China`s Economy: Recent Development and Long-Term Prospects

Abstract

China’s economic development in the past three years (1997-99) has been affected by the Asian financial crisis and the rapid changes in the PRC’s social and economic institutions. The combined effect has been a sharp decline in exports and foreign direct investment (FDI) and a slowdown of growth in gross domestic product (GDP). Although the implementation of a whole array of monetary and fiscal policies helped to 411 the economy in late 1999 and the first ha If of2000, the growth rate of GDP still lies below the 1990-96 record.\nDespite the recent slowdown, China under the twenty years of reform and opening-up policy has signfIcantly enlarged the industrial base and improved infrastructure and market operations. The long-term outlook on the Chinese economy projected by the World Bank and many Western experts remains optimistic. While some gloomier projections exist, on balance the optimists prevail.\nIn the journey toward becoming a world-class economic power the Chinese economy also faces such obstacles as the decay of state-owned-enterprises (SOEs), the existence of a huge surplus labor; and the rapid deterioration of the environment. Whether or not solutions to these problems are found will determine China’s chance of becoming a major player in the twenty-first century world economy.