that in order to complete this major task China will enlist the aid of major overseas suppliers and create manufacturing plants within the nation. AT&T, Motorola, Northern Telecom, Alcatel, Ericsson, NEC, and Siemens are just a handful of the multinational companies which hold a considerable share of the Chinese telecom market, once again proving that China is becoming a party to interdependence. The Chinese pharmaceutical market, much like Chinese industrial markets, is experiencing rapid growth due to reforms in China's economic strategy. The nation's government has decided to lower import tariffs and remove the necessity of an import license to bring pharmaceuticals into the country. Also, patented foreign drugs, such as Tylenol, are now being protected from counterfeiting by administrative action. The result of these provisions are overseas contractual investments totaling $1.5 billion in the past five years, and income from the medical industry's exports reaching 2.6 times the amount five years ago, according to Zheng Xiaoyu, director of the State Pharmaceutical Administration (moftec.gov).
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