Forecast, by The Economist
The 16h congress of the Chinese Communist Party, where the fourth generation of leaders is due to be appointed, could be postponed until November. Jiang Zemin, the president, would like to stay in power beyond the congress, despite widespread misgivings among senior party and military officials. Mr Jiang will probably keep his title as chairman of the Central Military Commission after the congress, and is fighting to stay on as general secretary of the party. He will certainly step down as president at the annual session of the legislature early next year, when he will most likely pass the mantle to the vice-president, Hu Jintao. Rumours suggest, however, that Mr Jiang has been manoeuvring to keep power behind the scenes even after Mr Hu takes power. These leadership tensions could jeopardise China’s political stability and hinder economic reform in the near-term. Nonetheless, forecasters polled by The Economist predict robust GDP growth of 8% in 2002.
Chinese spokesmen have reacted furiously to remarks by Taiwan’s president, Chen Shui-bian, who has backed a referendum on independence. China has never renounced the use of force to recapture Taiwan if it declares formal independence.
Economic policy outlook
The government is trying harder to crack down on rich tax evaders. China is under increasing pressure to boost tax revenues in order to plug its budget deficit.
Property markets in major cities staged a recovery in 2001, supported by a rise in office occupancy costs. The state will continue its current level of investment in domestic housing, however, to create a home-owning middle class.
Population: 1.26bn (2000; The Economist Intelligence Unit)
Population growth: 1% (average, 1996-2000)
Land area: 9.6m sq km
Fiscal year: Starts on January 1st
Currency: Renminbi or yuan (Rmb); Rmb8.277:US$1 (2001, average); Rmb8.277:US$1 (April 15th 2002)
GDP: Rmb8.9trn (2000); US$1.1trn (2000, at market exchange rates)(a); US$5.9trn (2000, at PPP)
GDP growth: 8.3% (average, 1996-2000); 8% (2000)
GDP per head: US$860 (2000, at market exchange rates)(a); US$4,700 (2000, at PPP)
Inflation: 0.4% (average, 1997-2001); 0.7% (2001, average)
The People’s Republic of China was founded in 1949 by the Chinese Communist Party (CCP). The CCP chairman, Mao Zedong, then led the country for nearly three decades. After gaining power in 1978, two years after Mao’s death, Deng Xiaoping began to introduce economic reforms, in the process consolidating his paramount authority. Most members of the collective leadership that runs China were appointed to their present positions in September 1997 and March 1998, although many top leaders were in senior positions well before Deng’s death in February 1997.
The CCP dominates the government. Jiang Zemin is concurrently state president, general secretary of the party, and chairman of the Central Military Commission (CMC). Zhu Rongji heads the state administration as premier. The standing committee of the political bureau (politburo) of the CCP is the ultimate policymaking body. The National People’s Congress (NPC) is the largely rubber-stamp legislature. The Chinese People’s Political Consultative Conference (CPPCC) groups political, social and religious constituencies within a showcase, powerless institution. There is no formal political opposition to the CCP; dissent is firmly suppressed.
China’s leadership wants continuing economic liberalisation and sustainable growth, but also enduring and pervasive political control. Reform of loss-making state-owned industry and the indebted state-owned financial sector is essential, but overmanning and provision of a wide range of welfare benefits to current and former employees makes this difficult. The government is using international obligations arising from China’s accession to the World Trade Organisation (WTO) to push through reforms against the resistance of vested interests. Implementation of reforms, however, will be imperfect. The increase in foreign competition facilitated by WTO accession will expose the weakness of the state-owned sectors of the economy.
All enterprises pay a 33% tax on profits. Preferential rates apply in the special economic zones (15%), the 14 coastal open cities (25%) and the 52 state-approved economic and technological development zones. The government has announced that corporate taxes will be revised in 2003 and some preferential rates will be ended. A three-year period of reduced tax is an incentive for new foreign-funded businesses. Inland areas receive preferential tax treatment compared with coastal regions.
In 2001, according to customs data, merchandise exports were US$265.9bn, and imports US$243.9bn, leaving a surplus of US$22bn. On a balance-of-payments basis, the trade and current-account surpluses totalled US$34.5bn and US$20.5bn respectively in 2000.
Major Exports (2001; % of total)
- Apparel & clothing, 13.8%
- Electrical equipment & parts, 9.5%
- Telecommunications products, 8.9%
- Computers, 8.9%
Major Imports (2001; % of total)
- Electrical equipment & parts, 16.4%
- Crude oil & fuels, 6.5%
- Machinery & parts, 5.2%
- Apparel & clothing, 5.2%
Leading Markets (2001; % of total)
- U.S., 20.4%
- Hong Kong, 17.5%
- Japan, 16.9%
- E.U., 15.4%
Leading Suppliers (2001; % of total)
- Japan, 17.6%
- E.U., 14.7%
- Taiwan, 11.2%
- U.S., 10.8%
Official name: People’s Republic of China
Form of government: One-party rule by the Chinese Communist Party (CCP)
Sub price: US $435 Single issue: US $195
The executive: Fifteen-member state council elected by the National People’s Congress (NPC); state council members, including the premier, may not serve more than two consecutive five-year terms
Head of state: A president and a vice-president are elected for a maximum of two consecutive five-year terms by the NPC
National legislature: Unicameral National People’s Congress (NPC): 2,979 delegates elected by provinces, municipalities, autonomous regions and the armed forces. The NPC elects the president and members of the state council and the members of the standing committee of the NPC, which meets when the NPC is not in session. All arms of the legislature and the executive sit for five-year terms
Regional assemblies & administrations: The 22 provinces, four municipalities directly under the central government and five autonomous regions elect local people’s congresses and are administered by people’s governments
National elections: The next NPC election is due by March 2003
National government: The politburo (political bureau, currently 20 members) of the CCP sets policy and controls all administrative, legal and executive appointments; the seven-man politburo standing committee is the focus of power
Main political organisation: The CCP, of which Jiang Zemin is the general secretary
Politburo standing committee: Jiang Zemin; Li Peng; Li Ruihuan; Zhu Rongji; Hu Jintao; Wei Jianxing; Li Lanqing
Key members of government
President: Jiang Zemin
Vice-president: Hu Jintao
Premier: Zhu Rongji
Vice-premiers: Li Lanqing; Qian Qichen; Wu Bangguo; Wen Jiabao
Heads of selected state ministries & commissions
Ministry of Finance: Xiang Huaicheng
Ministry of Foreign Affairs: Tang Jiaxuan
Ministry of Foreign Trade & Economic Co-operation: Shi Guangsheng
Ministry of National Defence: Chi Haotian
State Development & Planning Commission: Zeng Peiyan
State Economic & Trade Commission: Li Rongrong
Central bank governor: Dai Xianglong