Current Business Situation in China Review

Current Situation in China

Introduction: China is noted for two main facts. Its population is the largest in the world with over 1.3 billion people. And after the US, China is the world’s second largest economy in absolute terms. The country China is ruled by one-party, the Chinese Communist Party. In early 1980s, China’s economy has grown rapidly after opening up to foreign trade. The country mainly depends on agriculture with a large number of populations employed in this sector.

Self- Assessment

“Made-in-China” is one label people around the world cannot avoid in their daily life. The first thing one attributes the that label is Cheap and low quality. From stuffed Toys to high-end notebook computers, the best of the world companies have setup their manufacturing base in China making it easily the manufacturing headquarters of the world in terms of productivity or number of laborers employed in manufacturing. The general image of Chinese products have taken a beating with some bad press relating to bad manufacturing practices with instances such as banned material found in toys and industrial chemicals in food items.

The public awareness of China is set to quantum leap with the 2008 Olympics to be held at Beijing. The administration and the practices of the country is set to be exposed and scrutinized by the visitors and press all around the world.

Several economists have warned of the Chinese economy over-heating and that China will be unable to sustain the growth of its economy. But the fact is the Since 1990 China has had growth rate that exceeds all of the G7 countries and the European Union.


After the reforms started in 1979 the GDP of China has averaged 9.5% which phenomenal compared to the other developing countries. The per capita income has increased five times and Poverty is on the decline.

IMF Policy discussion paper, Wanda Tesang & Harm Zebregs

After joining The World Trade Organization in the year 2002, under many sectors of its economy, trade liberalization came into effect. The country equals the world average in trade freedom, monetary freedom, and labor freedom. The central government expenditures equal less than 20% of their GDP, which is actually lower than other major economies. Inflation is relatively low, at an average of 1.8% during year 2004 & 2006. In China, the markets determines prices of most of traded products, but the government maintains prices for petroleum, electricity, pharmaceuticals, coal, agricultural products, and other “essential” goods.

The banking sector is fairly developed and wide spread and is mostly state owned. Many of the leading multi-national banks have opened their branches in China, but had to face troublesome policies and regulations. However, after joining WTO, some progress has been seen in this respect.

The rate of Income tax is very high even though corporate tax rate is moderate. There are other taxes like value-added and real estate tax etc. The overall tax revenue was 15.8% of GDP.

The GDP of China stands at $8.8 trillion with 10.4% year on year growth. China recorded a 5-year compounded annual growth of 9.9% which above-average. The per capita income is growing at a rather slower rate currently at $6,757.


Modernization of China’s economy has had its share of problems. One of the main issue being unemployment. It is, after all, a daunting challenge to provide adequate employment to the world’s largest population. Shifting to the new economic generation, millions of workers lost their jobs as many traditional industries and factories closed down or relocated into rural areas in search of lower operational costs. Textile industry, for instance, which had provided employment to considerably large number of laborers is not a healthy industry any more with several plants closing down or relocating inwards into the country.

The development of private sector has made some progress in arresting the unemployment issue. Government has recognized and has announced several incentives and subsidies to labor-intensive private industries who take the laid-off workers into their shop-floors. It has started making some positive changes to the urban area where everyday thousands of people come from the villages seeking work. The annual unemployment rate now stands at 9%. The new emergence of the service sector, especially tourism and hospitality industry promises to employ a significant number of people in the coming years.

For pasr 5 years, China created about 51 million jobs in all urbenb areas, but the Labor and Social Security Minister Tian Chengping said 20 million people come to those areas every year looking for work, the official Xinhau news agency said.

Inflation (CPI)

China’s inflation rate after about seven years of near stagnat rate of 1.8% has leapfrogged many times to 6.8% in August 2007. The consumer price index (cpi) has been stubbornly on the rise despite anti-inflationary measures by the government. The Central Bank of China increased the interest rate 4 times in the 2007 alone in an effort to curb inflation. But it doesn’t seem to have helped much.

China’s economy has significantly changed during last many years. The country became more market oriented. The Chinese government was troubled by some major issues which detained its economy down, like mass lay off at state-owned enterprises making lots of people unemployed, as also other corruption and crimes related to business were bothering the government. Apart from this environmental damages also caused lots of problems. However, now China has made plans for conserving resources and protect environment in upcoming years.

Economic Situation of China By Shirley Simmons

Even though fast, China’s economic growth was solid. The GDP growth has increased 10.7% from the last year, and countries economic development seem to stable with small fluctuations in quarterly and annual GDP growth rates. The economic growth although remained near to 10% for 4 consecutive years, the price rise have been relatively slow & stable.

GDP Growth rate.
Figure 1.GDP Growth rate.

The government revenue was 3.93 trillion yuan for year 2006, which shows an increase of 24.3%. Industrial enterprises generated 1.8784 trillion yuan profits, and after 2003 for first time consumption per unit of GDP fell by 1.23%.

Agriculture sector: Lots of new policies were introduced favouring farmers. Taxes on agriculture &allied products were abolished across country. Financial burdens on farmers were reduced by about 125 billion yuan each year. An increase was made in transfer payments to major grain-producing counties & those with limited financial resources, granting a total of 23.5 billion yuan in rewards & subsidies.

Huge amounts were invested for rural upgrade project for rebuilding and extending asphalt & cement roads for connecting more townships and villages. Measures were taken for improving working & living conditions in rural areas. Central government & state government jointly spent money for arranging safe drinking water in countryside which benefited millions of rural population.

China also encouraged for openings of more retail shops in rural areas, which reached 100,000 stores in countryside itself.

Year 2006-07 showed rich grain harvest and outputs nearly 497.46 million tons each year. Agriculture structure improved a lot, for products like wheat, rice, sugar, cotton, mil and aquatic products.

However, China has comparatively weak agricultural infrastructure, which disallows the rural income to increase. Measures to stand against the natural disasters harming the agriculture should be more efficient by use of modern technologies. Returns are very low from this sector.

Industrial sector: In China industrial reformation is also accelerating. High-tech enterprises were promoted. The industries are restructured in China with excess production capacity. Encouragement was given for independent manufacturing.

Industries were restructured with more production capacity. Strides for independent innovation were encouraged more in the country, and policies supporting them were introduced. The service and structure were improved all over the country as also the national transport capacity was increased, as also development in services industries in production like logistics, banking, insurance & information services were increased.

Various kinds of products and business were introduced in consumer & service industry.

Since the country has the largest population, education was a must among all the public. Government made nine year compulsory education strict, which helped a lot extend in reducing illiteracy among young adults. Money guarantee was made for poor people for achieving compulsory education, because of this millions of millions of students from poor families got free textbooks and millions of rural student living in campus were given living allowances.

Better care in public health and family planning systems were organized. Huge amounts were spend by government for developing infrastructures of health clinics. Facilities for supervision & inspection of foods & drugs were made.

China was conscious about saving energy and reduce pollution to protect environment. Clean production was aimed and technical guidance was issued to industries. Actions are taken for controlling urban water pollution & industrial wastewater.

Implementation of China’s economic and social development plan in 2006.

International Trade of China is also seen developing fast in recent years as much as double digit, more than twice of growth of world trade as whole, Total sum of export and imports of goods & services were almost US$1.6trillion last year, which reached China to 3rd position in nation trade all over the world.

The Current Economic Situation in China Lawrence J. Lau, Ph. D., D. Soc. Sc. (hon.).

Conclusion: All these years China has been like a closed book. Mysterious, offering a glimpse inside only every now and then. Not really opening up. But 2008 is likely to be the turning point in China’s future. The Beijing Olympics will effectively draw the future of china. Which way is it likely to go. The growth of China has been so swift and solid in the last 3 decades that the whole world is looking for reasons to criticize the Chinese policies. World-over the media has had field days with China’s manufacturing mishaps, like the banned paint on the Toys and industrial chemicals in food exports. The Beijing Olympics will be an event when the whole of China will be thrown open on display for all to see and comment.

China has turned the Olympics into a big public relations exercise aimed to improve the tourism and hospitality industries. The one party rule under the Communist, has its advantages and disadvantages. China’s reputation as the manufacturing headquarters of the world is diminishing due to the slowly but steadily increasing labor costs, lack of trained and skilled manpower and a host of allegations of human rights violations and reckless manufacturing with scant regard for the environmental safety. But China’s advantages are likely to drive it forward for still some more decades.


China’s Current Macro-Economic Situation WANG Tongsan, 2007. Web.

IMF Policy discussion paper. Wanda Tesang & Harm Zebregs. Web.

Economic Situation of China. By Shirley Simmons. Web.

Implementation of China’s economic and social development plan in 2006. Web.

The Current Economic Situation in China Lawrence J. Lau, Ph. D., D. Soc. Sc. (hon.). Web.

Cite this paper

Select style


BusinessEssay. (2022, November 10). Current Business Situation in China Review. Retrieved from


BusinessEssay. (2022, November 10). Current Business Situation in China Review.

Work Cited

"Current Business Situation in China Review." BusinessEssay, 10 Nov. 2022,


BusinessEssay. (2022) 'Current Business Situation in China Review'. 10 November.


BusinessEssay. 2022. "Current Business Situation in China Review." November 10, 2022.

1. BusinessEssay. "Current Business Situation in China Review." November 10, 2022.


BusinessEssay. "Current Business Situation in China Review." November 10, 2022.