China Economic Development Part II

In the late 1990s, China allowed several major state companies to go bankrupt for the first time under the Communist regime. The five-year plan 1996–2001 divided China into seven economic regions, each with several provinces. These will coordinate their common development, with the aim, among other things, of reducing greatly increasing differences between rich coastal provinces in the east and poor inland provinces in the west. In a new attempt to level the government in 1999, the government launched a strategy for further efforts in the provinces furthest west. This involves, among other things, a controversial 1100 kilometer rail connection to Lhasa in Tibet.

Infrastructure and industry

In 1996, the People’s Congress approved a long-term infrastructure plan until 2010. Among the projects is the completion of the world’s largest hydroelectric power station San Xia (Three Gorges) on the Chang Jiang River (Yangtze), a channel system for directing almost half of the water masses into the river to China’s dry regions. in the north, development of China’s largest coal deposits in Shaanxi and Inner Mongolia, a system of national highways totaling 35,000 kilometers (connecting all provincial capitals and cities with over 1 million inhabitants) and a railway network along the coast from Heilongjiang in the north to Guangdong in the south.

Especially since 2000, power shortages have created significant problems, not least for industry. Construction work at the San Xia power plant started in 1994. In 2005, more than one million people had been displaced from their homes. A number of cities with over 100,000 inhabitants had been vacated and partially submerged. The project was completed in 2009. Annual production is 85 terawatt-hours (TWt) annually, making San Xia the world’s largest producer of electric power.

The giant project has been disputed and criticized, especially by environmentalists. The government has, for its part, argued that the giant dam will provide better flood control. Almost every year, hundreds of lives and great values ​​are lost during flood damage along Chang Jiang. Thousands perished when a dam erupted in 1998, one of China’s worst flood disasters in recent times.

International trade and investment

China became a member of the World Trade Organization in December 2001(WTO). As a result, Beijing seriously broke out of its traditional isolation and purposefully entered a globalized economy. Obviously, this has far-reaching consequences for both world trade and China’s own economy. Inwardly, WTO membership has strengthened the reform process, but the transition to a more market-based economy also puts many state companies in a difficult situation. The integration of the Chinese economy into the world economy has given consumers around the world cheaper goods, and China’s own billion population higher prosperity. Significant shares of world commodity production have been relocated to China since the turn of the millennium to take advantage of low wages and favorable exchange rates. Millions of jobs have been “flagged out” to China from countries across the globe.

Since January 1, 2005, China has been able to increase its textile exports after the old quota restrictions in the importing countries ended. However, exports rose so strongly that the EU and the US, on behalf of their textile manufacturers, forced agreements on new temporary quotas. The new Chinese export offensive led to a crisis among textile manufacturers in low-cost countries.

The growing Chinese economy has, since the turn of the millennium, been one of the most important drivers of a wider global upswing. China, for its part, has been the world’s largest recipient of foreign direct investment to an increasing extent. Thus, in 2004, more than $ 60 billion in foreign investment capital was pumped into China, which contributed to the rapid growth rate. Since China opened its door to foreign investment in 1979, foreign companies have contracted investments of close to $ 1.5 trillion in China. Since around 1980, a whole new sector of the economy has been created by the establishment of nearly 500,000 foreign companies, either as joint ventures) or wholly owned enterprises. These have greatly contributed to the transfer of knowledge and technology and created new contact areas with the outside world.

Since the turn of the millennium, China itself has increasingly invested abroad. This has happened through extensive acquisitions of companies, especially in the energy and commodities sector. There was a stir when the Chinese in 2005 wanted to buy one of the US’s largest oil companies, Uncoal, but strong reactions from the US Congress put an end to the acquisition. The Chinese are also building targeted brands for a globalized market, especially for electronic products. Among Chinese companies that have gained significant market shares globally since the turn of the millennium are Lenovo PC manufacturer, TV manufacturer TCL Corp., as well as electronics manufacturers Haier and Huawei.

China Economic Development 2