INFLATION : Market prices were stable throughout the year of 2001. Prices rose in the first half of the year and declined in the second half of the year, influenced by the international economy. The consumer price index (CPI) in 2001 was up 0.7 percent over the previous year, with an increase of 0.7 percent in urban areas and 0.8 percent in rural areas. Measured using components of the price index of goods and services, the price level of foods remained the same. The prices of some goods and services declined: cigarettes and alcoholic drinks by 0.3 percent; dresses and clothes by 1.9 percent, home appliances and services by 2.3 percent, transportation and telecommunication by 1.0 percent. The prices of some goods and services rose:, goods and services for entertainment, culture and education by 6.6 percent; and housing by 1.2 percent. The manufacturer’s price of industrial products declined by 1.3 percent. The cost of raw materials, fuel and power declined by 0.2 percent. Fixed-asset investment rose by 0.4 percent.
EMPLOYMENT : The work done to increase employment was strengthened further. By the end of 2001, there were 730.25 million employees, 9.4 million more than the previous year, of which 239.4 million employees were in urban areas, an increase of 7.89 million year-on-year. By the end of 2001, the total number of employees of the state-owned enterprises (SOEs) who was retrenched was 5.15 million, 1.42 million less than the last year. In 2001, every effort was made to help the 2.27 million retrenched workers to find new jobs. By the end of the year, the urban registered unemployment rate was 3.6 percent. Unemployment will remain an important issue in the long-term in China.

The social security system was further consolidated and improved. By the end of 2001, 103.55 million employees were registered in the Unemployment Insurance Program, and a total of 3.12 million unemployed were receiving benefits. A total of 106.30 million employees and 33.46 million retirees had been included in the Basic Retirement Pension Program, and a total of 76.29 million employees and retirees took part in the Basic Medical Care Program. The number of urban residents covered by the Subsistence Allowance System reached 12.70 million, all residents in the urban areas with the lowest per capita incomes in China.

BALANCE OF PAYMENTS : Foreign trade maintained high growth in 2001. Total volume of exports and imports for the year reached US$509.8 billion, up by 7.5 percent over the previous year. The total volume of exports reached US$262.2 billion, up by 6.8 percent over the previous year. The total volume of imports reached 243.6 million US dollars, up by 8.2 percent over the previous year. Exports of machine components and electronic products increased relatively faster. The value of exports of high-tech and new-tech products was US$46.5 billion, up by 25.4 percent, which was accounting for 17.5 percent of total exports, 2.6 percentage points more than the previous year.

The international tourism industry experienced a steady development. In 2001, China received 89.01 million tourists from overseas, up by 6.7 percent year-on-year. The foreign currency revenue from international tourism was US$17.8 billion, with a growth rate of 9.7 percent year-on-year. The number of Chinese tourists going abroad increased by 15.9 percent, of which 6.95 million people/trips were private travelers, with a growth rate of 23.4 percent year-on-year.

Foreign Direct Investment (FDI) increased rapidly. In 2001, a total of 26139 new foreign-invested project/enterprises were approved, up by 16.0 percent over the previous year. The contractual investing value amounted to US$69.2 billion, up by 10.4 percent over the previous year. The actual value of utilized FDI was US$46.8 billion, up by 14.9 percent over the previous year.

National foreign exchange reserves continued to increase. By the end of 2001, total foreign exchange reserves reached US$212.2 billion, an increase of US$46.6 billion than the previous year.

EXCHANGE RATE : The exchange rate of the renmimbi (RMB) against foreign currency kept stable. By the end of 2001, 1 US dollar was equal to 8.2766 RMB. The RMB appreciated by 15 basic points.

GROSS EXTERNAL DEBT : By the end of 2001, the recorded balance of the foreign debts amounted to US$170.11 billion, not including debt in Hong Kong, China; Macao; and Chinese Taipei. As the Chinese government used the international standard statistical category for foreign debt instead of the one implemented before 2000, data for 2001 is not comparable to the data of 2000. By the end of 2001, foreign government loans and international finance institutes’ loans amounted to US$23.70 and US$27.57 billion respectively. National debt issued overseas reached US$12.67 billion.

FISCAL POLICY : The statistics in this section do not include debt revenues. In 2001, the total fiscal revenue reached US$197.80 billion, with an increase of US$35.96 billion over the previous year, up by 22.2 percent year-on-year. Total fiscal expenditure amounted to US$227.68 billion, an increase of US$17.95 billion more than was budget of the year. This was an increase of US$35.73 billion over the previous year, up by 18.6 percent year-on-year. There was a fiscal deficit of US$29.88 billion in 2001.

In 2001, a total of US$18.12 billion of Long-Term Treasury Bonds for Construction were issued. The total value of Long-Term Treasury Bonds for Construction issued from 1998 to 2001 reached US$61.62 billion, which played an effective role in attracting supplementary investments and loans from local governments, economy sectors, enterprises and banks resulting in a total investment of US$362.47 billion on projects and programs supported by treasury bonds. These projects and programs played an important role in stimulating economic growth, restructuring economic instituitions, increasing employment opportunities, and improving people’s living standards.

The total deficit in the central budget for 2001 accounted for 2.7 percent of GDP. The remaining debts totaled US$188.58 billion, accounting for 16.3 percent of GDP. Both the deficit and the remaining debts were within safe limits.

MONETARY POLICY : The growth of monetary supply consistent with economic growth and the objects of monetary policy were basically achieved. By the end of 2001, the balances of the broad money supply (M2), the narrow money supply (M1), and cash in circulation (M0) reached US$1912.65 billion, US$723.39 billion and US$189.56 billion respectively, and up by 14.4 percent, 12.7 percent and 7.1 percent year-on-year, respectively. The net amount of cash put into circulation amounted to US$12.52 billion in 2001, a decrease of US$1.95 billion, which could be explained by the sharp increase of use of all kinds of card issued by banks and a decrease in cash payments for the purchase of agricultural products and by-products.

Savings and loans in financial institutions increased steadily. Savings and deposits in various forms in all banking institutions totaled US$1735.22 billion, up by 16.0 percent. The balance of loans issued by all financial institutions amounted to US$1357.01 billion, with an increase of 11.6 percent using comparable measures of which, the balance of short-term loans was US$813.46 billion and the balance of long-term and medium-term loans was US$414.10 billion, up by 7.7 percent and 15.2 percent respectively. The structure of loans was continually improved.

MEDIUM-TERM OUTLOOK

In 2002/3, China’s government will focus on the following:

(1) The structure of the agricultural industry will be adjusted. More work should be done to accelerate industrialization and economies of scale in agricultural sectors. Living standards in rural areas should be improved and the burden on rural residents should be alleviated. Every effort will be made to strive for a 4 percent increase in rural per capita net income in real terms.

(2) A total value of US$18.12 billion Long-Term Treasury Bonds for Construction are going to be issued to maintain sustained and steady growth of the economy and to curb any potential deflation.

(3) Great efforts will be made to create more job opportunities and to further improve the social security network. Vigorous steps will be taken to develop labor-intensive industries with comparative advantages. It is hoped that in urban areas there will be 8 million more employees in 2002/3 than there were in 2001.

More effort will be made to develop the Insurance System for Residents with Low Living Standards in Urban Areas and to help disadvantaged groups with difficulties. Diligent efforts will be made to increase the incomes of residents in both urban and rural areas, especially those with low incomes. Positive steps will be taken to further develop the Basic Endowment Insurance System, the Unemployment Insurance System and the Basic Medical Care Insurance System for employees in urban areas.

(4) Actions will be taken to further develop policies and improve the environment for consumers. It is expected a credit system for private individuals will be established and developed. More action will be taken to expand the scale of credit consumption and introduce new consumption behaviors, such as renting consumption. Consumers will be encouraged to spend money on housing, cars, telecommunication, tourism, cultural entertainment, sports and medical care. New consumption fields and behaviors will be cultivated and developed.

(5) Positive efforts will be made to integrate information technology and application into the national economy and the wider society. Moves to upgrade the industrial structure will be accelerated in order to improve the overall quality of industries. Key sectors and enterprises will be reengineered by using the high, new and advanced technologies applicable to them to improve this R&D capacity and meet market demands.

(6) The economic system will further reformed. Reform of the shareholding system in State-Owned Enterprises (SOEs) will be standardized. Corporate governance in companies will be improved. The management of enterprises will be improved and enterprises will be encouraged to make more use of information technologies. Restructuring of monopoly industries will continue and more steps will be taken to introduce reforms. The sound development of non-state sectors of the economy will be supported, encouraged and guided while measures are taken to ensure the development of state sectors of the economy.

(7) The implementation of ‘opening’ policy to the outside world should be further improved. Every effort must be made to improve foreign trade and foreign investment. The structure of export goods should be adjusted and optimized to realize the strategy of market diversification and increase exports. Qualified enterprises are encouraged to invest and compete for contracts in foreign countries, which will be an effective way to stimulate the export of equipment, materials, and labor and the importing of goods and energy that are in short supply in China. Careful arrangements will be made to import key equipment and technologies and important raw and processed materials that are badly needed in China.

The investment environment will be further improved to encourage foreign investors to invest in fields such as modern agriculture, high-tech industry, infrastructure construction, the development of western regions of China and the reengineering of SOEs. The opening of the services trade should be carried out step by step. The management of foreign debts needs to be improved to reduce debt risks.

(8) Actions will be taken to continue the implementation of the strategy of developing China’s western regions and the coordination of regional economic development. The improvement of infrastructure and ecological conditions in the western region will be accelerated. Efforts will be directed at developing science, technology and education, stepping up the development of unique industries and transforming resource advantages into economic advantages.

(9) The structure of budgetary expenditures should be optimized to bring the role of finance into full play to contribute to economic growth. The total budget revenue will reach US$217.66 billion and total expenditure will be US$255.09 billion, with the central budget deficit of US$37.43 billion under control.

More play will be given to the role of the prudent monetary policy so that the financing will make a greater contribution to economic growth. The structure of credit should be adjusted and optimized. Vigorous efforts will be made to improve financial services. The loan hypothecation system for small enterprises should be improved. Small sum credit loans will be introduced positively and steadily into rural areas. More actions will be taken to standardize and develop the securities market and appropriately increase the enterprise bond scale. Monetary policy instruments such as interest rate, behaviors in open markets and rediscount rate will be applied more to allow greater flexibility in regulating the money supply. Conscientious efforts will be made to further reform financial institutions to improve the supervision of financial institutions, and the quality of financial assets, to reduce the proportion of non-performing assets, and to enhance competitiveness and risk-resistance capacity.

(10) More efforts will be made to accelerate the development of science, technology and education and implementation of the sustainable development strategy consistent with the development of all social undertakings. Great effort will be put into promoting scientific and technological progress and innovations. The process of applying scientific and technological advances to production and industrialization will be accelerated and the development of a system of technical standards will be promoted. Self-owned intellectual property rights for key technologies will be developed and the protection and management of intellectual properties will be strengthened. The system of venture capital investment and innovation of scientific inventions will be developed.

We shall adhere to the idea that the development of education must lead the way of the development of China. The elementary education will be further strengthened, compulsory education will be made universally, and overall the quality education of students will be promoted. The compulsory education project for poverty-stricken areas will be carefully implemented. The introduction of information technology to institutions of higher education in western regions will be carefully carried out to promote the integration of information technology in education.

Efforts for the improvement of the ecological environment and environmental protection will be further strengthened. An integrated monitoring system will be established to monitor the effects of development on ecology, environment, resources and disasters. More efforts will be made to develop shelter forests and natural reserves in key areas.

(11) Further steps will be taken to deepen the reform and ‘opening’ policy and meet the challenges and opportunities arising after China’s accession to the World Trade Organization (WTO). Positive actions will be made to revise and make national and local laws, rules and regulations, relating to administrations by following the rules of the WTO and China's commitment to them. More efforts will be made to make administrative rules and regulations to regulate the behaviors and orders in the market.

The measures of macro-economic adjustment will be further optimized. The government will make the economic adjustments by indirect methods, such as policy guidance and information publication, with a reduction in direct intervention on micro-economic activities.

More efforts will be made to regulate economic order in the market. The regulations will be set to manage and administrate key markets such as medicine market and food market. Local discrimination obstacles and the illegal rules that restrict marketing and investment across regions will be removed and further use forbidden. Further, harsh actions will be taken to prevent the illegal production and marketing of counterfeit and poor quality commodities in the market.

The major anticipated targets of the economic and social development for China in 2002/3 are as follows:

• Economic growth rate around 7 percent;

• A growth rate around 10 percent in investment in fixed assets;

• The increase of the price level of consumer’s goods and services by 1 to 2 percent;

• An increase of the total volume of foreign trade, both imports and exports;

• The fiscal deficit of the central government to be under US$37.43 billion;

• The growth of the supply of broad money (M2) and narrow money (M1) to be around 13 percent, with under US$18.12 billion cash in circulation;

• The registered unemployment rate in urban areas to be under 4.5 percent; and

• The natural growth of population to be under 8 thousandth.

Note:

1. 2001 statistics are quoted from the official statistics published by National Bureau of Statistics of China. They are preliminary data.

2. The statistics of the Hong Kong Special Administration Region and the Macao Special Administration Region are not included.

3. Statistics do not include the data from Chinese Taipei.

4. The absolute values of GDP and the value-added of all sectors are calculated based on current values, while the growth rates are calculated based on comparable prices.

Annex I

CHINA: OVERALL ECONOMIC PERFORMANCE

Notes: 1 Real Investment in Fix Assets Growth
2 Current price
3 Current price
4 3 months inter-bank rate

Annex II

CHINA: FORECAST SUMMARY (percent change from previous year)

Annex III

CHINA: MEDIUM-TERM TREND FORECAST (percent)