Economy

The CCP reformulates many aspects of its public ideology as "with Chinese characteristics" and this is true of its economy as well, which it calls Socialism with Chinese characteristics. Beginning in late 1978 the Chinese leadership has been reforming the economy from a Soviet-style centrally planned economy to a more market-oriented economy but still within a rigid political framework of Communist Party control. To this end the authorities have switched to a system of household responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprise in services and light manufacturing, and opened the economy to increased foreign trade and investment. Prices controls were also relaxed. This has resulted in mainland China's shift from a command economy to a mixed economy with both communist and capitalist tendencies.

The government has tended to not emphasize equality as when it first began and instead emphasized raising personal income and consumption and introducing new management systems to help increase productivity. The government also has focused on foreign trade as a major vehicle for economic growth, for which purpose it set up over 2000 Special Economic Zones (SEZ) where investment laws are relaxed in order to attract foreign capital. The result has been a quadrupling of GDP since 1978. In 1999, with its 1.25 billion people and a GDP of just $3,800 per capita, the PRC became the sixth largest economy in the world by exchange rate and third largest in the world after the European Union and the U.S. by purchasing power. The average annual income of a Chinese worker is $1,300. Chinese economic development is believed to be among the fastest in the world, about 7-8% per year according to Chinese government statistics. China is now a member of the World Trade Organization.

Mainland China has a reputation as being a low-cost manufacturer, particularly due to flexible non-unionised abundant cheap labor. An unskilled worker at a Chinese factory in the rural area, costs a company under $1/hour, much lower than minimum wage of $5.15/hour for the U.S.

More important is the Chinese worker preference not to join a trade union. This is a substantive benefit to employers as it adds a level of flexibility to labor relations not enjoyed in most other parts of the world. A possible reason for this could be work ethics, or it is also conceivable it is driven by a fear that unions will be abused by the Communist Party of China to identify dissidents.

Another aspect of the Chinese economy that is often overlooked is the low cost of non labor inputs. This is due in part to an overly competitive environment with many producers and a general tendency towards an oversupply and low prices. There is also the continued existence of price controls and supply guarantees left over from the former Soviet style command economy. As State owned enterprises continue to be dismantled and workers shift to higher productivity sectors, this deflationary effect will continue to put pressure on prices in the economy.

Preferential tax incentives are also given as a direct fiscal incentive to manufacture in China, whether for export or for the local market of 1.3 billion. China is attempting to harmonize the system of taxes and duties it imposes on enterprises, domestic and foreign alike. As a result, preferential tax and duty policies that benefit exporters in special economic zones and coastal cities have been targeted for revision. Chinese exports to the United States were $125 billion in 2002; American exports to China were $19 billion. The discrepancy is largely attributable to the fact that the U.S. consumes far more than it produces and that Chinese people paid low wages cannot afford the US's expensive products. Another factor cited by some people was the unfavorable exchange rate between the Chinese yuan and the United States dollar to which it used to be pegged. On July 21, 2005 the People's Bank of China announced that it would move to a floating peg, allowing its currency to move by 0.3% a day. Chinese exports to the United States are rising 20% per annum, much faster than U.S. exports to China. With the elimination of clothing quotas, China stands to take over a large chunk of the worldwide textile industry.

In 2003, China's GDP in terms of purchasing power parity reached $6.4 trillion, becoming the second-largest in the world. Using conventional measurements it is ranked 6th. With its large population this still gives an average GNP per person of only an estimated $5,000, about 1/7th that of the United States. The officially reported growth rate for 2003 was 9.1%. It was estimated by the CIA that in 2002 agriculture accounted for 14.5% of China's GNP, industry and construction for 51.7% and services for 33.8%. Average rural income is about one third that of urban areas, a gap which has widened in recent decades.

Due to its size and ancient culture, China has a tradition of being a leading economy. In the words of Ming Zeng, professor of management in Shanghai, "By some statistics, for example, even as late as the 16th century, China had one third of global GDP. The powerful US now only has about 20%. So if you make this historical comparison, three or four hundred years ago, China was definitely the superpower in the world. [...] Trying to regain some of that glory is certainly a strong motivation for many Chinese."

The economic regions of Mainland China covered under the strategies promulgated by the central government.

The disparity in wealth between the coastal strip and the remainder of the country remains wide. To counter this potentially destabilizing problem, the government has initiated the China Western Development strategy (2000), the Revitalize Northeast China initiative (2003), and the Rise of Central China policy (2004), which are all aimed at helping the interior of China to catch up.

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