China Financial Daily

Macro-opinion on Chinese Economy, Current Problems and Measures
Abstract: Our country needs development, our cities need progress, our people’s living standard needs improvement, and our society is wanted to be more harmonious. All of these are depending on the economy; therefore, economy plays a decisive effect. Before the reform and opening-up, China took the closed-door diplomatic policies; but after the reform and opening-up, we open our door to the world. By the brilliant contrast, we can see there are tremendous changes before and after reform in so short decades. However, through introducing large investment and abiding sustainable development strategy, making clear that the different effects of economic globalization brings to developing countries and developed countries, we shall bring forth some corresponding measures to narrow the gap between China and developed countries. Through the reform of Chinese economic system and adoption of various measures to foreign economy, we can finally narrow the gap.

I. Introduction
Since the reform and opening-up, Chinese economy has made enormous progress; under this great developmental trend, it is comparative necessary to summarize the arisen problems and affirm the achievements in the past few decades. Naturally, we still need to objectively analyze the current status of Chinese economy and developmental orientation in the coming decades. However, we shall narrow the gap between China and developed countries by all kinds of effort.

II. Analyze Chinese Economy
A. What’s economy (definition?)
1. Definition of Economy
Economy refers to economize and be thrift on production or life. The former includes economizing capital, material, labor, etc; in the final analysis, it is to save the working time, that is, to produce more needful production for society by using the least labor consumption. The later refers that the individual or family carefully calculates on life expenditure, consuming minimal consumables to satisfy maximal requirement. In conclusion, economy is to use lesser manpower, material resources, finance, time and space to obtain the biggish result or profit.
2. Functions of Economy
Whether the comprehensive national strength of a country is strong or not, economy makes a significant part in it; when the economy has definite development in the country, we just have the ability to start the economic construction, and then the cities just have capability of development. From the aspect of the gap between the east and west in China, it is a best example of all. As a rule, the economic development of coastal cities is relatively faster and the step of urban construction is comparably quicker. Only when the economy has sound development, our country is able to be more harmonious; moreover, the development will be more stable and quickly, and the people’s living will be better guaranteed.
B. Chinese Economy
1. Review of Chinese Economy
Since the reform and opening-up, Chinese comprehensive economic strength have achieved prominent enhancement.
1. From the side of comprehensive national strength, China had made momentous advancement up to 1978 according to traditional economic index. From 1978 to 2007, the annual growth rate Chinese GDP was 11.5%, which ranked the third place in the world. This rate was not only higher than that of the GDP with 6.1% annual growth rate from 1952 to 1978 before the reform and opening-up, but also it was higher than that of other foreign countries at the same time in the world: the growth rate of China was 6.7% higher than the annual growth rate of world economy; it was 7.8% higher than developed countries; it was 6.4% higher than developing countries; it was 1.9 to 3.5 higher than the countries with comparably high economic growth rate, such as: Singapore, Korea, Taiwan Province of China, Malaysia, and Indonesia. These figures are enough to make us feel pride.
2. From the aspect of industrial distribution, under the fast growth economy condition, Chinese industrial structure promotes and optimizes the Chinese industrial distribution. Before the reform and opening-up, Chinese implemented the balanced development strategy in the regional development, which emphasized mutual development and economic self-forming system in all regions but neglected the development of comparative advantages. However, after the reform and opening-up, Chinese regional development strategy has changed step by step, which has stressed from self-forming system in all regions into the development of comparative advantages. Under the guideline of this strategy, although the development would be affected by regional profit limitation and industrial structures in all regions have some similarities, the new pattern of regional industrial structures, which are on the basis of comparative advantages, are coming into being.
3. From the side of people’s living standard, the majority of Chinese people were still quite penniless in long period before the reform and opening-up; their consumption level was still in the poor stage. After the reform and opening-up, people abandon the old development strategy and take the continuous increased materials and spirit requirements which satisfy the people as socialistic production purposes and critical tasks for all levels government; the status of consumption as the indispensable and important link of normal circulation for national economy has been recognized. In 1987, Chinese Center confirmed Chinese economic development “three-step” strategic deployment: First step, up to the year of 1990, GNP doubles that of 1980, and to solve people’s food and clothing problems; second step, at the end of this century, GNP of 2000 quadruples that of 1980, and the people’s living standard reaches well-off level; third step, by the middle period of next century, per capita GNP is expected to be on par with the medium developed countries. People’s living is relatively rich and it achieves modernization basically. Under such a flourishing background, the income standard of Chinese receives marked improvement, whereas the consumption demand of people will be quickly increased. Therefore, the increase of consumption demand supports the economic growth from the aspect of demand.
2. Prospect of Chinese Economy
The progress of technology drives people from closed-door policy to open-door policy, from partial open to all-around open, from low level open to high standard open. Economic globalization to the developing country is not only an opportunity, but also a challenge. With the establishment of global and regional multilateral trade system, such as: the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC), a brand-new, more open and competitive world trade system will grow up gradually. Only when the developing countries participate in this system, they could go shares with the profit of globe cooperation. In 1997, the gross level of Chinese GDP ranked the seventh place in the world. According to the economist predicts that Chinese GDP level will strive to exceed that of the Japan and just to be inferior to American GDP, and ranks the second place in the world. As China is in the rank of low income range, with comparative low per capita GDP level, Chinese economy still has the great possibility to achieve high and fast. If Chinese GDP could keep approximately 7% growth rate, however, in the year of 2020, Chinese GDP will exceed that of Japanese. With the enhancement of Chinese economic strength and upgrade of industrial structure, the share of Chinese foreign trade amount will be obviously increased in world trade amount up to 2020; moreover, the Chinese per capita GDP is expected to 5000 dollars calculated by current price of 2020, which is the world average in 1997.
3. Present Situation of Chinese Economy
1) Development of Trade
Under the special background, the Chinese had taken closed-door diplomatic policy. After the reform and opening-up in 1978, the open-door policy has brought new technologies, new products, and new machines, which have accelerated the development of Chinese economic society and have made countrymen feel more subsistent and competitive pressures. Therefore, some people held doubts on open-door policy, but the fact has proved that the reform and opening-up takes great important part in Chinese long-term development. So the open-door policy shall not only be gradually deepening, but also energetic and active in order.
2) Functions of Foreign Capital
With the step of China entering into World Trade Organization, more and more foreign enterprises come into China, which also means that more and more merchants compete in Chinese market. To Chinese people, it is more advantages than disadvantages in any case, as better material enjoyment and cheaper commodities are waiting for them. To Chinese local companies, they are encountering great challenges, as the former monopolization has disappeared. If they want to exist and wish to win the profit, they shall incessantly advance company level, and use the lowest cost to produce best products. The in-depth research indicates that Chinese people must timely adjust our aim of policy for foreign trade in order to improve the competitive power of our foreign trade export to make it to be engine function of our national economic increase and promote harmonious development of whole economic society.
3) Policy of Sustainable Development
In the continuous development of economy, although the productivity has been improved, it overly consumes resources and destroy the ecological balance and survival environment; Although it partly meets the requirement of most people in the near future, sometime it sacrifices long-term development profit of human beings. From the point of view of long-term profit, the strategy of sustainable development spreads extensively, which improves people’s environmental protection, changes people’s thinking mode and value theory, and makes healthy consumption to be the standard of choosing the commodities and makes green consumption to be fashionable. To realize the sustainable development in economic society has been the time tide, it could not only keep wealthy subsistence and developing space to the thousands of generations of off-springs, but also provide a better life to the people in the contemporary era; it even embodies the development ideology of “human oriented”. All kinds of development policies must make for the realization of sustainable development.

III. Influence Brought by Economic Globalization
A. Influence to Developed Countries
As the focus of public attention in recent 10 years, economic globalization has been regarded as great trend or direction of future world economic development. The world economy has been mutually interlaced and inosculated, and has formed into world economic integration. The leading powers of economic globalization are America and other western developed countries; America and other western developed countries promote globalization movement by some international organization, whereas the leaders of this integrative movement are: World Trade Organization, World Bank and International Monetary Fund (IMF). The beneficiaries of globalization are mostly America and other developed countries, which bring great profit to their own countries. To them, there are more advantages than disadvantages for these countries.
B. Influence to Developing Countries
As to the developing countries, the conditions are quite different. It is probable that few developing countries get more profit in some time; closing the door to construct does not work and develop. Therefore, the globalization could bring good opportunity to faster development of developing countries’ economy; it needs both introducing and going-abroad: not only actively increase international competitive power, but also make an endeavor to try for international economic cooperation. In such way, China could have the ability to accelerate the strategic adjustment of our national economic structure, advance long-term development of economy, and encounter fierce and drastic international competition to exploit international market.
C. Gap between Developed Countries and Developing Countries
Economic gap: Over 20 developed countries, they have about 1/7 world population together, but their GNP and trade export amount occupies more than 75% of world total amount, that is, they control about 3/4 world fortune; whereas over 120 developing countries, with 6/7 world population, only take 1/4 world fortune. According to per capita calculation, per capita GNP in developed countries reaches over 2700 dollars, while the developing countries are less than 500 dollars.
Energy sources: The developed countries all universally attach importance to water and electricity, nuclear power exploitation and construction; the cattle fostered by them provide milk and meat but not labor. However, in rural areas of our country (developing countries) use straw, firewood and grass as fuel in life and use big livestock as labor.
Agriculture aspect: In developed countries, the agriculture operation is highly mechanized and intensive, while the production value of stockbreeding is more than planting; in developing countries, planting is the main industry.
Grain aspect: The developed countries mostly take dairy and meat products, while minority of national farms reserve the grain, and they get more and more grain; but some developing countries can not afford the food, so they have to stay the conditions of starvation, half-starvation, and malnutrition.
Industrial distribution: The developed countries are from centralized into decentralized; the developing countries are mainly centralized.
Population growth: The population growth rate of developed countries is low, and some of them even have negative growth; the population in developing countries increases quickly.
Urbanization process: The urbanization process in developed countries is slow, and some of them even appear anti-urbanization process phenomena; in developing countries, the speed of urbanization exceeds that of the developed countries, as surplus rural labor and lopsided development of economy.

IV. Measures Carried out by Chinese Government
A. Reform of Chinese Economy
1. Reform of State-owned Economic System
All of our state-owned companies are supervised by our country, so the companies have no incentive cost and also have no sufficient measure to advance efficiency.
On the basis of primary business, the companies endure all kinds of policies from government, which make the companies impossible to increase efficiency as the aim to organize production, and many of companies with bad achievement pass the buck to government for their evil management to seek economy support. Therefore, the companies shall be self-dependent and renovate their own technologies continuously to make the economic benefit of the companies drive the social economy.
2. Reform of Rural Economic System
There is considerable gap between urban and rural areas, as our national rural economic system is not quite perfect, we must gradually establish a unified urban and rural labor market, and improve the development urban and rural compulsory education and health service to ensure the fundamental guarantee to farmers’ life. From many aspects to improve the certain issues appeared in the rural system, such as: problems of land ownership for farmers, public finance and tax system, national grain reserve system, improvement of farmers’ protecting system, establishment of unified labor market, etc; therefore, these measures could gradually reduce the gap of social security level between urban and rural areas.
B. Measures for Foreign Economy
1. Reform Product Types in Exports
In the early stage of the reform and opening-up, the orientation for political objectives of Chinese trade development was relatively concentrated; China made an export-oriented foreign trade development strategy according to the actual national condition of the shortage of foreign exchange at that time. From 1987 to 2007, our national import and export trade volume changed from 20.64 billion dollars to 1.7607 trillion dollars, and ranked the third place in the world, but we must be aware that “high energy consumption, high pollution and labor resource intensive products” are our main export resources. Changing the type of export products in trade allows no time to delay.
2. Economic Balance through Macro-control
Macroeconomic regulation and control is relative to micro-economic management, which refers to the management for overall problems and changes of national economic operation. General speaking, it refers that the government achieves a desired effect by some means. In the current Chinese macro-economic regulation and control, the central government and local governments have played important roles. Macro-control materialize in many ways: in the trade, Chinese encourage the exports, so they encourage the exports by export tax rebates; in order to protect some industries in China, our government also put forth a few safeguard measures to avoid serious trade surplus and deficit. In some developed cities, the housing prices have been a heart trouble in a lot of people’s mind; facing the sudden rise of housing prices, the government also put forward the corresponding measures to control the housing prices increase. In many ways, we can see the significant role of macro-control in Chinese economy.

V. Conclusion
Track back to the history and analyze the status quo of Chinese economy, we shall clearly see that our nation in so short several decades frees from a bad condition with backward technologies and extreme poverty. We analyze the differences from three aspects: the comprehensive national strength, industrial distribution and people’s living standard before and after the reform and opening-up of our country. Up to now, the GDP of our country ranks the third place in the world, however, when we are joyful for the GDP rank, we should also understand clearly that there is a big distance between our country and some developed countries: our per capita income is still quite low, our urban development are still unbalanced, especially the differences between the east and west areas. Moreover, the type of trade export product is too low level; as to energy consumption, people have not attached great importance to it, and the rural system is not very perfect. But it is fortunate that we have found these problems, and expect to take all kinds of measures to solve these problems. Simultaneously, economic globalization has created many opportunities for us but also some inevitable disadvantages. In any case, we still believe that we could narrow the gap between our country and the developed countries, and even surpass them.

VI. Bibliography