Economy and Government of China
- The People’s Republic of China (PRC) is the second biggest economy in the world behind the United States of America and has the largest population of any country at 1.3 billion people.
- Although still officially a Communist country, China’s economy has changed during the last quarter of a century from a centrally planned system that was largely closed to international trade, to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy.
- Some of the biggest companies in the world are found in China. Their names largely unknown in the West, some operating in over 50 countries, they control extraction, manufacturing, supply and distribution networks in many different industries.
- The development of the private sector – led by an emerging class of entrepreneurs – has been crucial in this shift.
- In 1978, the first year of post-Cultural Revolution economic reforms in China, state-owned enterprises (SOEs) accounted for more than 90% of the country’s GDP; this has since fallen to about a third.
- However, boundaries between business and the State remain blurred and to further complicate matters, boundaries between the State and the Communist Party of China are also vague.
- Public officials may be managers in private enterprises yet the State may be the majority shareholder in a company and the Party organisation within the enterprise will exercise much more influence and power than the notional shareholder which is the State.
- Economic development has been more rapid in coastal provinces than in the interior.
- By 2011 more than 250 million migrant workers and their dependents had relocated to urban areas to find work and there is a strong rural/urban divide in many cities.
- Shanghai's migrant population, for instance, soared from 9 million in 2000 to 23 million people in 2010.
- However, as younger generations have higher expectations of quality of life than their predecessors, there is some evidence that they are now questioning low pay and poor benefits and are less interested in physically demanding jobs such as construction and manufacturing.
- Environmental degradation has been a significant side effect of migration and the growth of industry in China, causing serious air pollution, soil erosion, and water scarcity problems. The country continues to lose arable land both through soil erosion and economic development, increasing its dependencies on imported goods.
Looking ahead, the Chinese Government faces several economic development challenges:
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To sustain adequate job growth for tens of millions of workers laid off from SOEs.
The loss of the ‘iron rice bowl’ (Chinese idiom referring to the system of
guaranteed lifetime employment in state enterprises) has meant that, along with
migrants, there are many new entrants to the private sector workforce;
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To reduce corruption and other economic crimes;
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To contain environmental damage;
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To address social strife related to the economy's rapid transformation and ageing
population (a demographic consequence of the ‘one child’ policy that China
implemented in 1979);
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To reduce economic inequality as the gap between the rich and the poor
continues to grow (according to official figures the top 10 percent of urban
Chinese earn about 23 times that of the poorest 10 percent);9
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To achieve a shift from an export-oriented economy towards one more weighted
towards domestic consumption.
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