The Economy of China

China is the third largest economy in the world, after the United States of America and Japan, having a nominal GDP of US$3.42 trillion in terms of exchange rate. The International Monetary Fund classifies China’s per capita income at about $7,800, from the point of view of purchasing power parity. It is considered fairly poor by world standards. China’s GDP has grown an average 10 percent a year since free market reforms in 1978.

China’s huge economy is expanding rapidly. It has grown more than ten times over the last thirty years. However, there is an income disparity among the Chinese people, which has increased in the last few years.

In the 1970′s and 1980s there was action taken in terms of economic reforms. The economic reforms have been adopted slowly but in a steady pace. The focus was on organizing the agricultural activities. Economic Chinese leaders were trying at that time to switch the center of agriculture from farming to household activities. Business enterprises owned by the state government were granted more independence. This gave even more authority to government officials at local level and managers of plants. A variety of enterprises, which were privately held, appeared.

Economic reforms took hold in China, as the banking system becomes more diversified and stock markets began to develop. These reforms had many other effects. For example, they influenced the sectors outside state government control, which grew rapidly. China opened itself economically to the rest of the world and direct foreign investment and trading developed.

Agriculture and industry are the most important sectors in the economy of China. Together, the two employ over 70 percent of China’s force of labor, producing over 60 percent of GDP. The Ministry of Commerce and the Bank of China supervise foreign trade. The government still controls the China economy, but the amount of economic activity has restricted the government’s power over the economy. The government governs many of the country’s financial institutions through the People’s Bank of China (which, in 1950, took the place of the Central Bank of China) and the Ministry of Finance, under the State Council’s control.

The People’s Bank of China controls circulation, issues the currency and manages payments, accounts and receipts. It also deals with transactions from over the seas and with international trade in general. Also, economic development is funded by the China Development Bank. ABC, the Agricultural Bank of China, manages the agricultural sector. Common commercial transactions are carried out by ICBC, the Industrial and Commercial Bank of China. Although many such institutions and policies are in place, the Chinese economy is still essentially a command economy.