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China's Economic Conditions
Summary
Since the initiation of economic reforms in 1979, China has become one of the
world's fastest-growing economies. From 1979 to 2005 China's real gross domestic
product (GDP) grew at an average annual rate of 9.7%. Real GDP grew by 11.1%
in 2006, and during the first quarter of 2007, it rose by 11.1% over the same period
in 2006. China is expected to continue to enjoy rapid economic growth over the next
several years, provided that it continues to implement needed reforms, particularly
in regard to its inefficient state-owned enterprises and the state banking system. If
projected growth levels continue, China could become the world's largest economy
within a decade or so.
Trade and foreign investment continues to play a major role in China's booming
economy. In 2006, exports rose by 27% to $969 billion, while imports were up by
20% to $792 billion. This produced an trade surplus of about $177 billion. From
2003 to 2006, the value of total Chinese trade doubled. On the basis of current
trends, China could surpass the United States in 2007 to become the second largest
merchandise exporter (after the European Union). Well over half of China's trade
is conducted by foreign firms operating in China. The combination of trade
surpluses, foreign direct investment flows, and large-scale purchases of foreign
currency have helped make China the world's largest holder of foreign exchange
reserves at $1.3 trillion as of June 2007.
Although the economy has shown remarkable growth in recent years, Chinese
officials have expressed concern over a number of areas that they perceive as
threatening future growth, including rising inflation, over-dependence on exports and
fixed investment for growth, widening income gaps, and growing pollution. The
government has indicated its goal over the coming years to create a "harmonious
society" that would promote more economic balanced growth and address a number
of economic and social issues.
China's economy continues to be a concern to many U.S. policymakers. On the
one hand, U.S. consumers, exporters, and investors have greatly benefitted from
China's rapid economic and trade growth. On the other hand, the surge in Chinese
exports to the United States has put competitive pressures on various U.S. industries.
Many U.S. policymakers have argued that China often does not play by the rules
when it comes to trade and they have called for greater efforts to pressure China to
fully implement its World Trade Organization (WTO) commitments and to change
various economic policies deemed harmful to U.S. economic interests, such as its
currency policy, its use of subsidies to support state-owned firms, and trade and
investment barriers to U.S. goods and services. In addition, China's rising demand
for energy and raw materials has raised prices for such commodities and has sharply
increased pollution levels, which may have important global implications.
This report provides an overview of China's economic development, challenges
China faces to maintain growth, and the implications of China's rise as a major
economic power for the United States. This report will be updated as events warrant.
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Morrison, Wayne M. China’s Economic Conditions, report, July 13, 2007; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc807681/m1/2/: accessed April 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.