China Economic and Social Development

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China Economic and Social Development

• Zhang Jianping
• Central University for Nationalities
• December 1,2005 Beijing

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•  
• Introduction
• In 1978, the absolute poor in China numbered 250
  million and the poverty incidence was 33.1. By
  the end of 2004, among the total population of
  1.29988 billion, the absolute poor numbered 26
  million (by the standard of annual income 668
  RMB) with poverty incidence as 2.8, which is a
  notable advance in poverty reduction efforts.

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? Preview of National Economic and Social
Development

• 1.High economic growth
• During 1979-2004, Chinas GDP grew at an
  annual pace of 9.4. As the biggest developing
  country, the high grow has been the most
  remarkable feature for the country. Since the
  1980s, China shadowed Japan, the US, EU and the
  world average and developing world average in
  terms of economic growth. Its GDP in 2004
  amounted to 13.6515 trillion RMB, exceeding 1.6
  trillion US dollar which is a proof that China
  has become an important source of growth for the
  world economy.

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GDP Growth of Various Regions
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2. Economic restructuring and optimization are
speeding up Primary industry is losing its
proportion in total GDP secondary and tertiary
industry is assuming a heavier weight so that
they have become the driving force for economic
growth. It is noticeable that the
medium-and-high-tech industry is holding an
enlarging share in GDP.

• Basic composition of GDP in 2004

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The Third Industrial Restructuring Since Reform
and Opening-up
Changes of three industries weight to
GDP(19782003)
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Changing Composition of Industries with Different
Technical Content (19932002)
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Urbanization Development
Urbanization Rate(19782003)
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• 3. Accomplishments in Opening to the outside
  world
• Foreign Trade
• Chinas foreign trade increased from 20.6 billion
  US dollars in 1978 to 1154 billion US dollars in
  2004 ( exports 593.4 billion US dollars and
  imports 561.4 billion US dollars) with an annual
  growth over 17, much higher than the 6
  contemporary global growth and also higher than
  many developed countries and regions. Therefore,
  China is the most dynamic with the largest
  potential in the world economy.

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Exports to major countries and regions in
2004(Unit100 million US )

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Changes of world trade volume during 1994-2003

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Global Trade during 2002-2004(100 million US )
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Foreign Exchange Reserve

• Since the unification of exchange rates in 1994,
  China has seen a constant surplus of
  international balance under both current account
  and capital account, among which the trade
  surplus has exceeded 300 billion US . By the end
  of 2004, the national foreign exchange reserve
  reached 609.9 billion US , up 206.7 billion over
  the previous year. Due to the continuous increase
  of trade surplus and high investment growth,
  Chinas foreign exchange reserve is rising
  exponentially. For the first half of 2005, the
  growth rate surpassed 100 million US , with the
  total amount breaking the record of 700 billion
  US for the first time.

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4. Enormous decline of Poor Population

• Since reform and opening-up, Chinas great
  achievements in poverty reduction can be
  evidenced by the decline of poor population from
  250 million to less than 30 million.

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? Driving force underpinning the Constant
High GrowthThe major reasons are China adopted
a policy of reform and opening-up. It has
accomplished the transfer from a
centrally-planned to a market-based socialist
economy that better adapts to the changed social
and economic conditions in China. Improvement of
market system, reforms on state-owned enterprises
and further opening to the outside world have
helped diversify investors and fill in the
financial gap which is a leading force for
growth. And emphasis on education, reform and
development on social security is another.
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• Investment on Fixed Assets
• Calculated by constant price,during
  1979-2004, Chinas annual growth on fixed assets
  investment was 12.6, maintaining 3 percentage
  points more than GDP growth rate. Its
  contribution to GDP growth reached 42.5, namely,
  4 percentage points of overall economic growth.
  Despite the minor fluctuations, the investment
  kept a rapid pace of growth. Therefore, it is the
  major driving force for national economic growth.

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• The growth rage of fixed asset investment in the
  third prosperous phase of economic development ()

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• Recipients of fixed asset investment and growth
  tendency

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Government Input to Capital Construction(19962003
)

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Channels and sources of fixed asset investment
in various social sectors()
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• Fixed assets classified by investors

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Increase of fixed asset investment classified by
sectors since 2000
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• Since Februery,2005, as the Chinese government
  promulgated the Decision to Promote the
  Development of Non-Public Sectors, non-public
  sectors have entered a new phase of development
  with the ratio of benefit indicators and
  industrial added value rising significantly in
  the aggregate value.

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Utilization of Foreign Capital

• Since the reform and opening up, utilization
  of foreign capital has been growing at an
  increasing speed and scale. In 2003, the actual
  utilization of FDI reached 53.5 billion ,
  exceeding that of the US for the first time as
  one of the largest recipients just after
  Luxembourg. In 2004, the approved FDI enterprises
  numbered 43664, 6.3 more than the previous year
  contracted foreign capital amounted to 153.5
  billion , 33.4 more than the previous year
  actually utilized FDI reached 60.6 billion .

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Foreign Direct Investment to China(Unit100
million )

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• Sustained investment growth drives local demands
  as well as supply. The rapid growth of fixed
  asset investment has a far and positive influence
  on Chinas national strength which can be seen in
  the accelerated construction of major physical
  facilities and the improvement of transportation
  and telecommunication once regarded as a
  bottleneck for growth. All the above formed up a
  solid basis for sustainable social and economic
  growth. Additionally, the investment has also
  brought about a constant rise of funds to real
  estate and subsequently a better living condition
  for the residents.

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Consumption Growth

• The growth of consumption, although slower than
  fixed asset investment, has generally maintained
  a rapid pace. During 1979-2004, Chinas annual
  growth of consumption was 8.5, 1 percentage
  point more than GDP growth. Consumption
  contributed 53.2 to the overall national growth,
  driving the growth 5 percentage points higher
  than the previous year.

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• Since the reform and opening up, the stable
  increase of income average nationwide has
  stimulated a constant growth of consumption which
  prompts economic development.
• Income(RMB/Person)
• 1978 1990
  1995 2000 2001 2002 2003 2004
• Urban
• Residents 343 1510 4283 6280 6860
  7703 8472 9422
• Rural
• Residents 134 686 1578 2253 2366
  2476 2622 2936

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• Annual growth of income
• 
  1979-2003 2002 2003 2004
• Per capita disposable income
• for urban residents
• (current price)
  13.7 12.5 10.3 11.1
• Actual Purchasing Power 6.7
  13.5 9.3 7.7
• Per capita disposable income
• for rural residents(current price)12.6 4.6
  5.9 12.0
• Actual Purchasing Power 6..9
  4.8 4.3 6.8

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Relation between per capita GDP and the final per
capita household expenditure(statistics in 1995
as a benchmark, US)(Changes during 1990-2002)
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Features of Economic Growth in the New Century

• Entering the new century, starting from 2001,
  Chinas GDP grew by 7.5, 8.0, 9.1 and 9.5
  each year, mainly contributed by secondary
  industry. The expanding fixed assent investment
  is the fundamental reason for the growth of
  secondary industry. As preliminarily calculated,
  secondary industry contributed 70 to GDP growth
  in 2003 and less in 2004 because of the
  macro-control measures took by the government,
  however, the contribution kept at 61.

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? Development of Social Security

• 1. Reform on Social Security System
• Defects of social security in a
  Centrally-planed economy
• In the centrally-planed economy, Chinese urban
  and rural segmentation bereft the rural residents
  of an up-to-time social security while that for
  the urban residents are confined to the public
  sectors.
• Social security in urban areas was based on the
  security provided by the employer since the mid
  of the 1960s, specifically, a structure of high
  employment, low income and high benefit. The
  security that the laborers would expect is
  subject to the job they obtain.

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• l In response to economic restructuring and to
  satisfy the demands of sectors with various
  ownership, the Chinese government launched the
  construction and reform on social security system
  centered on pension insurance since the 1980s. A
  modern social security system is shaping up.
  China has seen a rapid development in this part
  of social undertaking.

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• l In 1993, the Chinese government stipulated that
  a multi-level social security system must be
  established and that the premium of pension and
  medical insurance shall be paid by both the
  employer and the employee in a combination of
  social pooling and individual account.
• l In 1997, the State Council issued The Decision
  of the State Council on Setting up Basic Medical
  Insurance System for Staff Members and Workers in
  Cities and Towns in which a focal point is that
  pension premium shall be paid by the enterprises
  and employees. The enterprise pays no more than
  20 of the salary while the employees
  responsibility ranges from 4 at the beginning to
  8. Enterprises nationwide shall set personal
  account for employees with the amount as 11 of
  their salary. The amount turned in by employees
  shall all be deposited to the account and the
  shortage shall be replenished by the employers.

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• With the establishment of the Minimum Social
  Security System and the promulgation and
  implementation of the Regulations on the Relief
  to the Migrants to Urban areas with no
  Livelihood, the social relief system has achieved
  a big leap forward and is playing an important
  role in poverty reduction.
• A wave of profound reforms have wiped various
  social insurance. Pension, medical and
  unemployment insurance as the three pillars of
  insurance are being improved a pension insurance
  system with a combination of social pooling and
  individual account have come into shape
  Coordination and allocation of basic pension fund
  have been realized.
• Approach to social benefit is shifting from
  hidden imbursement to overt imbursement.

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Pension Insurance

• By the end of 2004, the beneficiaries under the
  umbrella of basic pension insurance numbered
  163.53 million among which employees 122.5
  millions and retirees 41.03 million while the
  total retirees nationwide were 46.75 million. The
  revenues gained from basic pension insurance
  totaled 425.8 billion RMB throughout the year
  among which central finance contributed 52.2
  billion RMB and local finance contributed 9.2
  billion RMB. The expenditure stood at 350.2
  billion RMB. It is the first time that the
  pension is provided on time and in full.
• By the end of 2004, the rural pension insurance
  covered 53.78 million farmers with 2.05 million
  of them having received the pension fund. The
  accumulative balance of the insurance was 28.5
  billion RMB for that year. 22.01 million urban
  residents received the subsistence allowance from
  the government.

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Unemployment Insurance

• The number of those included in the nationwide
  unemployment insurance by the end of 2004 was
  105.84 million with 4.19 million of them having
  got paid. Revenues from unemployment insurance
  reached 29.1 billion RMB while expenditure stood
  at 21.1 billion RMB, up by 15.8 and 4.1
  respectively over the previous year. The balance
  for this year was 38.6 billion RMB.

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Basic Medical Insurance

• By the end of 2004, the number included in
  nationwide basic medical insurance stood at
  124.04 million, among which employees 90.45
  million and retirees 33.59 million.
• Revenues for that year was 114.1 billion RMB,
  expenditure 86.2 billion RMB. The revenues and
  expenditure coming from social pooling are
  respectively 62.3 billion and 46.4 billion. The
  balance for the year was 95.8 billion among which
  social pooling 55.3 billion and personal account
  40.5 billion.

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Employment

• By the end of 2004, urban employees totaled 752
  million among which primary industry absorbed
  352.67 million (46.9),secondary industry 169.2
  million (22.5) and tertiary industry 230.11
  million (30.6). Employees in townships totaled
  264.76 million among which 110.99 million in
  public units, 55.15 million in private or
  self-employed sectors.

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? Major Problems in Social and Economic
Development

• 1. Agriculture weak foundation, difficulty in
  increasing grain output and farmers income,
  enlarging urban and rural gap.
• 2. Manufacture Enormous ongoing and emerging
  projects, blind expansion of investment with low
  efficiency rise of materials price intensive
  relation between demand and supply in terms of
  coal, power and petroleum inappropriate use of
  resources and environmental pollution.
• The change of growth mode is an emergency
• 3. Geographic gap of economic and social
  development no narrowing of geographic gap, no
  abatement of unemployment pressure, no
  improvement of living conditions for a number of
  residents.

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Enlarging Rich and Poor Gap

• Report on the Development of Productivity in
  China revealed that the Gini Coefficient was
  0.458 in 2000, exceeding the alarming line of 0.4
  and it keeps rising in recent years until 0.5 in
  2004. It warns that the enlarging rich and poor
  gap should arouse attention.

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Comparison between urban resident per capita
disposable income and that of rural residents
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Slow increase of farmers income and the more
remarkable segment between urban and rural economy
Comparison between urban resident disposable
income and that of rural residents(comparable
price,)
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Imbalance of geographic economic development
The Western Development Strategy, though
promote the development of west China, can not
prevent the enlarging gap between east and west.
Most of Chinese poor live in the west, especially
in the ethnic minorities areas.
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