Overview of the National Economic and Social Development since Reform and Opening in China

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Overview of the National Economic and Social
Development since Reform and Opening in China

• Pan Shengzhou
• Policy Research Office of the Central Committee
  of the Communist Party of China

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• Contents
• I. Important policy decisions on economic
  development of the past 26 years in China
• II. Important measures for reform and opening of
  the past 26 years
• III. Basic Experiences of reform and development
  in China

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1. Important policy decisions on economic
development of the past 26 years in China
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• From 1979 to 2005, Chinas GDP increased by
  9.4 times with annual average growth rate of 9.6
  and per capita GDP increased by 8.1 times with
  annual average rate of 8.4. The total GDP in
  2005 reached 18.2 trillion RMB Yuan, equivalent
  to 2.12 trillion US dollars whilst the per capita
  GDP is 1,624 US dollars.

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1.1Shifting the focus of work of the Party and
the nation to economic construction
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• During the 27 years from 1952 to 1978, Chinas
  GDP increased by 3.72 times with annual average
  growth rate of 5.9 due to relatively high
  population growth, the per capita GDP only
  increased by 1.8 times and the annual average
  rate was 3.9.
• The Third Plenary Session of the 11th
  Congress of the Chinese Communist Party held at
  the end of 1978 made an important policy decision
  of historical significance, shifting the focus of
  the work of the entire Party to economy hence
  starting the stage of reform and opening.

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• Comrade Deng Xiaoping had repeatedly pointed out
  that Poverty is not socialism, the primary
  task of socialism is to develop productivity and
  development is of overriding.
• Comrade Jiang Zemin puts forward that development
  is the first primary task of the Chinese
  Communist Party.
• The current Secretary General Comrade Hu Jintao
  also points out that we must concentrate on
  economic construction and pursue development
  whole-heartedly.

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1.2 Formulating the strategic objective of
three-step modernization drive
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• The first stepby 1990 the GDP should double on
  the basis of 1980
• The second stepGDP would double again in 2000
  on the basis of 1990 and initially realize
  moderately prosperous living standard
• The third step around 2050 the per capita GDP
  would reach the standard of medium-level
  developed countries.

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• The 11th Five Year development plan
  formulated last year puts forward that the per
  capita GDP in 2010 should double on the basis of
  2000, and then double again in 2020 on the basis
  of 2010, realizing the objective of building
  moderately prosperous society in an all-round
  way.

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• The period from now to 2020 presents a period
  when the per capita average GDP ranges from
  1,000-3,000 US dollars and rather dramatic
  changes in economic and social structure are
  envisaged as international experiences tell us,
  which can become a fast growth period but also a
  stage of economic stagnation with multiple
  conflicts.

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1.3 Timely setting forth new strategy, principle
and regulatory policy centering sustained, rapid
and healthy economic development
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• Priority was given to the development of light
  and textile industry in early 1980s.
• The 9th Five Year Plan of the 1990s proposed
  to transform the economic system and economic
  growth pattern.
• The 10th Five Plan of 2000 proposed the
  strategy of industrialization and urbanization
  (at present, agricultural labor force still
  accounts for 47 of the total employment the
  proportion of urban population is only 43).

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• In 2000, the 10th Five Plan proposed the
  strategy of advancing industrialization and
  urbanization. (In 2005, the GDP of China
  accounted for 4.7 of the world total, but its
  energy consumption accounted for 12.1, fresh
  water for 15, steel for 37, aluminum for 25
  and cement for 45 of the world total
  respectively. )
• The Third Plenary Session of the 16th Party
  Congress in 2003 made a decision and tabled a
  human-centered, overall coordinated and
  sustainable scientific development outlook.
• The 11th Five Year Plan of 2005 set up new
  tasks of uplifting independent innovative
  capacity, constructing socialist new countryside
  and building up socialist harmonious society.

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• Since reform and opening, there had been three
  times of important adjustments targeted at
  economic fluctuations
• The first one was large-scale structure
  adjustment from 1984 to 1985 in light with
  inflation resulted from excessive investment in
  fixed assets.
• The second time was from 1990 to 1991. Hasty
  steps of relaxing prices of scarce commodities
  caused market fluctuations.
• The third time was from 1997 to 1998. In 1996,
  Chinese economy realized soft-lainding, Asia
  encountered financial crisis in 1997 and the
  problem of insufficient demand occurred to the
  Chinese economy. Through issuing long-term state
  treasure bonds for construction and implementing
  active financial policies to boost domestic
  demand, it maintained rapid and sustained
  economic growth.

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• The macro regulation being implemented at
  present is to prevent over-heated economy.
• It is to appropriately control excessive
  investment in iron and steel, cement,
  electrolytic aluminum, coal-based chemical and
  real estate industries, meanwhile, efforts are
  made to develop high and new-tech industries,
  adopt modern technologies to transform
  traditional industries, speed up the development
  of the tertiary industry.
• Implementation of policies that encourage
  consumption changed the economic growth pattern
  of excessive reliance on investment and export.

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• Looking at the process of a series of
  adjustments, one can see that the capacity of the
  Chinese government in driving the socialist
  market economy and macro regulation has been
  continuously improved, and it has changed
  gradually from relying on administrative measures
  to economic and legal approaches to address the
  issues, i.e. using economic leverages as finance,
  taxation, interest rate, price and import ant
  export and modifying macro economic parameters to
  guide micro economic behavior in order to realize
  the objective of regulation.

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1.4 Continuing economic structure adjustment and
optimization in line with the development tasks
at different stages
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Adjustment of the structure of industries (1)
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Adjustment of the structure of industries (2)
Using 9.3 of the global arable land and 5.4 of
the fresh water, China produces 1/4 of total
grain output of the world, hence resolving the
issues of food and clothing of 1.3 billion
people.
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Adjustment of the structure of industries (3)
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Adjustment of the structure of industries (4)
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Adjustment of the structure of industries (5)
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• Regional economic structure (1)
• In order to encourage some regions to take the
  lead in
• prosperity which will lead the rest to common
• prosperity
• Reform and opening were firstly implemented in
  the coastal areas in the 1980s. Two regions of
  development as the Pearl River Delta and the
  Yangtze River Delta were established, and the
  development trend of the Bohai Sea rim was also
  encouraging.
• In the mid 1990s, the Central Committee of the
  Party tabled the strategy of developing the
  western regions
• Entering the 21st century, the Central Committee
  proposed to revitalize the old industrial bases
  in northeast China, promote the economic rise of
  the central region, develop and open up the new
  coastal zone of Tianjin.

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• Regional economic structure (2)

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• Regional structure (3)

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1.5 Setting forth and adhering to the
implementation of the strategy of reinvigorating
the nation with science and education
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• Educational undertaking in China has
  witnessed two historical leaps
• Firstly, 9-year universal compulsory education
  and basic illiteracy eradication among the youth
  and those in the prime of their life has been
  basically realized in the country. The coverage
  of 9-year universal compulsory education has
  reached 95, whilst the illiteracy among the
  youth and those in the prime of their life has
  dropped to below 5.
• Secondly, higher education developed at
  unprecedented rate with gross enrollment rate
  increased from 9.1 in 1997 to 21 in 2005

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• The ratio of financial expenditure on education
  in the GDP increased from 2.5 in 1997 to 3.41
  in 2005.
• Investment in education increased by 7.3 times in
  12 years. The enrollment of ordinary higher
  education institutions was 609,000 in 1990 and it
  went up to 5 million in 2005. The number of
  registered students on campus was 2.063 million
  in 1990 and it climbed to 15.62 million in 2005,
  increased by 7.6 times.

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1.6High investment rate buttressing fast economic
growth
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The average annual growth of investment in fixed
assets from 1981 to 2005 was 20.1. In 2004, the
capital formation rate, i.e. the investment rate
reached 44.2 and the average was 38.9 in 25
years. In 2004, the ultimate consumption rate was
53.0, and the total investment in fixed asset in
2005 reached 8,860.4 billion RMB Yuan.
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• Efforts will be made to increase the income of
  the medium and low income groups, uplift the
  proportion of medium income group, regulate
  excessive high income and abolish illegal income
  so as to establish an olive shape in resident
  income structure. Meanwhile, we actively
  encourage residents to upgrade their consumption
  structure. We will also develop consumption
  credit and make efforts to turn house,
  automobile, education, information and tourism
  into new hot spots of consumption.

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2. Important measures for reform and opening in
the past 26 years Upholding market-oriented
reforms, China has realized the shift from
planned economy to market economy system and
initially established socialist market economy
system.
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2.1 Rural reform from the late of 1970s

• In the late of 1970s, land household
  responsibility contracting system linking output
  with income was implemented in rural areas, land
  ownership belongs to collective yet farmers have
  long term rights of land use.
• Starting from this year, agricultural tax is
  completely exempted in the country. Direct
  subsidy is given to grain growers and minimum
  protective price is applied to rice and wheat.
  Subsidy is also given to farmers to purchase
  improved seeds and large farm machineries.
• At present, there are over 100 million people
  employed by such enterprise at present. Township
  enterprises contribution to GDP is 27.9, to the
  incremental value of industry 46.3, to the
  financial revenue 27, to foreign currency
  earning 40 and to farmers income 1/3. It plays
  important role in industrializing rural areas.

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2.2 Upholding public ownership as the mainstay
and common development of multiple-ownership
economy (1)

• We will develop mixed ownership economy so
  that shareholding system will become the major
  carrier of public ownership
• On the basis of diversified investment
  subjects, it is to establish corporation
  administration structure with mutual control and
  coordination of the shareholder meeting, board of
  directors and corporation management so that
  modern enterprise system will be established,
  hence it will resolve the problem encountered in
  integrating public ownership with market economy.

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2.2 Upholding public ownership as the mainstay
and common development of multiple-ownership
economy (2)

• At present, the net value of state-owned asset
  is 10.9 trillion RMB Yuan, the incremental value
  of state-owned and state-controlled shareholding
  enterprises accounts for over 1/3 of the GDP. In
  2004, in the incremental value of industries,
  state-owned and state-controlled shareholding
  enterprises accounted for 2,321.3 billion RMB
  Yuan making up 42.4 of the total industrial
  incremental value, collective enterprises
  accounts for 5.3 while shareholding cooperative
  enterprises account for 1.9. The above three
  components, i.e. public ownership enterprises
  accounts for 49.6 of the industrial incremental
  value.

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2.2 Upholding public ownership as the mainstay
and common development of multiple-ownership
economy (3)

• The state adopted policies that encourage the
  development of private and individual economies.
  At present, non-public economy accounted for 1/3
  of the GDP. By the end of 2004, the employment of
  the non-public economy sector in urban areas had
  reached 86.53 million accounting for 32.7 of the
  total employment of urban areas, of which 10.33
  million were employed by foreign funded and 25.21
  million by individual funded enterprises. The
  investment of non-public sector accounted for
  49.3 of the total. Non-public economy plays
  important role in the national economy.

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2.3 Reform of macro economic management system
(1)

• Planning system reform
• The direction of reforming the planning system is
  to shift from direct to indirect administration.
• We view both planning and market as means of
  economic regulation.
• The national medium and long term plans are
  mainly to formulate 5-year to 10-year development
  objective, strategy, principle and policies for
  the national economy.
• Annual plan is mainly projection plan tabling
  eight indicators of annual economic growth rate,
  investment scale, financial revenue and
  expenditure, currency supply, market price,
  employment rate, international balance of
  payments and natural population growth, as the
  macro regulation objective.

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2.3 Reform of macro economic management system
(2)

• Investment system reform
• It is to change the investment subjects from
  being the government prior to reform to
  enterprises. investment projects are to be
  decided by enterprises independently. The
  government only needs to approve those projects
  that use government finance and are of key
  importance.

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2.3 Reform of macro economic management system
(3)

• Taxation system reform
• Taxation system reform is to implement partition
  of financial rights and powers between the
  central and local governments and establish
  transfer payment system.
• It is also to unify taxation system of urban and
  rural areas and income tax system for domestic
  and foreign funded enterprises.
• The composite budgeting system should be
  established with recurrent budgeting and
  investment budgeting. Government finance will be
  mainly invested in public goods and service
  projects, while enterprise investment will cover
  ordinary competition industries.

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2.3 Reform of macro economic management system
(4)

• Financial system reform
• Promote transformation of commercial banks to
  corporations
• Develop capital market
• Establish and improve financial supervision
  system
• Improve financial regulation
• Promote determination of interest rate by market
  force
• Establish regional financial institutions of
  multiple ownerships
• Guard against and mitigate risks

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2.4 Improvement of market system

• We will develop all elements market of capital,
  technology and labor, breach regional blockade
  and monopoly of industries, establish unified,
  open, competitive and orderly market system.
• Establish fair competition mechanism of survival
  of the fittest so that the basic function of
  market in resource deployment can be fully tapped.

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2.5 Improvement of legal system

• We will continue to improve the Constitution,
  civil law, business administration law,
  administration law, economic law, criminal law,
  litigation and non-litigation procedural laws and
  regularize the mature reform achievements in the
  form of laws and further promote reform through
  legislation.

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2.6 Opening wider to the outside world

• External trade enlarged continually. By the
  year of 2005, total amount of foreign trade
  reached 14219 trillion dollars, ranking third
  across the world. From 1979 to 2005, cumulative
  amount of actually utilized foreign capital is
  809.1 billion dollars with 0.47 million programs.

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3.Basic Experiences of reform and development in
China
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3.1 Adhere to emancipating mind and seeking truth
from facts, promote national development based on
practical needs of primary stage of socialism.
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3.2 Play economic construction as the key factor
of national development unflinchingly, address
all kinds of challenges with development-oriented
approaches.
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3.3 Correctly deal with relationship between
reform, development and stabilization.
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3.4 Stick to combining reasonably domestic reform
with openness to the outside world
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3.5 Combine reasonably urban reform with rural
reform.
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3.6 Stick to promoting material civilization and
moral civilization simultaneously, carry out the
public governance policy according to law and
social morals.
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At present time, Chinas development is facing
many challenges

• Natural resources and environment protection need
  to be paid more attention.
• A lot of social problems need to be solved.
• Disparities between urban and rural areas,
  different regions are still severe.
• Facing large international competition.

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• In order to address above challenges, we put
  forward a concept of development in scientific
  way. In the first two decades of the new century,
  we will build up on this basis a well-off society
  at the higher phase of development to benefit
  more than 1 billion population and take about 30
  years more to basically realize modernization in
  the mid of the century.

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• Thank you!