China Economy
CHINA
AN ECONOMIC OVERVIEW
The rapid rise of China as a major economic power within a time span of about three decades is often described by analysts as one of the greatest economic success stories in modern times. From 1979 (when economic reforms began) to 2011, China’s real gross domestic product (GDP) grew at an average annual rate of nearly 10%. From 1980 to 2011, real GDP grew 19-fold in real terms, real per capita GDP increased 14-fold, and an estimated 500 million people were raised out of extreme poverty. China is now the world’s second-largest economy and some analysts predict it could become the largest within a few years. Yet, on a per capita basis, China remains a relatively poor country. China’s economic rise has led to a substantial increase in U.S.-China economic ties. According to U.S. trade data, total trade between the two countries surged from $5 billion in 1980 to $503 billion in 2011. China is currently the United States’ second-largest trading partner, its third largest export market, and its largest source of imports. Many U.S. companies have extensive operations in China in order to sell their products in the booming Chinese market and to take advantage of lower-cost labor for export-oriented manufacturing. These operations have helped some U.S. firms to remain internationally competitive and have supplied U.S. consumers with a variety of low-cost goods. China’s large-scale purchases of U.S. Treasury securities (which totaled nearly $1.2 trillion at the end of 2011) have enabled the federal government to fund its budget deficits, which help keep U.S. interest rates relatively low. However, the emergence of China as a major economic superpower has raised concern among many U.S. policymakers. Some claim that China uses unfair trade practices (such as an undervalued currency and subsidies given to domestic producers) to flood U.S. markets with low cost goods, and that such practices threaten American jobs, wages, and living
AN ECONOMIC OVERVIEW
The rapid rise of China as a major economic power within a time span of about three decades is often described by analysts as one of the greatest economic success stories in modern times. From 1979 (when economic reforms began) to 2011, China’s real gross domestic product (GDP) grew at an average annual rate of nearly 10%. From 1980 to 2011, real GDP grew 19-fold in real terms, real per capita GDP increased 14-fold, and an estimated 500 million people were raised out of extreme poverty. China is now the world’s second-largest economy and some analysts predict it could become the largest within a few years. Yet, on a per capita basis, China remains a relatively poor country. China’s economic rise has led to a substantial increase in U.S.-China economic ties. According to U.S. trade data, total trade between the two countries surged from $5 billion in 1980 to $503 billion in 2011. China is currently the United States’ second-largest trading partner, its third largest export market, and its largest source of imports. Many U.S. companies have extensive operations in China in order to sell their products in the booming Chinese market and to take advantage of lower-cost labor for export-oriented manufacturing. These operations have helped some U.S. firms to remain internationally competitive and have supplied U.S. consumers with a variety of low-cost goods. China’s large-scale purchases of U.S. Treasury securities (which totaled nearly $1.2 trillion at the end of 2011) have enabled the federal government to fund its budget deficits, which help keep U.S. interest rates relatively low. However, the emergence of China as a major economic superpower has raised concern among many U.S. policymakers. Some claim that China uses unfair trade practices (such as an undervalued currency and subsidies given to domestic producers) to flood U.S. markets with low cost goods, and that such practices threaten American jobs, wages, and living