Pragmatic for the people.
| Author | Stone, Ted |
| Position | Sars and Chinese economy |
China's late leader, Deng Xiaoping, said of the journey towards capitalism that 'it doesn't matter whether a cat is black or white, as long as it catches mice'. By his death in 1997 he had presided over two decades of expedient economic reform, opening up the nation to unprecedented levels of foreign investment. Ted Stone describes how far China's economy has come--and forecasts where it's going
While the giant economies of Europe flounder and Japan seems permanently stuck in recession, China is flourishing. Growth of 7 or even 8 per cent a year is not unusual in the world's most populous nation. Although severe acute respiratory syndrome (Sars) has had a significant short-term impact, the outbreak is unlikely to undermine the country's long-term economic growth.
China's economy has been faring much better in terms of growth than the once-booming American economy. Of course, this doesn't mean that its gross domestic product rivals that of the US--it's still 10 times smaller--but China, with 1.3 billion inhabitants, has huge potential. Its labour costs are low and major improvements in infrastructure have made it easier for foreign investors to enter the market. In fact, China has attracted $400 billion--third after the US and the UK--in direct foreign investment over the past 20 years.
Agriculture is the back0one of the Chinese economy, employing 65 per cent of the labour force. Following land reforms in the early 1980s--including the replacement of collective farming with the household responsibility system, whereby individual families were given land usage rights--the sector's average annual growth has been 6.7 per cent. At the same time, there have been heavy investments in biotechnology, especially the development of genetically modified crops. By the late 1990s, township and village enterprises (TVEs) were contributing 13 per cent of the state's revenues.
The same China that embraced communism in 1949 entered the World Trade Organisation in November 2001--a move that has made it a stronger commercial player on the global stage. The trend started in 1978, when the Communist Party began liberalising the economy, and it's expected to continue under the new leaders who came into power at the end of last year.
Further reforms are needed, but the current leadership has learn from the past, according to Jack Sung, of Dutch investment consultancy bureau IMS. "Communism changed the lives of people who were kids in 1949. Those kids are the leaders at this moment:' he says. "They have experienced it, they know what mistakes were made and they know how not to make those mistakes again."
In 1978 Deng Xiaoping took control of the Communist Party and initiated a more market-orientated economy. The agricultural...
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