Economy

China constitutes 1/10 of the world’s Gross Domestic Product (GDP). China’s economy has been growing at an average annual rate of 10% since free market reforms began in 1978. Its GDP is the world’s 2nd largest in terms of Purchasing Powers Parity (PPP) and the 3rd largest in Exchange Rate terms. Industry and construction contribute nearly 50% of GDP, services 40%, and agriculture just over 10%. Exports of goods and services exceed imports by just under 4:3. Agriculture and industry together employ 70% of the labour force.

Since 1978, China’s foreign exchange reserves have grown steadily from $2.3 billion to $1.7 trillion. It is estimated that 70% is in US dollar holdings and bonds; 10% in Japanese Yen; and the remainder in Euro and Pound Sterling. Only about 1% of the reserves are in gold – China has not grown its gold reserves since they increased by 50% to 546 tonnes between 2001 and 2002.

Per capita income has increased at an average of more than 8% per annum over the three decades, lifting 400 million people out of extreme poverty. Outside China, there has been no decrease in the number of people living in extreme poverty (on less than US$1/day); within China, the number halved between 1990 to 2001, 15 years ahead of the World Bank’s Millennium Development Goals. The proportion of Chinese living in extreme poverty has dropped from 90% at the foundation of the PRC in 1949 to less than 10% today.

But with per capita income of about $2500 per annum, China still ranks around 100th in the world and gap between rich and poor continues to widen. A standard measure of this gap is the Gini co-efficient: China’s figure is 0.47, ranking it 97th in the world (under Mao, it was 0.16 – lower than any other country ranked today) and significantly above the warning threshold of 0.40.

In This Section:
1 - The Currency
2 - Inflation
3 - Interest Rates
4 - Regional Contributions