China Market

China market was previously under the profound influence of the communist rule which was imposed on the markets in such a manner that the key decisions of the market of what to produce, how much to produce and for whom to produce was dictated according to the government mandate. The economy gradually started opening up from a completely planned economy after the arrival of Deng Xiaoping in 1978 who introduced reforms towards the adoption of a market-oriented strategy for production and consumption decisions. China market can now be characterized as a mostly free market system with some pockets of the economy (and the market) still under government control. However, there has been significant marketization of state-owned enterprises. After China became a member of the World Trade Organization (WTO) on the 11th December, 2001, significant steps towards establishing a market economy were taken. Some of the market access commitments made by the country covering the agricultural, industrial services sectors were:

Gradual phasing out tariff and non-tariff barriers to trade: average import tariffs for industrial products have to be lowered to 8.9% in 2005 and to 15% for agricultural products by 2005.

Implementation of the WTO agreement on Trade-related Investment Measures (TRIMS).

Opening up and easing of FDI restrictions of other key sectors such as telecommunications, financial services and professional services.

The market economy system adopted by China after twenty years of reforms and opening up of the economy has yielded the following results:

China has experienced consistent growth rates of GDP (Gross Domestic Product) hovering around 8% for the last few years. As of 2007, the real GDP grew by 11% in the first quarter of 2007. GDP grew by 10.7% in 2007.

Per capita disposable income which is one of the key indicators of transforming to a completely market-oriented economy stood at 11,759 renminbi for the urban households in 2006, a growth of 10.4%. Per capita incomes for rural households in 2006 experienced a growth of 7.4%.

The number of private enterprises increased to 4.98 million at the end of 2006.

With the opening up of the economy and the growth in productive efficiency, the outputs of many Chinese enterprises have rapidly increased which is attracting a large quantity of Foreign Direct Investments (FDI). The number of new projects utilizing FDI stood at 41,473 in 2006.

Foreign currency reserves for the Chinese economy grew by 30.2% and stood at US $ 1066.3 billion.

The retail sales of consumer goods in the Chinese market grew by 13.3% in 2004 and 12.5% in 2005 to 13.7% in 2006. This growth was mainly attributed to the steady rise in disposable incomes around the whole of China.

Added value of industrial output increased by 16.4% in 2005 to 16.6% in 2006 and stood at 7975.2 billion renminbis.

But as a word of caution, with the opening up of the economy quite rapidly over the recent years, China has been found lacking in ensuring that the trickle-down effects of the increasing growth rate has been has been positive. The rising income inequalities, growing unemployment of unskilled labour, people resorting to crimes as a result of discontent over the issue that only a few enjoy the fruits of development has to be effectively addressed by the Chinese authorities.