China Facts And Figures

Source: http://www.chinabusinessvisits.com/china-info.htm

I. Economy

China's economy during the last quarter century has transformed from a centrally planned system largely closed to international trade, to a more market-oriented economy with a rapidly growing private sector. Since the market reforms, China has achieved an average gross domestic product growth rate of 9.9 percent. While 2009 was projected to be the “toughest year for China’s economic growth in the 21st century,” the Chinese economy still grew at 8.7 percent in 2009, fueled by 12 percent growth in domestic demand for the first three quarters of 2009.

The economic rebound was aided by the government’s unprecedented RMB 4 trillion (USD 586 billion) stimulus package announced in November 2008. This fiscal measure increased spending on infrastructure, consumer subsidies, and social welfare projects; it was partly undertaken in response to the slump in exports to Europe and the United States which closed down many factory operations in Southern China. Government-led investment was a key driver in economic growth, but real estate investment also rose rapidly in the second half of 2009; the total stock of real estate related loans rose 38 percent in 2009 to RMB 3.7 trillion which accounted for 22 percent of GDP. Recent data released by the China National Bureau of Statistics (NBS) signals that the financial crisis is over in China; the country’s annual GDP growth rate increased to 10.3 percent for 2010. In the second quarter of 2010, China surpassed Japan as the world’s second-largest economy.

In 2010, macro-economic policymakers adopted a tighter fiscal stance in response to uncertainties in the world economy and the consequences of the massive government-led stimulus. The NBS published 2010 statistics which revealed consumer prices rose by 3.3 percent and food prices increased by a sharp 7.2 percent, raising concerns of inflation. Policymakers must consider raising interest rates to deal with rising inflation, and address concerns about property bubbles and international calls for exchange rate flexibility.
Reigning in 2011, countless austerity measures have been issued to address the possibility of a real estate bubble and rising inflation. These generally revolve around real estate tax, mortgage restrictions, land restrictions and encouraging local governments to develop affordable housing for low-income families. Some examples of these measures include:

• In January 28, 2011, both the Shanghai and Chongqing municipal governments adopted changes in property taxation polices. In Chongqing, real estate priced two times above the average market price or more will be charged an additional interest rate of 0.5 percent. In Shanghai, local residents purchasing their second or third property and incoming immigrants purchasing their first property will be subject to additional tax between 0.4 to 0.6 percent.
• Nation-wide real estate financing policies were issued to banks in an effort to curb real estate investments: Down payments for second properties can be no less than sixty percent, increased from the fifty percent requirement in 2010, and mortgages for third properties are no longer allowed;
• As of 2011, discounted mortgage rates are no longer permitted compared to mid-2010 during which property owners could receive up to a twenty-five percent discount on mortgage rates.

In January 2011, the Central Bank announced increased reserve requirements and interest rates in an effort to curb inflation. The two tables below detail the new requirements.

II. Politics

The Chinese Government is subordinate to the Chinese Communist Party (CCP); its role is to implement party policies. The primary organs of state power are the National People's Congress (NPC), the State Council and the President (the head of state).

In all important governmental, economic and cultural institutions in China, party committees work to see that party and state policy guidance is followed and that non-party members do not create autonomous organizations that could challenge party rule.

III. Development Overview

On March 5, 2011, the final draft of the 12th Five-Year Plan (FYP), which will dictate national policies from 2011 to 2015, was submitted to the National People’s Congress for review. While introducing aggressive goals to raise income and curb pollution, the blueprint also adopted a modest tone, identifying key restraints and threats to China’s growing economy. Despite impressive Gross Domestic Product (GDP) growth rates averaging 9.9 percent in the past few years, the plan projected an average annual GDP growth rate of 7 percent. The report also acknowledged that China’s “development is not yet well-balanced, coordinated or sustainable” citing shortcomings in the widening gap between rich and poor, rising prices and illegal seizures of people’s land. Improving living standards was a focus point of the plan, pledging to raise household incomes annually by seven percent while limiting inflation to four percent.

Environmental protection also factored heavily in the draft. For the first time ever, China will place a cap on total energy use, limiting consumption to the equivalent of four billion tons of coal by 2015. Plans were also made to build new statistical and monitoring systems to gauge greenhouse gas emissions and accelerate construction of sewage treatment plants.

Moving forward, China’s development will rest on two important socio-economic segments:

1. Growth of the private sector small- to medium-sized enterprises (SMEs). SMEs remain the backbone of the Chinese economy, accounting for 99 percent of registered enterprises in China as of 2009 year-end. As banks face stricter regulatory requirements on capital adequacy and loan deposit ratios, they are re-focusing efforts on the lending to established and state-owned enterprises, making financing for SMEs increasingly difficult to obtain. In response, the Central Bank has been working to surmount these financing difficulties. An example of this is the recent China Banking Regulatory Commission requirement that all state-owned commercial banks and joint-stock commercial banks establish specialized units for providing services to SMEs. So far, these efforts seem to have yielded positive results - in the first quarter of 2010, new loans to SMEs grew by 22.9 percent from the previous year.
2. Stable development of the rural economy. A well-known issue in China is the growing income disparity, particularly between urban and rural populations. Recent studies show that China’s Gini Coefficient, an indicator of income disparity, rising to 0.47 as of 2010. This reflects a relatively high income disparity, much of the poverty centering on rural areas. In recent years the government has emphasized the “Three Rural Issues” (三农: refers to the farming industry, rural communities and farmers) in support of rural development. On March 5, 2011, it was announced the State Council will be drafting a ten-year poverty-reduction plan (2011 – 2020) which aims to “eradicate poverty in 10 years”. The plan will target large areas of destitute populations, such as Gansu Province.