Economy of China

China in the Global Economy

Lawrence J. Lau, Ph. D., D. Soc. Sc. (hon.)

Kwoh-Ting Li Professor of Economic Development Department of Economics Stanford University Stanford, CA 94305-6072, U.S.A.

UTStarcom China Telecom Executive Management Program Stanford Graduate School of Business May 3, 2004

Phone: 1-650-723-3708; Fax: 1-650-723-7145 Email: LJLAU@STANFORD.EDU; WebPages: http://www.stanford.edu/~LJLAU

A Preview (1)

The Chinese Economy Today Comparison with Developed and Developing Economies Short-Term Economic Outlook Prospects for Long-Term Economic Growth Potential Risk Factors

Recurrence of the SARS epidemic Is the Economy Over-Heated? Financial Stability

Reform of the State-Owned Enterprises The Social Safety Net

Pension Unemployment

The Banking Sector (Non-Performing Loans, Pyramid Schemes, Real Estate Bubble) The Stock Market

Exchange Rate Mechanism (Hot Money, Capital Flight, Abolition of Capital Control) Lawrence J. Lau, Stanford University 2 Taiwan Straits

The Chinese Economy Today

The Chinese Economy Today (1)

East Asia is the fastest-growing region in the world over the past two decades, the East Asian currency crisis of 1997-98 notwithstanding. China is the fastest growing country in East Asia—approximately 9% p.a. since beginning of economic reform (1979) and 7.9% over the past five years. Between 1979 and 2003, Chinese real GDP grew from $177 billion to $1.41 trillion (2003 prices) (6th largest GDP in the world) and real GDP per capita grew from $183 to $1,090. The U.S. GDP (approximately $11 trillion) and GDP per capita (approximately $37,845) are respectively more than 8 and 38 times the comparable Chinese figures in 2003. China survived the East Asian currency crisis of 1997-1998 relatively unscathed. Despite the SARS epidemic, the rate of growth of real GDP in 2003 was 9.1%, the highest since the mid-1990s. China is one of the very few socialist countries that have made a successful transition from a centrally...