An Analysis of China's Current Economic Outlook

China, having initiated many economic and market reforms in recent years, is seen by some analysts as having also implemented a new economic model that is socially as well as economically successful. Li He, an economist with extensive expertise in Chinese affairs, stated that since the 1970s, China has experienced a gradual and ongoing shift from a centrally planned economy to a market system; these reforms, said He, "have resulted in fast and continuous growth." It is the purpose of this report to examine China's current economic outlook, drawing upon primary as well as secondary sources to profile an economy that has acquired substantial amounts of foreign direct investment (FDI) as it transforms itself from a largely agrarian economic base to one emphasizing industrial and manufacturing as well as entrepreneurial activities.

The National Bureau of Statistics of China identified Gross Domestic Product (GDP) data for the four quarters of 2004 as follows:

Absolute Value, Yuan Growth Rate

(100 million Yuan) over Prev. Yr.(%)

Gross Domestic Products 136515 9.5

Tertiary Industry 43384 8.3

These data were augmented by comments from the U.S.-China Business Council which noted that "China's controlled economic stabilization is unquestionably underway." The US-CBC called for continued

. . .
, China's Ministry of Commerce did identify six problems challenging China's commodity market as 2005 got underway. These problems are: "1) Prices of some farm produce, including cotton and soybean, are fluctuating too frequently and the output of some seasonal farm produce has risen but prices have dropped, bringing great harm to farmers 2) Price hike pressure still exists. The prices of capital goods in 2004 rose by 13.6 per cent and the prices of some basic raw materials began to rise after a short period of correction. The strained supply of coal, electricity and oil has not been eased. 3) Too rapid a rise in production capacity of some industries has resulted in the growth of inventories and the amount of working capital occupied. The inventories of wholesale and retails enterprises rose 12.1 per cent at the end of 2004 as compared with the level at the beginning of the year. 4) Market order needs further standardization as fake and shoddy goods are seen everywhere. 5) Too rapid a rise in the prices of agricultural capital goods and rural consumer goods have held up the development of the rural market." 6) Consumption is out of proportion to investment, resulting in the surplus of production capacity
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Approximate Word count = 2169
Approximate Pages = 9 (250 words per page)

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