Economy of The People's Republic of China - Development

Development

See also: List of administrative divisions by Human Development Index (HDI).

China, economically frail before 1978, has again become one of the world's major economic powers with the greatest potential. In the 22 years following reform and opening-up in 1979 in particular, China's economy developed at an remarkable rate, and that momentum was maintained into the early years of the 21st century.

China adopts the "five-year-plan" strategy for economic development. The Twelfth Five-Year Plan (2011–2015) is currently being implemented.

Like Japan and South Korea before it, for nearly 30 years China has indeed been growing, thrusting its citizens into prosperity and its goods across the world. Between 1978 and 2005, China's per capita GDP had grown from $153 to $1284, while its current account surplus had increased over twelve-fold between 1982 and 2004, from $5.7 billion to $71 billion. During this time, China had also become an industrial powerhouse, moving beyond initial successes in low-wage sectors like clothing and footwear to the increasingly sophisticated production of computers, pharmaceuticals, and automobiles.

Just how long the trajectory could continue, however, remained unclear. According to the 11th five-year plan, China needed to sustain an annual growth rates of 8% for the foreseeable future. Only with such levels of growth, the leadership argued, could China continue to develop its industrial prowess, raise its citizen's standard of living, and redress the inequalities that were cropping up across the country. Yet no country had ever before maintained the kind of growth that China was predicting. Moreover, China had to some extent already undergone the easier parts of development. In the 1980s, it had transformed its vast and inefficient agricultural sector, freeing its peasants from the confines of central planning and winning them to the cause of reform. In the 1990s, it had likewise started to restructure its stagnant industrial sector, wooing foreign investors for the first time. These policies had catalysed the country's phenomenal growth. Instead, China had to take what many regarded as the final step toward the market, liberalizing the banking sector and launching the beginnings of a real capital market.

This step, however, would not be easy. As of 2004, China's state-owned enterprises were still only partially reorganized, and its banks were dealing with the burden of over $205 billion (1.7 trillion RMB) in non-performing loans, monies that had little chance of ever being repaid. The country had a floating exchange rate, and strict controls on both the current and capital accounts.