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China, economically extremely backward before 1949, has become one of the world's major economic powers with the greatest potential, and the overall living standard has reached that of a fairly well-off society. In the 22 years following reform and opening-up in 1979 in particular, China's economy developed at an unprecedented rate, and that momentum has been held steady into the 21st century. In 2004, the government further strengthened and improved its macro control, and the economy entered its best ever development period of recent years. The gross domestic product (GDP) for 2004 amounted to 13,687.59 billion yuan, 9.5 percent higher than the previous year.

China adopts the "five-year-plan" strategy for economic development. The 9th Five-Year Plan (1996-2000) was outstandingly successful, and the 10th Five-Year Plan (2001-2005) mapped out the first plan for the new century, setting these main targets:

-- Sustaining fairly rapid growth, strategic restructuring, improving the quality and benefits of economic growth so as to lay firm foundations for doubling the 2000 GDP by 2010; substantial perfection of the socialist market economy and putting state-owned enterprises on a modern enterprise footing, thus allowing greater participation in international cooperation and competition.

-- GDP to reach some 12,500 billion yuan, and per capita GDP 9,400 yuan by 2005 (at 2000 prices assuming annual economic growth of around 7 percent). A marked improvement in quality of life, with 5 percent annual growth in the disposable income of urban residents and in the net income of rural residents; keeping the registered urban unemployment rate stable at around 5 percent; maintaining generally stable prices and basically balancing international revenue and expenditure.

-- Optimizing and upgrading the industrial structure to sharpen China's competitive edge. By 2005, the added value of the primary, secondary and tertiary industries will account for 13 percent, 51 percent and 36 percent, respectively, of GDP; employing 44 percent, 23 percent and 33 percent, respectively, of the labor force. Further improvement to infrastructure; increased urbanization and bringing the widening development disparity between regions under effective control.

Most of these targets have already been achieved ahead of schedule. At present, the government is drafting the 11th Five-Year Plan (2006-2010).

Economic system

Economic restructure is one of the most crucial elements of China's reform and opening-up policy. For the first 30 years of the PRC, the government practiced a planned economy system, whereby industrial production, agricultural production, and the stocking and selling of goods in commercial departments were all controlled by state plan. The variety, quantity and prices in every sphere of the economy were fixed by state planners. While this contributed to the planned, focused and steady development of China's economy, it also sapped its vitality and limited its growth. Economic reforms began with the rural areas in 1978, and were extended to the cities in 1984. In 1992, after some 10 years of reform in the clear direction of the establishment of a socialist market economy, the government set out the main principles of economic restructuring: encouraging the development of diversified economic elements whilst retaining the dominance of the public sector; creation of a modern enterprise system to meet the requirements of the market economy; a unified and open market system across China, linking domestic and international markets, and promoting the optimization of resources; transformation of government economic management in order to establish a complete macro-control system; encouraging certain lead groups and areas to become rich first, enabling them to help others towards prosperity too; the formulation of a China-appropriate social security system for both urban and rural residents, so as to promote overall economic development and ensure social stability. In 1997, the government stressed the importance of the non-public sector to China's national economy, in which profitability is encouraged for such essential factors of production as capital and technology, so as to further progress economic reforms.

A socialist market economic system has now taken shape, and the basic role played by the market has been improved in the sphere of resource allocation. At the same time, the macro-control system continues to be perfected. The pattern has basically been formed in which the public sector plays the main role alongside non-public sectors such as individual and private companies to achieve common development. According to the plan, China is forecast to have a relatively complete socialist market economy in place by 2010 and this will become comparatively mature by 2020.

Three-Step Development Strategy

China's overall economic construction objectives were clearly stated in the Three Step Development Strategy set out in 1987: Step One--to double the 1980 GNP and ensure that the people have enough food and clothing -- was attained by the end of the 1980s; Step Two--to quadruple the 1980 GNP by the end of the 20th century --was achieved in 1995 ahead of schedule; Step Three--to increase per-capita GNP to the level of the medium-developed countries by the mid-21st century--at which point, the Chinese people will be fairly well-off and modernization will be basically realized.

Key national projects

The "West-to-East Electricity Transmission," the "West-to-East Gas Transmission," and the "South-to-North Water Diversion" are the government's three key strategic projects, aimed at realigning overall economic development and achieving rational distribution of national resources across China. The "West-to-East Electricity Transmission" project is in full swing, involving hydropower and coal resources in western China and the construction of new power transmission channels to deliver electricity to the east. The southern power grid line, transmitting three million kw from Guizhou to Guangdong, was completed in September 2004. The "West-to-East Gas Transmission" project includes a 4,000-km trunk pipeline running through 10 provinces, autonomous regions or municipalities, conveying natural gas to cities in northern and eastern China. This was finished in October 2004 and has a design capacity of 12 billion cu m per year. Construction of the "South-to-North Water Diversion" project was officially launched on 27th December 2002 and completion of Phase I is scheduled for 2010; this will relieve serious water shortfall in northern China and realize a rational distribution of the water resources of the Yangtze, Yellow, Huaihe, and Haihe river valleys.

In 2003, after a decade of hard work, another key national project --the Three Gorges Dam --began to impound water, opened its permanent locks to navigation and sent power to the grid from its first generating units. It is designed to install 26 sets of generators, each with a generating capacity of 700,000 kw. When fully operational, the annual output of the Three Gorges Power Plant will reach 84.7 billion kw, produced from 26 sets of generators, each set able to meet the needs of a 1,000,000 population city.

Another key national project, the 1,142 km-long Qinghai-Tibet Railway, the highest railway in the world, will be completed in 2006.

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