China 1184
Photo by: Lazar Todorov

People's Republic of China

Zhonghua Renmin Gongheguo



China is situated in the eastern part of Asia, on the west coast of the Pacific Ocean, in the southeastern part of the Eurasian continent, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam. Its border countries include Afghanistan, Bhutan, Burma, (Hong Kong), India, Kazakhstan, North Korea, Kyrgyzstan, Laos, (Macau), Mongolia, Nepal, Pakistan, Russia, Tajikistan, and Vietnam. The land area consists of 9,596,960 square kilometers (3,696,000 square miles), the third largest in the world after Russia and Canada. The country's coastline is 14,500 kilometers (9,010 miles) long. China is divided into 22 provinces, 4 municipalities, 5 autonomous regions, and 2 special administration regions (Hong Kong and Macau). Beijing, the capital, is also the cultural and educational center of China. The city has an area of 65 square kilometers (25 square miles) and is partially surrounded by walls that were built in the 15th century.


The population of China was estimated at 1,262 million in July of 2000, an increase of 10.36 percent from the 1990 population of 1,143 million. In 2000 the population growth rate was estimated at 0.9 percent, the birth rate was 16.12 per 1,000, and the death rate was 6.73 per 1,000. With a projected annual population growth rate of 0.9 percent between 2000 and 2010, the population is expected to reach 1,392.5 million in 2010. A simulation study conducted by the China State Statistics Bureau indicates that country's total population will peak at 1,402 to 1,550 million in the 2030s or 2040s.

The population of China consists of 56 ethnic groups. Han Chinese make up 91.9 percent while Zhuang, Uygur, Hui, Yi, Tibetan, Miao, Manchu, Mongol, Buyi, Korean, and other ethnic minorities make up 8.1 percent. The great majority, 68 percent of the population, is between ages 15 and 64; while 25 percent is at the age of 14 or below, 7 percent is at 65 or older. The life expectancy at birth in 2000 is estimated at 71.4 years (total population), 69.6 years (male) and 73.3 years (female). The country's high life expectancy and low infant mortality rates are envied by much richer nations.

In 1949, when China became a communist nation, the population was about 541 million. Over the following 10 years, it increased by another 118 million. It continued to rise through the 1960s. The government encouraged this increase so China could develop water control and communication infrastructures. The government also thought increased production could help produce more food and strengthen the nation's defense. Twenty years later, the millions born during that period contributed to another baby boom. By 1970, there were roughly 830 million Chinese. The over-growing population had generated serious problems and negatively affected the national economy.

To slow the population growth the government introduced a one-child-per-family policy in the late 1970s.

The policy was created not only to deal with the huge population problem but as a prerequisite for the social and financial planning necessary in a socialist system. The policy is more strictly enforced in urban areas and is unpopular in the rural areas where male children are more important. However, it is enforced enough to make most couples obey it. With the introduction of the one-child policy, the population growth has slowed, with probably 250 million fewer births since 1979. Two types of obvious changes in population have taken place. First, the people are aging. The number of people 65 or older is estimated at 87.8 million in 2000 and is expected to be 167 million by 2020, compared with an elderly population of 66 million in 1990. Second, the population is becoming more urban. For instance, the urban population was at 297 million in 1990, up 90 million from 1982. During the same period, the populations of the 2 largest cities, Beijing and Shanghai, have increased 17 percent and 13 percent respectively.

Overpopulation is the number-one global problem. Many people question controlling population through legislation. Even after the 20 years that the Chinese civilization has trusted this solution to solve their problem, some still violate the policy. However, this does not imply that legislative control is wrong, especially when dealing with the extremes facing China. Backers of China's population policy say that such state-mandated birth control and family planning is necessary not only for the well-being of China but for that of the whole world.


China has an estimated 69,412 kilometers (43,131 miles) of railroad. Every province-level administrative unit except Tibet was served by rail, and plans were being made to extend a line south from the Lanzhou-Urumqi line to Lhasa, in Xizang (Tibet). Railways have been the most important tools for transportation in China. For example, more than 50 percent of the country's traffic is moved by the railroad system. China's railway network consists of a series of north-south trunk lines, crossed by a few major east-west lines. Most of the large cities are served by these trunk lines, forming a nationwide network, with Beijing as its hub.


China has 1,209,800 kilometers (751,894 miles) of highway in total, among which 271,300 kilometers (168,586 miles) are paved (with at least 24,474 kilometers or 15,200 miles of expressways). The network of all-weather roads and highways is not a unified national system with consistent standards; the conditions of many of the roads are poor. Despite its shortcomings, the road network is probably adequate to meet the country's current needs. China has a small number of cars, trucks, and buses as compared with the United States or Japan. In the early 1990s there were about 7 million motor vehicles, two-thirds of which were trucks and buses. It produces about 200,000 trucks annually and limited automobiles. An increasing number of cars are owned privately, which will lead fast demand for qualified highways. The highway network accounts for only about 2 percent of total freight traffic.


China set up the General Administration of Civil Aviation of China (GACAC) after 1949, which has continued to serve as the nation's domestic and international air carrier. Most major cities are served by domestic flights, and a few large cities like Guangzhou, Shanghai, and Beijing have international service. GACAC planes fly to Europe, Japan, the United States, and South Asia. Some provincial and urban authorities operate intercity airlines that carry passengers and freight. There are 206 airports (1996 est.), among which 192 have paved runways.


China has 110,000 kilometers (68,354 miles) of navigable waterways and 1,746 ships (merchant marine). It has 9,070 kilometers (5,636 miles) of crude oil pipelines, 560 kilometers (348 miles) of petroleum products pipelines and 9,383 kilometers (5,830 miles) of natural gas pipelines (1999 est.).


China's power sector has performed impressively in support of economic growth during the past twenty years. Faced with the need to expand its power capacity, the state is investing heavily in the construction of new power plants and self-financing capability. Equally significant in the development of the national power sector are the establishment of regional power grids and the implementation of an electricity tariff reform to tackle the problems of inefficient power distribution and usage. Electrical power is supplied mainly by the state-owned enterprises. China has effectively restructured its power industry by closing a large number of small thermal power plants with high coal consumption, heavy pollution, and poor economic efficiency. According to the official statistics, the country generated 1.16 trillion kilowatt hours (kWh) of electricity in 2000, a 6 percent increase from the previous year; the country has made headway in building and renovating 87 urban power grid projects and 1,590 rural ones. China has also developed its enormous hydroelectric potential so that a larger share of its domestic demand for electric power can be met with renewable hydropower. Renewable hydropower is tapped from moving water such as waterfalls and fast-moving streams.

The reform and opening up policies have brought great leaps and bounds to the development of the country's nuclear power industry. Meanwhile, China attracts foreign funds to supplement the domestic shortage of funds in power construction and to upgrade the technological equipment of the power industry. According to the statistic communiqué of the PRC on the 1998 national economic and social development issued in February of 1999, the newly-increased annual production capacity in 1998 through capital construction projects included 16.9 million kilowatts of power generation by large and medium-sized generators and 47.26 million kilovolt-amperes of power transformer equipment (including 7.79 million kilovolt-amperes of updated power grid in urban and rural areas). China is the country to deliberate the biggest nuclear power station construction plan in the world. According to the central government's plan, by year 2020, China will possess 40,000,000 KM of nuclear power installed capacity.


Considerable effort has been expended on the postal and telecommunications systems in China since 1949, but they are still far from meeting Western standards of speed and efficiency. The mail is mainly carried by the nation's railroad. As is the case with transportation, the telecommunications system is sufficient enough to meet the needs of a growing economy. There were 110 million main lines in use (1999 est.) and 23.4 million mobile cellular phones in use (1998). Domestic and international services are increasingly available for private use; an unevenly distributed domestic system serves principal cities, industrial centers, and most small and middle-sized towns. Domestically, inter-provincial fiber-optic trunk lines and cellular telephone systems have been installed; a domestic satellite system with 55 earth stations is in place. Internationally, China has 5 Intelsat (4 Pacific Ocean and 1 Indian Ocean), 1 Intersputnik (Indian Ocean region), and 1 Inmarsat (Pacific and Indian Ocean regions), as well as several international fiber-optic links to Japan, South Korea, Hong Kong, Russia, and Germany. The country had 673 radio broadcast stations—369 AM, 259 FM, 45 shortwave—and 417 million radios. In 1997, the country had 3,240 television broadcast stations, (of which 209 are operated by China Central Television, 31 are provincial TV stations and nearly 3,000 are local city stations), and 400 million televisions. In 1999, the country had 3 Internet service providers (ISPs).


China's principal food crops are rice, wheat, corn, gaoliang (Chinese sorghum), millet, barley, and sunflower seeds. China is the world's largest producer of rice, and rice accounts for almost half of the country's total food-crop output. Rice, wheat, and corn together make up more than 90 percent of China's total food grain production, and these crops occupy about 85 percent of the land under cultivation. Grain production has risen steadily since rural economic system reform started in 1978. There has also been a steady rise in the output of industrial crops, the most important of which are cotton, oil-bearing crops (such as peanuts and rapeseed), sugar (both cane sugar and beet sugar), tobacco, baste fiber (for cordage, matting, and similar uses), tea, and fruits. Poultry and livestock production, though rising, remains the weakest sector of Chinese agriculture. Livestock numbers are high, but the amount of meat produced per animal is low. Thus, China has 15 percent of the world's livestock and about 40 percent of its pigs, but it provides only 7 percent of the meat products and 15 percent of the pork.


Despite China's large land area, its forest resources are modest. Much of the western interior is too high or too dry to support dense forest stands. In the humid east, the forests were harvested for centuries for building material and firewood; limited effort was made to regenerate them. In 1949, it was estimated that about 8 percent of the total surface of the country was covered with forests. Since then, an active program of forestation has been undertaken, and it is estimated that the forested area has been increased to 12 to 13 percent. In recent years about 2.5 million acres (1 million hectares) of forestland have been added annually. The state is aiming to have 20 percent of the country's surface in forest. In contrast, more than 30 percent of the United States is forested.


China has a long tradition of ocean and freshwater fishing and of aquaculture. Pond raising has always played an important role and has been increasingly emphasized to supplement coastal and inland fisheries threatened by over-fishing. China produces about 17.6 million tons yearly, first among the world's nations. More than 57 percent of the total catch is from the ocean. The remainder comes from rivers, canals, lakes, and ponds. China's coastal zone is rich in fish. All the coastal seas have extensive areas of shallow water over the continental shelf. In these seas, especially the Yellow River and East China River, cold and warm ocean currents mix, creating an environment that is particularly suitable for many species of ocean fish, including croakers, mackerels, tuna, herring, and sharks. Several varieties of shell-fish and specialties such as squid and octopus are also produced.


With one of the largest and richest stocks of minerals of any country, China has enough minerals to support a modern industrial state. Mining of all types of minerals is expanding rapidly. The most significant minerals are coal, iron, tin, copper, lead, zinc, molybdenum, tungsten, mercury, antimony, and fluorspar. China has the world's largest coal reserves, which are estimated at more than 600 billion tons. These reserves would keep the country supplied with coal for about 500 years, if usage were to continue at its present level.


The country also has substantial petroleum reserves, both on land and offshore. Offshore prospecting is under way in several locations, with a number of Western and Japanese petroleum companies assisting China. Such minerals as tungsten, aluminum, titanium, and copper have export possibilities. Extensive deposits and promising sites were located in 1960s. The main production centers are in the North China Plain and in the Northeast. For instance, Daqing petroleum production basis in Heilongjiang Province is one of the largest petroleum producers in the country. Since the mid-1970s, China has been ranked as one of the ten largest oil-producing countries in the world, with the capacity to produce more than 1 billion barrels yearly. A small quantity of this output has been exported for earning foreign currency.


Chief manufactured products include cement, rolled steel, chemical fertilizer, paper and paperboard, sulfuric acid, sugar, cotton yarn, cotton fabrics, cigarettes, television sets, and washing machines. Generally, the Chinese industrial structure has a higher level of manufacturing although it is far from high manufacturing in terms of productivity. Since 1978, the proportion has decreased, largely of output of low-level manufacturing sectors in light industry with agricultural products as raw material and mining sectors in heavy industry, but low-level expansion and repetitious construction in these sectors are still very serious. Product quality upgrade is still behind the demand of structures' upgrade, which in turn leads to the dependence on import of high-level manufactured goods for economic growth. The proportion of the 2 preceding sectors dropped from 34.1 percent and 8.19 percent in 1985 to27.16 percent and 5.97 percent in 1998, dropping in total by 7.03 percent and 2.22 percent respectively. Compared with the United States and other developed countries, the horizontal industrial expansion with low levels of manufacturing causes low-level malignant competition in the domestic manufacturing sector. The same effects can be found in high-level consumption of energy and raw materials. For this reason inflated demands bring about a large increase of sectors with low technology content and delay upgrade of industrial structures.


Dining out is one of the most important social activities for both personal and business reasons in China. The food service can be categorized as fine dining, family restaurants, neighborhood restaurants, quick-serve restaurants, street vendors, food courts, and cafeterias operated by the institutions or corporations. Since the 1980s, Western-style chain restaurants have been the driving force for the development of service, quality, value and distribution in the Chinese food service industry. A recent survey indicates that China has approximately 2.2 million restaurants and cafeterias. With the growth of China's economy, the changing life styles, and increased disposable incomes for the potentially largest group of middle-income families in the world, China is expected to be the new leader in the growth of the food service industry in the 21st century.


China is a world-class destination that offers several thousand years of history and brilliant cultural achievements. Tourism has been designated as an important growth area under the current national restructuring. Remarkable progress has been made in China's tourism since 1978, when it barely existed as an industry. In 1978, on the eve of the open-door policy, China received a mere 760,000 tourists and US$260 million in tourism-related foreign exchange earnings.

During the 1980s, the state council strengthened its management over tourism and adopted a policy of enlisting support from all quarters—the state, the collectives, related ministries or departments, individuals and foreign investors. China began the construction of a large number of tourist hotels by using foreign capital and also improved the ability of its travel agencies to solicit tourists. In 1988, the national tourism industry earned US$2.24 billion in foreign exchange, or 10 times the figure in 1978. Meanwhile, efforts have continued to open up new scenic spots, tap new visitor sources and improve tourism-related rules and laws. Drawing experience from developed countries, China improved its management skills and the overall quality of employees to optimize the environment for tourism expansion.

In the 1990s, the country began to design special tourism projects. The Visit China '97 program was a big success, with overseas visitors hitting 57.6 million and foreign exchange earnings reaching US$12.074 billion, thus catapulting China's place in world tourism earnings from 41st to 11th. At the same time domestic tourism also reached a new record with the number of tourists jumping to 644 million and earnings reaching US$27 billion. As a result, tourism income in the year totaled over US$38 billion, or 4.1 percent of the GDP. Massive infrastructure investments and rising living standards helped to stabilize the basic tourism market and improve the overall environment for tourism expansion. China's tourism earnings in the year 2000 were estimated as US$43.9 billion, or 5 percent of the GDP, with US$14 billion in foreign exchange earnings from overseas.


Retail was one of the fastest growing sectors in China in the earlier 1990s. Since retail industry reforms began in 1992, the government has adopted some new policies highlighted by the proclamation of the Provisional Rules on Retailing and Wholesaling in June 1999. These policies have propelled the retail industry through a process of fundamental transformation. While shopping in the past meant visiting a run-down department store and choosing from a limited range of low-quality products, currently the Chinese consumer is exposed to a growing number of sophisticated retail formats and wooed by a wide range of foreign and domestic products. The existing retail formats in China are warehouse/discount stores, supermarkets, department stores, convenience stores, franchised service or chain-store outlets, specialty stores, shopping centers, catalogue sales, TV home shopping, and recently developed e-commerce .

One eye-catching development is that local governments, in spite of central regulations, approved a large number of joint commercial ventures. Some Chinese retail stores in large cities are even beginning to hire foreign managers or are being contracted to a foreign management team. Large multinational corporations have made considerable inroads into China's consumer markets. They do so by forming joint ventures with domestic manufacturers to produce and sell their own brand-name products. By doing so they effectively take over the well-developed distribution channels of the domestic firms, and consequently their market shares improve steadily. In this area, Asian businesses (especially overseas Chinese ones) again enjoy an edge because of their familiarity with the Chinese consumption culture. They are not deterred by the lack of policy transparency and inadequate legal infrastructure. They thrive on personal connections cultivated with state officials and often regard these as a better guarantee for security. In 2000, the activities of foreign-invested retailers remained subject to tight regulation although the government took its first steps towards opening the retail sector to real foreign participation in 1992. A pilot program restricted Sino-foreign retail joint ventures to 11 cities, with only 2 such ventures allowed in each pilot site.


The financial sector's main regulatory authority is the People's Bank of China (PBOC), the country's central bank. The PBOC controls the money supply, determines interest and deposit rates, and handles foreign exchange reserves through its division, the State Administration of Exchange Control. The PBOC also supervises banks' operations, uses the credit plan to administratively control overall lending, and oversees the People's Insurance Company of China as well as through its branches, trust and investment companies (TICs).

China has 4 state banks and eleven commercial banks. The state banks were created in 1984, when specialized banks and part of the monobank were transformed into commercial banks. The Agricultural Bank of China provides finance services in rural areas. The People's Construction Bank of China is responsible for medium- and long-term finance for capital construction. The Bank of China functions as the main international and foreign exchange bank, and the Industrial and Commercial Bank of China, the largest state bank, extends working capital loans to SOEs for fixed-asset investment. State banks with a network of branches, newly created affiliates, and special departments are responsible for implementing the credit plan.

More than 60,000 urban and rural credit cooperatives were established as an alternative to banks by 1999. Urban cooperative banks, small and manageable, are structured in a 2-tier system: the upper tier interfaces with capital markets and acts as a supervisor for the system, while the lower tier, a number of small-scale banks, handles deposits and loans. The rural or agricultural cooperative banks, acting under the guidance of the Agricultural Development Bank, have limited autonomy in management and lending decisions. Their clients are mainly rural townships and enterprises.

The state-owned People's Insurance Company of China (PICC) used to be a monopoly insurer. In 1993, it still handled over 95 percent of China's total insurance business. The new insurance law of 1995 limited the PICC to commercial insurance business and transferred its social insurance business to the Ministry of Labor. Currently, although the PICC and several government financial authorities own 17 regional life insurers, there are 3 other regional insurers and 2 independent national insurers. The market for life insurance and household casualty insurance is still small in China, and corporate customers purchase most casualty insurance. Most assets have to be deposited with domestic banks in interest-bearing accounts, while other investments need to be spread among safe investments and are limited to short-run commitments.


The Shanghai and Shenzhen Stock Exchanges, China's only 2 stock exchanges currently, were established in 1990 and 1991, respectively. No cross listing exists between these 2 exchanges. Since their founding, securities markets have grown rapidly, especially in the later 1990s. Securities exchange centers, limited to government and corporate bond trading only, exist in 18 larger cities. Securities exchange centers were established in the mid-1980s when SOEs were allowed to sell bonds to employees, other companies, and, to some extent, to the public. Securities exchange centers are linked to the stock exchanges through electronic trading networks.

Chinese companies offer 2 types of shares: A shares, which are exclusively sold to Chinese nationals, and B shares, denominated in Renminbi but traded and purchased in foreign currency exclusively by foreigners originally. By March 2001, B shares could also be purchased by Chinese citizens using foreign currency. B shares are restricted to limited liability shareholding companies. To be qualified, companies must have been profitable for at least 2 consecutive years; must possess sufficient foreign exchange revenues to pay dividends and cash bonuses; must be able to provide financial statements and earning forecasts for 3 consecutive years and at the time of listing; and must have a price-earning ratio of less than 15.

The state planning commission formulates quotas for stock and debt listings, which sets a figure for the aggregate offering price of issuances in a given year. The formulated quotas are then allocated on a provincial level. This process generates some problems, such as politicized selection and approval process, lowered quality of issuer with a large number of small issuers, the lack of predictability in the schedule of announcements of annual quotas, and the fact that announced quotas change yearly according to market conditions. Furthermore, the quota system pushes non-quota activity into unofficial and semi-official channels such as the securities exchange centers. Because of these problems, it is widely agreed that the Chinese stock markets are far from formal and mature and, thus, are full of myth and risks.


Foreign banks are generally restricted to hard currency operations, although the government has announced its intention to partially open a local currency business to foreign banks in its bid to join the WTO. Foreign banks are allowed to set up branches and local subsidiaries and to establish joint venture banks with Chinese partners in selected cities and SEZs. However, their activities must be limited to wholesale banking and only a limited number of foreign exchange transactions such as foreign exchange deposits and loans for joint ventures, foreign exchange investments and guarantees, and the settlement of import and export accounts. Foreign non-bank financial institutions consist of 6 finance companies and 6 fully-licensed insurance companies. Generally, it takes about 3 years for foreign insurance companies to obtain a PBOC-issued insurance license.


Economic reforms have made substantial improvements in the living standards of rural residents. Since 1978, the farmers boosted their incomes by engaging in specialized agricultural activities such as animal husbandry, agriculture, and orchard production, in addition to raising traditional crops. Furthermore, township and village enterprises (TVEs) accounted for the bulk of increased wage income earned by the rural residents. As the result, the disposable income among rural residents has increased dramatically since the early 1980s. However, in spite of these improvements, the rise in income of rural residents is markedly small when compared to that of urban areas. The total rural incomes are only 40 percent of urban incomes in China when in most countries rural incomes are 66 percent or more of urban income. The gap in income between rural and urban residents has grown at an increasing rate since the late 1980s. In fact, such disparity has been the most important contributor to the problem of social equity in China, followed by inter-regional disparity.


Decades of strict central planning created serious disparities in incomes among citizens in different regions. The average annual income is high, for example, in Jiangsu province located in the eastern region, but Guizhou, located in the western region, has a low income level. The difference is quite enormous. For instance, in 1996, per capita annual income of Jiangsu was 2613.54 yuan while in Guizhou it was 609.80 yuan; the ratio between the two was 4.3:1. In the same year, per capita GDP and the total GDP of the eastern region were 1.9 times and 5.5 times larger, respectively, than those of the western region.


In addition to the gap between urban and rural areas, city dwellers also feel the income inequality among themselves. According to the Urban Socio-Economic Survey Organization of the State Statistics Bureau, in the middle 1990s the per capita income of the top 20 percent income earners was 4.2 times greater than the bottom 20 percent, worsened from 2.9 times in the later 1980s. Although many enterprises in urban areas have either stopped working or closed down, many of the idle employees who have been laid off are waiting for future employment that would provide them the minimum incomes to maintain the basic standard of living in the urban areas. Currently, many idle workers are either receiving low incomes or no incomes at all. The wage level of retired employees is also quite low, and, considering the effects of inflation, their living standard is falling.


About 10 percent of the Chinese population lives below the poverty line. One of the largest challenges in China is poverty alleviation and elimination. According to the World Bank, due to aggressive measures, China has achieved great success in its anti-poverty struggle in the past 2 decades. The impoverished population dropped from about 250 million in 1978 to 125 million in 1985 because rural areas experienced economic growth. The Chinese government has been planning and organizing a number of large-scale anti-poverty programs all over the country since 1986. By the end of 1992, the poverty population of rural China was reduced to 80 million, reducing the poverty rate to 8.8 percent.

In 1994, in order to accelerate the poverty alleviation and ultimately eliminate poverty by the end of last century, the Chinese government launched the "8-7 Plan," the main point of which was to eliminate absolute poverty in 7 years through the tax favorite policy, financial support, and social-economic development program. For the convenience of implementing the "8-7 Plan," the central government selected the 592 poorest counties from the more than 2000 counties nationwide and designated them as "national poor counties." It was estimated that more than 70 percent of the 80 million poor concentrated in these 592 counties had very bad natural environments and under-developed social-economic conditions.

After 4 years, the poor population of rural China was reduced to 42.1 million, and the poverty rate was 4.6 percent by the end of 1998. The Chinese government spent 24.8 billion yuan (US$3 billion) on poverty alleviation in 1999, 30 times more than in 1980. Rural per capita income among China's 870 million rural residents in 1999 was 2,210 yuan. Only 3 percent of the rural population remained impoverished or living below the 635-yuan standard, making China's rural poverty rate the lowest among developing nations. In 2000, China announced that it had eliminated "absolute poverty."


Chinese labor has benefitted significantly from economic reforms. During the 8th 5-Year Plan (1991-95), real incomes increased by 7.7 percent annually in urban areas and 4.5 percent annually in the countryside. However some serious problems existed in the labor market, which threatened to impede economic reforms and to disrupt social stability. Increased lay-offs (officially labeled as "temporarily losing a job"), placing workers "off post" ( xiagang ), as well as delayed wage and pension payments, resulted in a number of demonstrations by workers and retirees in several Chinese cities. Within a certain period, typically 1 year, these "laid off" workers are usually encouraged to take other types of jobs, generally with less pay and/or status than their original positions. Many workers also take second jobs. Some continue to draw a basic salary and benefits from their previous employer for whom they do little or no real work. By 2001, the problems caused by the increasing lay-offs from SOEs, along with several other issues, became the first worries of the nation's leaders.

The official unemployment rate was officially reported to be 6 percent by the end of 1990s. Labor officials readily admitted that the official unemployment rate did not include 2 large and important groups that are effectively unemployed, redundant state sector workers and rural surplus laborers. By official estimate, the underemployed population in the countryside, defined as those with productive employment less than half of the year, exceeds 200 million people. Some probably more accurate estimates of urban unemployment vary anywhere between 10 and 23 percent. Even according to the official unemployment criteria, a report completed by China's State Commission for economic restructuring in early 1997 projected that China could have 15 to 20 million unemployed urban workers by 2000. Meanwhile, it is estimated that between the years 2000 and 2010 over 40 million new entrants will be brought into the urban workforce.


A national labor law effective 1 January 1995 codified earlier regulations and provides a framework for labor reform. New provisions in the law require workers at all types of businesses to sign labor contracts with the employers; establish arbitration and inspection divisions at all levels of government; set out a preliminary framework for collective bargaining at all types of enterprises; and empower managers to dismiss workers for economic reasons. However, the local governments are less effective in enforcing strict worker safety and overtime provisions of the Labor Law. As the result, industrial accidents, particularly in the mining sector, claim a high number of lives every year.

The Labor Law also requires localities to establish local minimum wages. For instance, the monthly minimum wage in Beijing at the end of 1996 was RMB 270 (approximately US$33); RMB 300 (approximately US$36) in Shanghai; RMB 398 (approximately US$48) in Shenzhen; and RMB 140 (approximately US$17) in Guizhou province. Other parts of China, including Guangdong, Jiangsu, and Shandong provinces, have created a sliding scale of minimum rates for different trades and localities. The minimum wage level determinations are generally higher than the local poverty relief ceiling but lower than the current wage level of the average worker.

Labor disputes, including delayed wages and strikes, have been increasing over the last several years in China. The upward trend has made some labor and union officials become defensive. The official media continuously pay attention to worker abuse, invariably at small, export-oriented foreign ventures with Asian (Hong Kong, Taiwan, South Korea) investment. However, many unofficial observers indicate that working conditions are generally worse in private Chinese enterprises and in domestic small town and village enterprises, which are often owned by local government. Most labor disputes are solved through arbitration and recently some cases reached the courts. According to official statistics, based on National Mediation Center and Labor Bureau records, 48,121 labor disputes occurred nationwide in China during 1996.


For the most part, unions in China maintain their primary function of enhancing production and sustaining labor discipline, rather than supporting worker rights. Local unions also perform a variety of social and welfare functions, such as handling disability benefits and housing funds and operating clubs, eating facilities, nurseries, and schools. The All-China Federation of Trade Unions (ACFTU), the country's only officially recognized workers' organization, remains focused on the state sector. There is still little evidence to suggest that ACFTU is being positioned to assume the new role of worker advocate mandated by article seven of the labor law, although some union officials at the working level may be increasingly interested in representing the interests of workers, particularly on safety issues.

For the ACFTU, improving labor discipline and mobilizing workers to achieve party and government goals are their primary objectives. However, since the early 1980s, additional objectives have been to increase productivity and encourage participation in, and support for, economic reforms. Generally, the membership is limited to the workers in SOEs. Over half of the country's non-agricultural workers are not members of the ACFTU, those who are outside the state industrial structure in collectives, private and individual enterprises, foreign-in-vested enterprises, and township and village enterprises.


The working conditions are generally poor in China, especially in the rural areas. The rate of industrial accidents had remained high until 1996 when, according to Ministry of Labor statistics, for the first time in many years the number of industrial accidents actually dropped. Total accidents stood at 18,181, 13.5 percent less than in 1995, with total fatalities at 17,231, a 13.9 percent drop from 1995. By 2001, there was no evidence to confirm whether this decline represents a permanent trend. The official media continue to criticize the overall high number of work-related accidents and fatalities. The majority of industrial accidents in China occur in mines, particularly in poorly regulated small-scale private, township, and village mines. For instance, in 1996 there were 7,695 mining accidents and 9,974 workers were killed.

Work safety issues attracted the attention of senior government leaders; occupational safety and health became the subject of constant campaigns. All work units are required to designate a safety officer. Since 1991, the Ministry of Labor has conducted an annual "industrial safety week" during May, to promote safety consciousness among managers and workers. As of mid-1997, the Ministry of Labor fulfilled new National Occupational Safety and Health legislation. Labor Ministry officials have also indicated that they have the responsibility of drafting improved National Mine Safety legislation. However, much evidence demonstrates that enforcement of existing regulations, rather than the drafting of new legislation, is what is needed most. Moreover, pressures for increased output, lack of financial resources to maintain equipment, lack of concern by management, poor enforcement of existing regulations, and a traditionally poor understanding of safety issues by workers, all make it difficult, if not impossible, to lower the high rate of accidents.

On 1 May 1995 China reduced the national standard workweek from 44 to 40 hours, excluding overtime. The Labor Law mandates a 24-hour rest period weekly and does not allow overtime work in excess of 3 hours a day or 36 hours a month. The Labor Law also sets forth a required scale of remuneration for overtime work that is set at no less than 150 percent of normal wages. Enforcement of these regulations varies according to region and type of enterprise. The official media regularly report cases of workers required to work long overtime hours at small-scale foreign-invested enterprises, particularly in special economic zones and other areas of Southeast China. Similar abuses in non-state sector enterprises are also widely acknowledged to occur.


Economic reforms have increased employment opportunities for both men and women in China. The growth of the less regulated non-state sector and the declining role of the government in job assignments has also increased the likelihood that women will face employment discrimination in China. In 1995 while hosting the U.N. Fourth World Conference on Women (FWCW), China pledged to pay more attention to the problems faced by women in the work-force. The state council promulgated the national program for Chinese Women's Development in August 1995 with the goal of increasing enforcement of the right to education and employment and asserting the status of women. Responding to the hesitancy demonstrated by government ministries to hire women at a Beijing job fair in early 1996, the All-China Women's Federation (ACWF) called for stricter safeguards of women's rights.

In SOEs, women are more likely to be forced into early retirement or placed "off-post." A joint study of sample enterprises in 5 cities performed by the Ministry of Labor and the ILO in early 1995 indicated that 70 percent of workers described as "surplus" were women. According to an official survey completed in Shanghai in August 1996, women were the first to be affected by unemployment in the city because of their overall lower level of skills. The 1988 Women's Protection Law provides a minimum of 3 months of maternity leave and additional childcare benefits for women. The law also provides exclusion for breastfeeding mothers from certain categories of physical labor and night shifts. However, the regulations are designed to provide additional incentives to women workers of childbearing age to abide by family planning policies, which do not affect rural workers.


China perhaps is one of few countries that discriminates against middle aged and older workers in terms of re-entering employment after being laid off. Many employers will state openly in their job advertisements that they would not hire those who are over 45 years old. Older workers are also finding it increasingly difficult to compete. Some managers complain that older workers do not have the skills needed for the current marketplace; others note that older workers are in poor health. Older workers are likely to be the first to be affected by downsizing in the state sector. By all accounts, older women have an especially difficult time maintaining their employment. Many older women are poorly educated upon entry into the job force and receive little opportunity to upgrade their skills thereafter. While managers may want to keep on a certain number of experienced men, most view older women simply as a burden. Older women find the differences in China's statutory retirement age especially rankling. The retirement age for men is 60, while for women it is 50 in industry and 55 elsewhere. Although traditional views hold that women want to retire early to take care of grandchildren, women today, especially educated women, prefer to make this decision themselves and not be forced out of the workforce before they are ready.


In theory, child labor is forbidden in China. For instance, the 1995 National Labor Law specifies, "No employing unit shall be allowed to recruit juveniles under the age of 16." Administrative review, fines, and revocation of business licenses of those businesses that hire minors are specified in article 94 of the Labor Law. Chinese children are entitled to receive 9 years of compulsory education and to receive their subsistence from parents or guardians. Laborers between the ages of 16 and 18 are referred to as "juvenile workers" and are prohibited from engaging in certain forms of physical work including labor in mines. The Labor Law mandates the establishment of labor inspection corps at all administrative levels above county government. The rapid growth of China's non-state sector has outpaced the evolution of government inspection and enforcement regimes. However, in poorer, isolated areas, child labor in agriculture is widespread given the few options available to minors who have completed their primary school education at approximately 13 years of age. According to official statistics, 10 million children between the ages of 6 and 14, two-thirds of whom were girls, dropped out of Chinese primary schools during 1996. Presumably they ended up performing some type of labor to help the family's financial well-being.


The long-term outlook for the Chinese economy remains unclear. China's commitment to join the WTO appears to represent a major commitment on the part of the Chinese government to significant economic reform and greater access to its domestic markets. Some observers believe that the Chinese government views accession to the WTO as an important, though painful, step towards making Chinese firms more efficient and competitive in the world market. In addition, the government hopes that liberalized trade rules will attract more foreign investment to China. It is expected that over the long run a more open market system would boost competition, improve productivity, and lower costs for consumers, as well as for firms using imported goods as inputs for production. Economic resources would be redirected towards more profitable ventures, especially those in China's growing private sector. As a result, China would likely experience more rapid economic growth than would occur under current economic policies. It is estimated that WTO membership would double China's trade and foreign investment levels by the year 2005 and raise real GDP growth by an additional 0.5 percent per year.

In the short run, due to increased foreign competition, widespread economic reforms (if implemented) could result in disruptions in certain industries, especially unprofitable SOEs. As a result, many firms would likely go bankrupt and many workers could lose their jobs. How the government handles these disruptions will greatly determine the extent and pace of future reforms. The central government appears to be counting on trade liberalization to boost foreign investment and spur overall economic growth; doing so would enable laid-off workers to be employed in higher growth sectors, especially in the growing private sector. However, the Chinese government is deeply concerned about maintaining social stability. If trade liberalization were followed by a severe economic slowdown, leading to widespread bankruptcies and layoffs, the central government might choose to halt certain economic reforms rather than risk possible political upheaval.

In February 1998 the officials announced their intentions to spend US$750 billion on infrastructure development over the next 3 years, although many analysts have questioned China's ability to obtain funding for such a massive financial undertaking in such a short period of time. It is likely that China intends to attract foreign investment for much of its infrastructure needs.

However, Chinese restrictions on ownership, profits, and operational control of major projects, China's demands for subsidized financing and sharing of technology, and uncertainties regarding obtaining approval from Chinese officials at the central and local levels have made foreign investors reluctant to invest in major Chinese infrastructure projects.


The central government has decided to accelerate the economic development in its west regions over the next few decades. China will build more highways in its western region, including 2 linking the heartland with the Tibet Autonomous Region, over the next 5 to 10 years. There are already 3 highways linking the inland areas with Tibet. China will also build another 14 main highways in the western region in the coming 10 years. China will have completed a modern highway network in the west by 2030. At the moment, roads in the western region are poor and insufficient. There are only 7.8 kilometers of highways per 100 square kilometers in the region, only half the national average. China has made the improvement of infrastructure the priority in its program to develop the vast western region. This development is expected to become one of the most dynamic forces in the country's economic growth.


The last 2 decades of rapid economic growth, urbanization, and industrialization have been accompanied by steady deterioration of the environment in China. The concentration of both air and water pollutants are among the highest in the world, causing damage to human health and lost agricultural productivity. Some major Chinese cities have particulate and sulfur levels from 2 to 5 times World Health Organization and Chinese standards. Soil erosion, deforestation, and damage to wetlands and grasslands have resulted in deterioration of the national ecosystems and pose a threat to future agricultural sustainability.

China has already taken some steps to reduce pollution and deforestation and has staved off an abrupt worsening of environmental conditions in general. A system of pollution control programs and institutional networks for environmental protection is being constructed at the national and local levels. As part of the recent government reorganization, China's environmental agency, the State Environmental Protection Agency (SEPA), has been upgraded to full ministerial rank and its coverage expanded to include the "green" issues. For better urban and industrial pollution control, China has focused increasingly on river basin management, greater use of economic incentives, and increased use of public information campaigns. Issues of vehicle emissions in urban areas are being tackled through improved traffic management, public transport initiatives, changes in transport fees, and phasing out of leaded gas, which has already been implemented in the largest city centers. Coastal zone management has been introduced, and energy conservation efforts and the development of renewable sources of energy have been expanded.


China has no territories or colonies.


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—Robert Guang Tian

Camilla Hong Wang


Beijing (Peking).


Chinese Renminbi (in Chinese "Renminbi" means "People's Currency") Yuan (RMB). One yuan equals ten jiao; one jiao equals ten fen. Paper bills include 1, 2, 5, 10, 20, 50, and 100 yuan; 1 jiao, 2 jiao, 5 jiao; 1 fen, 2 fen, 5 fen. There are coins of 1 yuan; 1 jiao, 2 jiao, 5 jiao; 1 fen, 2 fen, and 5 fen.


Crude oil, textile yarn, fabrics, chemicals, coal, soybeans, vegetable oil, rice, and small machinery.


Machinery, steel and other metals, wheat, chemicals, and fertilizers.


US$4.8 trillion (purchasing power parity, 1999 est).


Exports: US$194.9 billion (f.o.b., 1999). Imports: US$165.8 billion (c.i.f.,1999).

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