|Topic||Developing and Transitional Economies|
|Key Words||International Finance, Economic Growth, Gross Domestic Product, Exports, Investment|
When the Asian financial crisis spread from Thailand to Singapore to Malaysia to Korea, many economists speculated that China would next be on the list, especially considering the state of the Chinese banking system. The growth rate in China in 1999 was 7.1 percent and gross domestic product (GDP) climbed 8.1 percent in the first quarter of 2000. The increase in the country's rate of growth suggest that China's chief economic planner, Prime Minister Zhu Rongji, has managed to avoid the malady that plagued the rest of Southeast Asia.
The increase in China's GDP should not suggest that the country is not beset with economic problems. Most economic activity is concentrated in a handful of coastal cities. Other regions are suffering from a recession and it has been suggested that further declines in economic activity in the industrial northeast could lead to protests. The unemployment rate in this region is over 30 percent in some places. China has tried to improve economic conditions in this area by spending on huge public works projects. It has also increased government workers' salaries, increased vacation time and cut bank-deposit rates in an effort to encourage consumer spending. Price controls have been imposed to curb deflationary pressures. The country's national pension system is not fully funded and millions of workers fail to receive adequate retirement benefits.
Exports and foreign investment are the driving forces behind economic growth. Exports increased by 30 percent in the first quarter giving China a $5.2 billion trade surplus for the quarter. Foreign investment rose 10 percent in March 2000 compared with a year ago. The value of contracts for future foreign investment rose 27 percent in the first quarter. The growth in export revenue is expected to quiet fears that China will devalue the yuan, its national currency, to stimulate increased exports.
(Updated May 1, 2000)
|Source||Craig S. Smith, "China Makes Gains in Spurring Growth," The New York Times, April 17, 2000.|
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