From: zg11@ellis.uchicago.edu (zening  ge)
Subject: Another Article about China's economy from The Economist
Reply-To: zg11@midway.uchicago.edu
Organization: University of Chicago
Date: Wed, 27 Jan 1993 22:18:21 GMT

Junary 23rd - 29th issue of The Economist has anohter article about
the current Chinese economy and its possible development in the future.
I made a summery as the follows.

-------------------------------------------------------------

China feels the heat 

1). The statistics from last year:
    i.     >12% growth rate in real term (the fastest in Asia and
		maybe in the world);
    ii.    Real income in the cities was up 7%;
    iii.   Industiral output incerased by 20%;
    iv.    Dollar value of foreign trade by 22%;
    v.     >58 Bil.$ direct foreign investment (19 Bil.$ in 1991);
    vi.    Consumer prices rose less than 6% (less than the
	   government's prediction).

(I personally doubt the reliability of the last indicator.)

2). Potentials and problems

    i.     The extrodinarily fast growth has strained China's
infrastructure to breaking-point. The already inadequate
transportation system and energy production have fallen even further
behind demand. These bottlenecks will limit this year's growth at
about 9-10%;

    ii.    Inflation. When retrospect the economic fluctuations since the
reform, every boom was followed and then stopped by a high inflation.
But this may not be likely for last year's fast growth: the supply
side of the economy has been radically changed (improved).
Three-quarters of the total output, and half of industrial output, are
accounted for by the non-state part of the economy. Consumers are
saving more and they are more confident than they were in the panic
buying years (household savings were up more than 20% last year to 1.2
trillion yuan). 

On the other hand, the factors stimulating a high inflation are still
there: the government is still lack of efficient economic tools to
deal with inflation; credit in the first half of 1992 was expanded too
quickly. By June, the original target for the whole year has already
overshot. The currency in circulation rose about 40%. The process
of decentralization further weakens the capability of central
government's direct intervention. Meanwhile, there are no indirect
levers to replace the measurements by which the monetary authorities once
controlled the creidt.
	
"In the 1984-1985 inflation, one reformist leader, Hu Yaobang, was
ousted; in the 1988 inflation it was another reformer, Zhao Ziyang,
who took the fall. Today, two conservatives-Jiang Zeming, the party
secretary-general, and Li Peng, the prime minister-are mainly in
charge. The good news is that the next inflation may well be pinned on
them." 




 +----------------------------------------------------------------+
 |  Zening Ge                    Who cares? I am just a student   |
 |  Department of Economics      The posted does not necessarily  |
 |  University of Chicagao       reflect the opinion of the       |
 |  Chicago, IL 60637            Chicago School.                  |
 |  zg11@midway.uchicago.edu                                      |
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