According to an International Monetary Fund analysis, the growth rate of the Chinese economy hit a five-year low in 2008. From an impressive double-digit rate of 12.7% in 2007, China’s economic growth plummeted to 9.6%. The IMF also revealed that China’s per capita income in 2008 was equivalent to $3,180.The Gross Domestic Product (GDP) estimates based on Purchasing Power Party totaled $7.8 trillion. Owing to this, China became the second-largest economy in the world.
China Income: Trends in Per Capita Levels
In 1990, China’s average per capita national income was around $350. Within a decade, there was a threefold increase, taking the figure to $1,000. At the end of 2008, the figure tripled yet again and China’s average per capita national income reached another high of $3,000. If China’s average national income continues to rise at an annual rate of 8%, the country’s per capita income will reach $8,500 by 2020 and will touch the $20,000 mark by 2030. Hence, China’s average per capita income will exceed the current income of Taiwan and Korea and the country will qualify for an OECD membership.
China Income: Highlights
According to Goldman Sachs estimates, China’s Gross National Product (GNP) stood at $1,529 billion in 2005. The research organization projected that by 2050 China’s GNP would reach $44,453 billion, perhaps the highest in the world. Around 4% of China’s national earnings results from sate-owned enterprises. According to World Bank reports, China’s GNP doubled in 2007 and reached an impressive level of $3,126 billion. At this pace, China will definitely reach the ambitious GNP target for 2050. Although the world’s fastest growing economy is set to become the world’s number one, but its current economic system is characterized by:
- Income inequalities: The distribution of wealth in the economy is extremely lopsided. A major portion of China’s national income accrues to coastal areas. The Pearl River delta, located on the southeast coast, is home to some of China’s wealthiest people. On the eastern coast, individuals with high per capita income are centered on the Bohai Gulf of the Yangtze river. These powerful regions have amassed a major portion of Chinese income. By attracting liberal government policies, costal areas are aiming to accumulate more wealth.
- Low purchasing power: Over the last three decades, there has been an eightfold increase in China’s per capita income. However, rising personal income did not translate into increased consumer spending. This was on account of the surge in product prices, which is determined by market forces.
The government is also following a heavy taxation policy, which is hindering the expansion of private enterprises. To maintain the country’s buoyant growth rate, the need of the hour is to make the regulations less stringent.