China Economy

China's Economic Profile, The Chinese Economy,

Economy of China

Market liberalization in the Chinese Economy has brought its huge economy forward by
leaps and bounds - but rural China still remains poor, even as its cities increase in
affluence. 

China's economy is huge and expanding rapidly. In the last 30 years the rate of Chinese
economic growth has been almost miraculous, averaging 8% growth in Gross Domestic Product
(GDP) per annum. The economy has grown more than 10 times during that period, with Chinese
GDP reaching 3.42 trillion US dollars by 2007. In Purchasing Power Parity GDP, China already has
the biggest economy after the United States. Most analysts project China to become the largest
economy in the world this century using all measures of GDP. 

However, there are still inequalities in the income of the Chinese people, and this income
disparity has increased in the recent times, in part due to a liberalization of markets within the
country. The per capita income of China is only about 2,000 US dollars, which is fairly poor when
judged against global standards. In per capita income terms, China stands at a lowly 107th out of
179 countries. The Purchasing Power Parity figure for China is only slightly better at 7,800 US
dollars, ranking China 82nd out of 179 countries. 
 China Economic Structure
Economic
Economic Export &
Structure of Insurance Mortgage Stock
Indicators Import
China

STRUCUTURE OF THE ECONOMY 

Beginning in the late 1978, China

Economyhas been moving to a more market oriented economy. China
decollectivized agriculture, yielding tremendous gains in production.

Driven by a sharp rise in the procurement price

paid for crops and what amounted to the semi-
privatisation of agriculture, the share of Most of the agricultural production is restricted
agricultural output in total GDP rose from 30% in the east. china is the world's largest
in 1980 to 33% three years later. However, producer of rice and wheat, among cash crops,
after that the share of agriculture has fallen china ranks first in cotton and tobacco and is an
fairly steadily, and by 2002 it accounted for important producer of oilseeds, silk, tea, ramie,
only 15.4% of GDP. Thus , even with these jute, hemp, sugarcane, and sugar beets. 
improvements, agriculture accounts for only
20% of the nation's gross national product.  china ranks first in world production of red meat
(including beef, veal, mutton, lamb, and pork).
The structural changes gave increased authority Due to improved technology, the fishing
of local officials and plant managers in the industry has grown considerably since the late
industry, permitted a wide variety of small-scale 1970s. 
enterprises in service and light manufacturing.
Due to its increasing openness to foreign trade Apart from crops and food products, china is
and investment, in 1999, China one of the world's major mineral-producing
Economy became the second largest economy countries. Coal is the most abundant mineral
of the world after the USA, in terms of GDP.  (China ranks first in coal production). There are
also extensive iron-ore deposits; the largest
At present, more than half of the mines are at Anshan and Benxi, in Liaoning
population depends on agriculture for province. Oil fields discovered in the 1960s and
living. However agriculture's contribution after made china a net exporter, and by the
to GDP has remained low.  early 1990s, china was the world's fifth-ranked
oil producer. Growing domestic demand
Significantly large share of industrial beginning in the mid-1990s, however, has
production in GDP, characterized the forced the nation to import increasing quantities
Chinese economy, much before the start of of petroleum. 
economic reforms there. In 1978, industry
accounted for 50% of officially measured GDP. Coal is the single most important energy
This was particularly striking because so much source; coal-fired thermal electric generators
of the workforce remained on the land. The provide over 70% of the country's electric
relative share of the services sector has since power. China also has extensive hydroelectric
remained steady ( 33% in 2003), and the energy potential. 
continued shrinkage in the relative contribution
of agriculture has been reflected in a larger Major industrial products are textiles,
share for the industrial sector, which in 2003 chemicals, fertilizers, machinery
accounted for around 52.3% of GDP. (especially for agriculture), processed
foods, iron and steel, building materials,
plastics, toys, and electronics. 

ROLE OF STATE vs MARKET 

Until 1978, industrial output was dominated by
large state-owned enterprises (SOEs).
Gradually, the share of state-owned and state-
holding enterprises in gross industrial output
value had shrunk; in 2002 it was around 41%.
However, state-owned companies, controlled by
economic ministries in Beijing (Capital of China),
represented only 16% of industrial output.
State-holding enterprises may control large
numbers of state firms, and are not 100%
state-owned. 

The changes in economic policy, including

decentralization of control and the creation
of "special economic zones" to attract
foreign investment, led to considerable
industrial growth, especially in light
industries that produce consumer goods. 
 Foreign Direct Investment (FDI) In
China
China has principal attractions like low-cost labor and an enormous domestic market of more than
1.2 billion consumers. The investment climate has been opened up gradually. In the 1980s,
foreigners were restricted to export-oriented joint ventures with Chinese firms. In the early 1990s,
they were allowed to manufacture goods for sale in the domestic Chinese market; and by the mid-
1990s; the establishment of wholly foreign-owned enterprises was permitted. China's accession to
the WTO forces the government to open up the services sector. 

In 2004,China being one of the fastest-growing economies in the world attracted actual FDI of
more than US$60.6 billion, up 13 per cent from the previous year. 

Foreign direct investment (FDI) in China dropped slightly in the first five months of the year 2005-
06 but within a reasonable fluctuation. 

China attracted US$22.4 billion of FDI over the period, a 0.79 per cent decrease from the previous
year, according to statistics published by the Ministry of Commerce. 

Contracted direct investment to China, which indicates the future trend of FDI flow rose nearly 15
per cent over last year to US$65 billion. 

The ministry said China approved 16,437 new foreign-invested ventures between January and
May, down 4.75 per cent year-on-year. 

Based on official information, the country realized FDI of US$4.89 billion in May, a comparatively
large decrease of some 22 per cent over last year. 

Although all the figures for the period show a declining or slowing growth rate, experts said the
average investment in each project was increasing. 

"I would like to contribute the slowdown to the large amount of FDI last year," said Lu Jinyong, an
investment researcher with the University of International Business and economics in Beijing. 

China's economic relations crucially depend on bilateral trade with the other nations of the world.
The economic relations of China have undergone substantial changes since it has joined the
World Trade Organization in the year 2001. As an aftermath of the WTO agreements, the Chinese
government has followed the open trade policy.

The free trading system has further expanded the economic relations of China with its trade
partners, uninterrupted by all types of trade barriers. This transition of Chinese economy to an
open market-oriented economy has been highly beneficial for the all-round growth of China. 

As far as the trade relation between US and China is concerned, China's import from US has been
more than twice than what it was before 2001; that is before joining WTO. The Chinese exports to
US have also increased dramatically from 102 billion dollars to 243.5 billion dollars over the period
of 2001-2005.

The bilateral trade between Singapore and China is crucial in the context of China's economic
relations. The trade volume between Singapore and China was worth $11.28 billions till November,
2000. This was an increase by 33.09% from the corresponding figure in the previous year. Exports
from Singapore to China have also shown steady growth. The improvement in trade relations
between China and Singapore has been the consequence of the market-based open trade
structures of both the countries. 

China's economic relations can also be viewed from a different angle. Besides the trading
activities, it also involves investments across borders. The size of the Chinese territory is 1/6th
that of the US; while the population of China is four times more than US. China is dependant on
the export market of US to create job opportunities for its huge pool of labor force. The US
investors on the other hand, find the Chinese market as a profitable option for investment. It is
mainly because of the strong motivations of both the countries that the economic relation between
China and US is expected to be a stable one. 

In conclusion it can be said that China needs to maintain stable economic relations with the major
economies of the world to ensure growth and prosperity in future.
India China Economy - Trade Relations

Among the most encouraging recent developments in India China Economy and India-China
ties is the rapid increase in bilateral trade. A few years ago, India Inc had a fear of being
swamped by Chinese imports. Today, India enjoys a positive balance of trade with China.In 2004,
India's total trade to China crossed US $13.6 billion, with Indian exports to China touching $
7677.43 million and imports from china at US $ 5926.67 million. But major industry players in
India feel there is no need to give the Chinese a free ride into the domestic market so early. This
is particularly, when India and China have been directly competing across several product
categories. And that too, when both the applied and bound import tariffs are higher in India
compared with China. Indian industry's ambivalence over the proposed Indo-China FTA stems
from concerns over previous FTAs signed by the government. There's a feeling that some of
these FTAs were signed in haste, and without adequate homework. Result: There has been
confusion about the country of origin issue as well as the items to be put in the early harvest
lists.
China and India established diplomatic relations on April 1, 1950.  India was the second
country to establish diplomatic relations with China among the non-socialist countries. In 1954,
Chinese Premier Zhou Enlai and Indian Prime Minister Nehru exchanged visits and jointly initiated
the famous Five Principles of Peaceful Coexistence. Indian Prime Minister, Rajiv Gandhi's visit to
China in December 1988, facilitated a warming trend in relations. The two sides issued a joint
statement that stressed the need to restore friendly relations on the basis of the Panch Sheel and
noted the importance of the first visit by an Indian prime minister to China since Nehru's 1954
visit. India China Economy agreed to broaden bilateral ties in various areas, working to achieve a
"fair and reasonable settlement while seeking a mutually acceptable solution" to the border
dispute.

Rajiv Gandhi signed bilateral agreements on science and technology cooperation, on civil aviation
to establish direct air links, and on cultural exchanges. The two sides also agreed to hold annual
diplomatic consultations between foreign ministers, and to set up a joint ministerial committee on
economic and scientific cooperation and a joint working group on the boundary issue. The latter
group was to be led by the Indian foreign secretary and the Chinese vice minister of foreign
affairs. As the mid-1990s approached, slow but steady improvement in relations with China was
visible. Top-level dialogue continued with the December 1991 visit of Chinese premier Li Peng to
India and the May 1992 visit to China of Indian president Ramaswami Venkataraman.

Border trade resumed in July 1992 after a hiatus of more than thirty years, consulates reopened in
Bombay (or Mumbai in the Marathi language) and Shanghai in December 1992, and, in June 1993,
the two sides agreed to open an additional border trading post. Though, Rajiv Gandhi's visit to
China in December 1988 is usually identified as a turning point and break-through in
India-China relations, it should also be noted that many years of previous effort had a
contribution to it.. In 1976, the two countries decided to restore ambassadorial-level diplomatic
ties after a gap of 15 years. The next major step was foreign minister Vajpayee's visit to China in
February 1979 - 

The first high-level visit between the two countries since 1960. In 1984 India & China signed a
Trade Agreement, providing for Most Favoured Nation Treatment. In 1994 the two countries
signed the agreements on avoiding double taxation. Agreements for cooperation on health and
medical science, MOUs on simplifying the procedure for visa application and on banking
cooperation between the two countries have also been signed.

The Chinese economy was decentralized in 1978 and major economic reforms were introduced
which created conditions for rapid economic growth and structural changes in China. In 1980,
China's share in world trade was less than one percent, and it started permitting foreign direct
investment (FDI). In 1999, China had grown to become the world's second largest economy after
US in terms of GDP. The high growth rate of China is attributed to high levels of trade and greater
investment effort. Strong exports growth from China has helped push China's economy to 9.1%
growth rate in 2003-2004. China is the world's second largest recipient for FDI with total FDI
inflows crossing US $ 53 billion in 2003. Growth in Special Economic Zones (SEZ) has also helped
China increase its productivity.

Recently Chinese premier Wen Jiabao visited India, where he said that India and China
must take their trade to $30 billion level by 2010. Seeing the whopping growth in Sino-
Indian trade, China outlined a five-point agenda, including reducing rade barriers and enhancing
multilateral cooperation to boost bilateral trade. 

Chinese Premier Wen Jiabao said "We have set an objective (in the joint statement) to increase
the two-way trade volume from 13.6 billion dollar at present to 20 billion dollar by 2008.....we
plan to take it to 30 billion dollar by 2010." Addressing Indian business leaders at New Delhi on
April 11, he said that the two countries agreed for a joint feasibility study for a bilateral Free Trade
Agreement.

India China Economy have also agreed to work together in energy security and at the multilateral
level at the WTO to support an "open, fair, equitable and transparent rule-based multilateral trade
system", the joint statement signed by Prime Minister Manmohan Singh and Wen said. Wen also
offered to cooperate with New Delhi in its infrastructure programme.

Indian Commerce Minister Kamal Nath said China was poised to become India's largest trade
partner in the next two-three years, next only to the US and Singapore. 

TRADE PATTERN (value in USD millions)

Year China's Exports to India China's Imoprts from India
2000 1560.75 1353.48
2001 1896.27 1699.97
Percent Growth 21.5 25.6
2002 2617.73 2274.18
Percent Growth 40.9 33.8
2003 3343.59 4251.49
Percent Growth 22.2 87
2004 5926.67 7677.43
Percent Growth 77.3 80.6

According to a CII study, special focus on investments and trade in services and knowledge-based
sectors, besides traditional manufacturing, must be given, in view of the dynamic comparative
advantage of India. Indian companies could enter the $615 billion Chinese domestic market by
using it as a production base.

Presently, Iron ore constitutes about 53% of India's total exports to China. Among the potential
exports to China, marine products, oil seeds, salt, inorganic chemicals, plastic, rubber, optical and
medical equipment and dairy products are the important ones. The study said that services and
knowledge trade between India and China have significant potential for growth in areas like
biotechnology, IT and ITES, health, education, tourism and financial sector.

Value added items dominate Chinese exports to India, especially machinery, including electrical
machinery, which together constitute about 36% of exports from that country. The top 15 Chinese
exports to India have recorded growth between 29% (organic chemicals) and 219.89% (iron and
steel). 
 China Share Market

China Share Market is a relatively young one with huge potential in it.

China in itself is a wonder to the whole world and is becoming the model for many developing and
underdeveloped ones. It is growing at a rate of 9-to-10% per annum. This exclamatory success
has created strong investors' (both foreign and domestic) confidence on China and its effects can
also be seen in China Share Market.

China Share Market is witnessing a portfolio investment mania which saw a 130% gain in 2006
and has already crossed 50% profit margin within mid-May,2007. In fact, the market capitalization
of the overall China Share Market upto May, 2007 is US$2.3 trillion only lagging behind Japanese
Share Market(US$4.7 trillion) in Asia. It is being projected by many analysts and economists that
this fast rising market is going to be the 2 nd largest Share Market after USA within a span of 12
years.

History of China Share Market

Economic reform started in China in 1979. In this process the Chinese government first reformed
the agriculture economic system. After that they had started the industrial reform. In 1986
government allowed some of the companies to convert into share holding ones by issuing shares
to the employees and to the public but didn't allow the trade of these shares. In 1990, Chinese
government facilitated the investors to trade the shares in the market. For this they set up two
stock exchanges in China, one is Shanghai Stock Exchange and the other is Shenzhen Stock
Exchange. Both the exchanges were set up in 1990. Thus it is evident that the China Share Market
is still in its first stage and has passed only 17 years.

China Share Market mainly consists of two stock exchanges :-

Shanghai Stock Exchange

Shenzhen Stock Exchange

Shanghai Stock Exchange is the largest Stock Exchange of Mainland China and is headquartered in
Shanghai city. It was re-established on 26.11.1990 and started operating from 19.12.1990. During
the fiscal year 2006, the total listed companies of Shanghai Stock Exchange was 842, its annual
turnover was 5781.6 billion Yuan, and its market value was 7161.2 billion Yuan. The most common
index of Shanghai Stock Exchange is SSE Composite Index which was launched on 15.07.1991. It
has reached 2675.47 mark at the end of 2006 fiscal.

Mainly there are three types of securities traded in Shanghai Stock Exchange and they are :-

Stocks

Stocks traded in Shanghai Stock Exchange are of two types :-

A-shares were initially meant for the Chinese investors only and are priced in the domestic
currency called Rinminbi Yuan. But after the implementation of the reforms in Dec'2002, foreign
institutional investors have also been allowed to invest in A-shares under the system of QFII
(Qualified Foreign Institutional Investor). 

B-shares were meant for the foreign institutional investors and are priced in US$. Chinese people
were not allowed to transact in the same because Chinese laws didn't allow the domestic investors
to freely exchange foreign currency. But since 2001 domestic investors were also allowed to invest
in B-shares.

Bonds

Bonds traded in Shanghai Stock Exchange are of three types :-

Treasury Bonds or T-bonds 

Corporate Bonds 
Convertible Corporate Bonds

Funds

Shenzhen Stock Exchange is headquartered in Shenzhen of Mainland China. The companies listed
in this bourse are the ones in which the Government of China maintains its controlling stake. Prior
to 2005, most (2/3 rd ) of the stocks in Shenzhen Stock Exchange were not allowed to be traded
which caused contradictions between the traders and the government. It is only after 2005, when
the Chinese stock issue reform was implemented, that the investors were allowed to trade in these
non-tradable shares. Blue Chip Composite Index is the main index of Shenzhen Stock Exchange
launched in Jan'2005.

In this short span of time, approximately 17 years, the China Share Market has seen both highs
and lows. But, the whole world is really upbeat about the China Share Market as the Chinese
Economy is marching ahead like anything with a growth rate of 9% annually. But some of the
analysts are also cautious about the share market because they think that due to excessive
speculations the market is showing signs of overheating and the bubble might burst in the near
future.
 Value Added Tax (VAT) in China

Value Added Tax (VAT) was implemented in China in 1984. Initially, the tax was levied on 24
specified items. The need for constructing a socialist market economy system in China resulted
in the proclamation of 'The Provisional Regulation of the People's Republic of China on Value
Added Tax' on January 1, 1994. 

Value Added Tax in China is one of the important sources of fiscal revenues for the government,
especially the central government. The implementation of VAT is done by the State Administration
of Taxation while the customs collects the import VAT.

The revenue earned from VAT is divided between the central (75%) and local government (25%).

The list of VAT taxable items and the rates in China can be understood
from the following:
Rate
Coverage of Collection
Exportation of goods 0
Edible vegetable and grain duplicates 13%

Agriculture, forestry, aquatic products, products of animal husbandry

Book, magazines, newspapers

Tap water, cooling, heating, hot air supplying, gas, hot water, natural gas,
liquefied petroleum gas, coal/charcoal products for household use

Selected non-metal mineral products, Selected metal mineral products, coal

Chemical fertilizers, feeds, agricultural machinery, agricultural chemicals, plastic

converting film for farming
Crude oil, mine salt and other goods and services not listed above 17%
VAT in China is payable by individuals as well as enterprises who are associated with selling
merchandise, providing services related to processing, repairing and assembling and import of
goods. VAT Taxpayers in China are categorized into two sections, normal taxpayer and small
taxpayer, depending on the turnover of the goods and services on sale and the accounting system
condition.

The amount of VAT payable by the normal taxpayer can be calculated by the following:

Output tax payable for the current period – Input tax payable for the current period = Tax payable

The amount of VAT payable by the small taxpayer is as follows:

Sales amount x Applicable rate = Tax payable

(The applicable rate is 4% for commercial sectors and 6% for others)

Certain items and services are exempted from VAT. These include the following:

•  Instruments and equipment imported for direct use in scientific research, experiment and
education

•  the agricultural production materials as ruled, the self-produced primary agricultural products
sold by Agricultural producing units and individuals

•  Imported materials and equipment granted, gifted by foreign governments or international

organizations

•  Contraceptive medicines and devices

•  Articles imported directly by organizations for the disabled for exclusive use by the disabled

•  Materials imported directly to support the poverty relief and charity cause donated freely by
overseas natural persons, legal persons and other organizations

•  The taxable services provided by individual disabled laborers

•  Antique books purchased from the public

Certain reforms have been implemented in particular areas of China in 2004 with regard to the
VAT.
 China Agriculture

China Agriculture is one of the most important sector of economy and as the statistics suggest
the China Agriculture provides more than 12 percent of the total Gross Domestic Product or the
GDP in the country. 

More than 300 millions people in china are related with China Agriculture which is almost 50
percent of the total work force that China has got. If the ranking is taken into consideration then
China Agriculture is considered as the top country in farming output. The China Agriculture
produces wheat, rice, potatoes, peanuts,millet, cotton and many other things. 

China Agriculture according to statistics provides the biggest output compared to other countries
in the world but only 15 percent of the total land available in China can be cultivated. This
available land is divided into nearly 200 million household and at an average everybody has nearly
1.6 acres of land in their part. This shortage of cultivating land has often created trouble in its
history as the country has faced severe food shortage at various moments. 

It is observed that more than 75 percent of the total cultivated land is used for producing food
crops. Among the available cultivated land, rice, which is the most important food crop in China
Agriculture is cultivated on almost 25 percent of the land available. Cultivation of rice is mainly
available in places like Yangtze Valley, Huai River, Zhu Jiang Delta and many other places. 

Wheat is considered as the second most important crop in China Agriculture and it grows on
almost all parts of China but specially in places like Wei, Fen River, Loess plateau etc. Crops like
millet and corn are also grown in various places in the China Agriculture. 

Potatoes are also considered as important part of the China Agriculture and one can find various
species of potatoes being cultivated in China. Oil seeds are also cultivated in a large quantity and
is often exported as well. China Agriculture also gets a lot of revenue from the exportation of Tea
that they produce in many places of China. 

Other than these products China Agriculture also produces things like fish, flex, jute, meat and
other things. The China government also offers many kind of facilities for the people who are
related with China Agriculture. 
 China Chemical Industry
China Chemical Industry holds the third position in the nation. Though it has got a ranking after
the Textile Industry and Machinery Industry, it contributes almost 10% of China's GDP. 

China Chemical Industry has established a consistent growth path over the years. In 2004, it
recorded a 30% increase in production of petrochemicals. This achievement awarded the China
Chemical Industry the tag of the fastest growing industry in China. 

Though the productive capacity of China Chemical Industry is awesome, it suffers from crisis of
raw material and resources that are required for producing chemicals and Chemical Products. For
the raw materials and resources, China Chemical Industry is dependent on Imports. Therefore
upward price trends of petroleum and other chemical inputs are causing much disturbance to
China Chemical Industry. 

Other than the shortage in raw materials, China Chemical Industry also suffers from Limited
Energy Supply, Transport Problems and Electricity Shortages. The infrastructure also requires to
be improved to maintain the growth rate. Despite these problems, the China Chemical Industry is
growing due to Strong Demand for Chemicals within the country and also owing to the Cost
Advantages that China Chemical Industry enjoys over the Western Chemical producing countries.
Moreover, many local Chinese companies are involved in the process of setting up extensive
production capacity. Not only the local companies but the Western Multinationals are also investing
in China Chemical Industry. So, the increase in production capacity of China Chemical Industry is
mainly contributed by the Direct Investments in form of cooperative ventures with foreign
investors. 

As a result of all these initiative, the Chinese Economy is expecting that China Chemical Industry
will be able to increase its world market share to 13% from present 8% within 2015. According to
a Deutsche Bank survey, China Chemical Industry is going to experience a tremendous Growth
Boom in the near future which will place China Chemical Industry in the rank of second largest
Manufacturer of Chemicals only after U.S. 
 China Mortgage

The growth of the China Mortgage can be Mortgage Insurance In China

better understood from its construction 
The China mortgage insurance programme
generally covers Smart Mortgage Insurance
industry. In the year 1998, the total value of Programme and Super Insurance Mortgage
outstanding mortgages is about 427 billion RMB programme.
(US$51.7 billion). By the end of 2003, the value
has reached more than 1,2000 billion RMB
 Smart Mortgage Insurance
(US$1,452.8 billion). 
Programme
Such type of Mortgages saves the expenses
In the end of June 2004, the total value of
with an interest-free mortgage insurance
outstanding China Mortgages increased to
premium repayment for 3 years. 
13,800 billion RMB (US$1,670.7 billion). The
year on-year rate of increase from 1999 to 2003
is 218.6%?148.72%?65.77%?47.71& and Super Mortgage Insurance
42.46% respectively.  Programme
Such types of insurances reduce the financial
burden during the early stage of mortgage
Mortgage Lending In China  term with an interest-free mortgage
insurance premium repayment for 3 years. 
Mortgage lending in China has been growing at It brings more flexibility with deferred
a rate of 54.9% between 2000 and 1H2004.The principal repayment period ranging from 1 to
total mortgage lending stood merely at 8.5% of 3 years, during which only interest is payable
total loans, 11.1% of total GDP, in 2003 versus
34.3% of total loans and 50% of total GDP in
Hong Kong. Mortgages being considered as the
best lending opportunity, with good asset
quality (the non-performing loan ratio is less IFC'S Mortgage Services In China
than 1.5%) and good growth potential
(mortgage lending grew 57% year on year in The International Finance Corporation (IFC) has
1H2004). The housing privatizations since 1998 signed an agreement with Advantage Services
have made mortgage debt a tiny portion of total Holding Limited (ASHL) to invest in Advantage
property assets outstanding. Total outstanding China Holdings Limited (ACHL).
mortgage loans, at CNY1.3 tn, is about 5% of
the total value of urban residential property.  ACHL will establish joint venture companies in
China to provide home mortgage origination,
Housing Mortgage In China  borrower credit analysis, and contract
underwriting services to Chinese banks. 
The housing mortgage in China is not so old in
IFC's investment represents a 24.5 percent
comparison to others. In China the biggest
direct ownership in ACHL. Other types of
provider of home mortgage loans is the China
shareholders include ASHL and Netherlands
Construction Bank (CCB). The housing loans
Nederlanse Finanierings-Maatschappij Voor
made by the four state-owned commercial
Ontwikkelingslanden N.V. (FMO). 
banks were RMB355.6 billion (about U.S. $43
billion) in the year 1999. From the total loans,
Javed Hamid, IFC's Director for East Asia and
RMB217.2 billion (about U.S. $26.3 billion) went
the Pacific, said, "IFC is very pleased to support
to real estate developers and RMB 126 billion
the development of mortgage servicing in China
(U.S. $15.2 billion) to the mortgage loan sector
where private home ownership is expanding
accounting for about 35% of the country's
rapidly and lenders need to manage their
overall real estate loan amount at the end of
exposures as they increase their mortgage
1999. Presently the foreign lenders are allowed
lending portfolios.
into home loan areas after China's accession to
the WTO. 
This new institution should help alleviate credit
Residential Housing investments In concerns in China where the housing sector is
growing steadily, increase homeownership rates,
China and strengthen families and communities." 
The success of the reforms in 1998 has IFC's mission is to promote sustainable private
translated into a booming domestic property sector investment in developing countries, helps
sector and acceleration in housing investments in reducing poverty and improve people's lives. 
in china. The share of residential housing
investment as a percentage of GDP has risen to IFC finances private sector investments in the
5.6% in 2003, up from less than 3% before developing world, mobilizes capital in the
1998 and less than 1% before the 1990s. This is international financial markets and provides
in comparison to other developed or emerging technical assistance and advice to governments
economies that had undertaken a higher share and businesses.
of residential housing investments for decades.

Residential investment as percentage of

GDP: -
China Japan US Singapore
1960s Na 5.2% 4.6% 5.5%
1970s Na 7.1% 4.9% 7.2%
1980s 0.9% 5.3% 4.4% 9.5%
1990s 2.4% 4.8% 4.1% 8.7%
2000 4.6% 3.7% 4.8% 5.9%
Source:  CEIC, Goldman Sachs Research
estimates 
 China Insurance Industry
Introduction Insurance Industry List Of Companies  

Brief History Of China's From 1992 to 2000, China gradually

approved the re-entry of 16 additional
Insurance  &nbspIndustry  leading foreign insurers. Economic
reforms in china has increased the foreign
The current largest insurers in the world participation in Insurance industry in
including American Insurance Group (AIG) China. 
of United States, were founded in
Shanghai in 1919.  In 1980, when the insurance market was
first reopened as part of the post financial
reforms, insurance premiums totaled only
Before 1949, China's insurance industry RMB 640 million (US$ 77.4 million).  
was controlled by maximum foreign
companies operating in Shanghai. . Most
other insurers were large foreign
Present Potential Of China's
companies that left china entirely after Insurance Industry 
1949, though some retreated to Hong
Kong.  Beginning in 1980, China's insurance
market grew at an average rate of 26%,
From 1949 to 1976, the insurance reaching RMB159 billion (US$19.2 billion)
industry in china essentially ceased to by the year 2000.The growth rate of
exist. Few Chinese owned personal insurance premiums is projected, reaching
property, and almost all businesses RMB 280 billion (US$33.7 billion) by the
enterprises were government-owned and current year 2005. 
"self-insured." 
According to the report in 2000, the
Economic Reforms and China's Chinese insurance density (premiums per
capita) was RMB127 (US$15.30) in
Insurance Industry  contrast to the world average of US$
360.China's percapita spending on
In 1978, as part of the Deng Xiaoping- Insurance is very fast in the recent years. 
initiated economic reforms and opening up
of door policies. China economy began to For the year 1996 China's Economy
resume the insurance industry through reforms was young which led Chinese per
the reestablishing the People's Insurance capita spending on insurance to US$ 7.64
Company of China (PICC). PICC had in comparison to tin aged Economic
monopoly position in China's emerging reforms of India at US$1.7. 
insurance market. In 1996, PICC was
divided into three independent
companies. 
Conclusion 
In 1998, the PICC group was disbanded
and the 3 PICC companies were renamed Given that China's economy has grown
near about 8% per year since 1979.Most
foreign investors including those in the
 china Life Insurance insurance sector do not want to be left out
 China Property Insurance (PICC), of the most rapidly expanding and largest
 china Reinsurance potential insurance market in the world. 

In November of 1998, the State Council China's insurance industry has made rapid
devolved supervision functions from the advances after opening of the market to
People's Bank of China to the newly FDI. Presently as a result of WTO
established China Insurance Regulatory negotiations, China has agreed to
Commission (CIRC). completely open its financial services
market, including insurance. The WTO
Economic reforms led foreign enterprises accession has stimulated much additional
to play a role in the revival of China's Chinese reform activity to prepare China's
insurance industry beginning in 1992. In domestic insurance market for vastly
September of 1992, the People's Bank of increased foreign participation and
china granted AIG a permit to begin competition.
selling individual life and property
insurance in Shanghai.
 Commercial Banks in China
China has a large and robust banking system, largely comprised of Chinese and international
commercial banks.

These commercial banks are instrumental in supplying funds to the growing nation's large
manufacturing base as well as other industries.

In October of 2008, China's Central Bank deposited 30 billion yuan (US $4.4 billion) into China's
commercial banks for much-needed lending. China's State Council, or the Cabinet, has been
pushing for these banks to make more lending available to encourage growth, amid the financial
crisis which started in late-2008.

Aside from government cash injections to meet the demand for loans among medium- and small-
sized enterprises, investors in the countryside and consumers, the government has implemented
measures which included the following:

 Building a stronger capital market

 Intoducing more modern methods of financing
 Improving the management of foreign exchange
 Using fiscal funds to help banks reduce bad assets
 Increasing financial reform to monitor potential future dangers and risks

Below is a list of commercial banks:

 Agricultural Bank of China

 Bank of America (Asia) Ltd.
 Bank of China
 Bank of East Asia
 Chekiang First Bank Ltd.
 China Merchants Bank
 Citibank Hong Kong
 Dah Sing Bank
 Dao Heng Bank Group
 Hang Seng Bank
 Hong Kong Bank
 International Bank of Asia
 Jardine Fleming
 Kwong On Bank
 Shanghai Commercial Bank
 Standard Chartered
 Domestic and foreign banks and financial institutions in Shanghai
 Union Bank of Hong Kong Limited
 Wing Hang Bank
 Wing Lung Bank
 China GDP Growth

As per 2007 estimates, China has a total GDP (purchasing power parity) of about $6.9 trillion.
This country has played an integral role in boosting Asian economy. However, like in most other
countries, global economic meltdown has affected Chinese GDP growth too. Asian Development
Bank (ADB) has lowered its Chinese economic growth expectations. In comparison to its
previous-year high forecast of 9.5 percent, ADB has predicted an annual China GDP growth of
8.2 percent.

Slowdown in Chinese economy 

From September 2008 onwards, Chinese economy has been experiencing a slowdown.
Annualized GDP growth in 3rd quarter has fallen to around 9 percent from high growth rate of
10.4 percent for 1st quarter of this year. World Bank forecast puts expected GDP growth at 7.5
percent for next year. That would be lower than growth rate of 7.6 percent, experienced by
China in 1999, as a result of Asian Financial Crisis. But Chinese Academy of Social Sciences
(CASS) predicted a growth rate of 9.3 percent for 2009. 

China GDP composition 

According to 2007 estimates, agriculture accounts for more than 40 percent of China's total
GDP, industry contributes around 25 percent, and services total 32 percent (2006 estimates). 

Stimulus package 
To boost China GDP growth, a stimulus package of 4 trillion yuan was announced by its national
government on November 9, 2008. Chinese local government also announced a stimulus
package, which raised total amount to 18 trillion yuan. 

Can Chinese GDP maintain 8 percent growth? 

It depends on how Chinese local governments utilize national stimulus package. If local
governments can be proactive in using this stimulus package, more than 8 percent growth rate
is achievable for China in 2009. Decline in raw material prices coupled with Chinese
government's moves to increase supply of agricultural products, nationals can be assured
against rising prices. 

Losers and gainers 

Chinese manufacturing sector had a major role to play in the economic slowdown in China.
Export sector has been doing decently well, and is expected to touch 17 percent growth in
fourth quarter of year 2008-09. China's trade surplus is slated to touch $273 billion. That would
be higher than previous year figure of $262.2 billion. 
 China Economic Development

China economic growth has been acknowledged by many as remarkable. In a very short span of
time, it has grown to become one of world's largest economies. It is predicted that by 2035,
Chinese economy is likely to overcome that of United States of America. Credit for this
remarkable economic growth of China goes to its communist government, which adopted
several economic reforms and measures aiming for economic development. 

Global economic slowdown 

Global economic slowdown has affected this Asian giant, although its effects have not been as
pronounced as in other countries. International organizations like International Monetary Fund
have predicted a slowdown in Chinese economic growth for 2009. However this is unlikely to
affect economic development in China. 

China stimulus package 

To counter economic pressures imposed by global economic crisis, China has announced an
economic stimulus package of about 4 trillion yuan or $585 billion. A large part of this money
would be utilized for economic development of this nation. It remains to be seen if this package
is going to help China to boost its economy. 

Investment on infrastructure projects 

A major part of China's economic stimulus package would be utilized for infrastructure
projects in that nation. Existing infrastructure and housing projects are likely to receive a
boost following infusion of economic stimulus money. 

About 7.5 billion yuan have been set aside for low-rent housing projects in China. This is in
addition to about 2 billion yuan that had already been put on low-rent housing projects in China.
Economic development of China will take place with investment in infrastructure projects that
include railroad, water conservancy, and highways. 

Corruption 
Corruption at local government level has been a major challenge for China's national
government. It has been one major problem that acts as an hindrance to China economic
development. Lack of accountability of persons and money distributed to local governments for
public utility services is a major area of concern for China.

China Jobs, Chinese Jobs

 The jobs market in China has been surging since 1978, when the communist regime opened
its doors to foreign investment. The continuous arrival of foreign capital boosted the Chinese
economy, making it the fastest growing economy in the world. As China embraced globalization,
new industries were established and production hubs were created. Gradually, the country
became a key contributor to the global economy, which opened the floodgates of employment
opportunities.

Top Chinese Jobs and Skill Requirements

China has become a global hub for lucrative careers. Every year, the country attracts aspirants
hopeful of building their careers in:

 Information Technology (IT): Known as the sunrise sector of the Chinese economy,
electronic information employs individuals who are proficient in computer technology. The
Ministry of Information Industry expects this segment to grow at a pace faster than the Chinese
economy. This will result in better employment avenues for computer software developers,
programmers, designers and engineers.

 Pharmaceuticals: Due to a worldwide spurt in modern medicine, the demand for experts
in biomedical technology and drug research has increased significantly. To sustain
international competition, China has to focus on the development of indigenous research and
development, which will further result in high-paying white-collar jobs.

 Marketing: The marketing segment offers significant employment opportunities to

qualified personnel from sales. There is also high demand for experienced public relation
professionals. Creative individuals, adept in graphic design software can explore opportunities
in the advertising wing of marketing.

 Law: Due to an increased awareness of law, enterprises are seriously working towards
the incorporation of contracts and other legal elements. This has led to a significant rise in
the number of law firms, offering improved job opportunities to law graduates.

The Chinese economy also offers attractive employment opportunities to automotive

professionals. With the surge in the real estate sector, building contractors and architects are
also drawing handsome salaries. There is high demand for security brokers, certified public
accountants and orthopedic doctors.

China Jobs: Prospects

The 2008 global recession resulted in a significant drop in the job market for China’s new
graduates. Students graduating in 2009 will join around three million students who graduated in
2008 and are still seeking job opportunities.

The graduate glut can also be attributed to a rise in the number of college enrollments and
educational institutions. Although the number of college students has increased, there has not
been any significant improvement in their quality. In most cases, graduates were unable to find
 suitable employment in 2008 because they did not have the skills required by the industry.

 China Population, Chinese Population

 China Population Growth
 China Oil
 China Investment, Chinese Investments
 China Money, Chinese Money
 China Gas
 China Airport, Chinese Airports
 China Environment
 China Inflation, Chinese Inflaiton
 China Income, China National Income
 China Employment
 China Electricity
 China Budget
 China Unemployment
 China Income, China National Income
According to an International Monetary Fund analysis, the growth rate of the Chinese economy
hit a five-year low in 2008. From an impressive double-digit rate of 12.7% in 2007, China’s
economic growth plummeted to 9.6%. The IMF also revealed that China’s per capita income in
2008 was equivalent to $3,180.The Gross Domestic Product (GDP) estimates based on Purchasing
Power Party totaled $7.8 trillion. Owing to this, China became the second-largest economy in the
world.

China Income: Trends in Per Capita Levels

In 1990, China’s average per capita national income was around $350. Within a decade, there was
a threefold increase, taking the figure to $1,000. At the end of 2008, the figure tripled yet again
and China’s average per capita national income reached another high of $3,000. If China’s average
national income continues to rise at an annual rate of 8%, the country’s per capita income will
reach $8,500 by 2020 and will touch the $20,000 mark by 2030. Hence, China’s average per
capita income will exceed the current income of Taiwan and Korea and the country will qualify for
an OECD membership.

China Income: Highlights

According to Goldman Sachs estimates, China’s Gross National Product (GNP) stood at $1,529
billion in 2005. The research organization projected that by 2050 China’s GNP would reach
$44,453 billion, perhaps the highest in the world. Around 4% of China’s national earnings results
from sate-owned enterprises. According to World Bank reports, China’s GNP doubled in 2007 and
reached an impressive level of $3,126 billion. At this pace, China will definitely reach the ambitious
GNP target for 2050. Although the world’s fastest growing economy is set to become the world’s
number one, but its current economic system is characterized by:

 Income inequalities: The distribution of wealth in the economy is extremely lopsided. A

major portion of China’s national income accrues to coastal areas. The Pearl River delta, located
on the southeast coast, is home to some of China’s wealthiest people. On the eastern coast,
individuals with high per capita income are centered on the Bohai Gulf of the Yangtze river.
These powerful regions have amassed a major portion of Chinese income. By attracting liberal
government policies, costal areas are aiming to accumulate more wealth.

 Low purchasing power: Over the last three decades, there has been an eightfold increase
in China’s per capita income. However, rising personal income did not translate into increased
consumer spending. This was on account of the surge in product prices, which is determined
by market forces.

The government is also following a heavy taxation policy, which is hindering the expansion of
private enterprises. To maintain the country’s buoyant growth rate, the need of the hour is to
make the regulations less stringent.
 China Investment
For people who are fluent in Mandarin, China investment is easier and more profitable.

"There's much more to the Chinese economy than in the 1990s," said the manager of the Guinness
Atkinson China & Hong Kong Fund, Edmund Harriss. According to Harriss, foreign investment has a
major role in the growth of a country. The communist government is increasingly opening its doors
to free markets, as well as privately owned businesses.

The Ministry of Commerce (MOC) has released statistics showing that the FDI in China dropped to
8.4 billion U.S. dollars in March consecutively for the sixth month. However, the good news is that
in January 2009, the percentage decline in FDI was 32.67% and in February 2009 it was 15.81%.
So, it is showing signs of improvement.

According to Zhang Hanya, the director of the Research Institute of Investment, "Foreign
investment actually climbed 44 percent in March from 5.8 billion U.S. dollars a month earlier. The
month-on-month increase shows a recovering investor's confidence toward an economy stimulated
through governmental efforts.”

China Investment Opportunities: How to

Invest
Here are some important China investment opportunities:

 Stocks: For non-citizens, gathering information about Chinese stocks is a Herculean task.
This is because most of these are not covered by stock analysts and there may be uncertainty in
the financial reports. It is ideal to look at the Hong Kong exchanges and invest in shares of
Chinese companies listed there. In US exchanges, Chinese stocks are listed as American
Depositary Receipts (ADSs) or American Depositary Shares (ADRs).

 Mutual Funds: By investing in Chinese mutual funds (there are hundreds of them), one can
include Chinese stock diversification, since many mutual funds invest in Chinese stocks. Also,
several brokerages allow account set-up online, which makes the process easier. However, to
avoid any uncertain consequences, foreign investors should get into the past performance of the
fund. Investing in Chinese mutual funds also calls for investigation of the fund manager’s
background. Also, don’t forget to go through the investment strategy of the fund.

 Exchange-Traded Funds: The best way to invest in China is through ETFs, since they track
some big indexes. Unlike mutual funds, there are fewer loads associated with ETFs, except for
the broker’s fee. ETFs also entail lower risk, since individual investors can get in and out without
much effort.
 Chinese Exchanges: Individual investors should steer clear of exchanges, since these are
mainly dominated by government-run companies. Although the country is adopting innovative
approaches, it will take time to offer some level of comfort to investors in the individual stock
exchange.

China investment could be a risky proposition, considering the uneven information disclosure,
political composition and booming growth. Anything, from currency revaluations to stock
exchanges, can lead to dubious results. So, it is ideal to consider a long term view. Avoid investing
for more than two years if you don’t want the inevitable downdrafts. Preferably, invest not more
than 10% of your investing money in China investments.
 China Population, Chinese Population
China’s population has always drawn the attention of economists, as this Asian nation is the
world’s most populated country. According to the National Bureau of Statistics, at the end of
2008, China’s population stood at 1,328.02 million people. This staggering number represented an
increase of 6.73 million from the previous year’s figure.

In 2008, China witnessed 16.08 million births with the birth rate reaching 12.14 per thousand. The
total number of deaths was at 9.35 million and the death rate stood at 7.06 per thousand.
The Chinese population grew by 5.08% with a sex ratio (at birth) of 120.56.

The break up of the Chinese population according to age and gender is given below:

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China Population: Most Populated Regions

While estimating the extent of China’s population, all the provinces, autonomous regions and
municipalities under the jurisdiction of the central government and the military were included.
However, people residing in the Hong Kong Special Administrative Region, Macao Special
Administrative region and Taiwan Province were not a part of the survey. Even the military
personnel were excluded from the population estimates. In 2007, the total population of China’s
different regions was:

Region Total Population(in millions)

Beijing 16.33
Tianjin 11.15
Hebei 69.43
Shanxi 33.93
Inner Mongolia 24.05
Liaoning 42.98
Heilongjiang 38.24
Jilin 27.30
Shanghai 18.58
Jiangsu 76.25
Zhejiang 50.60
Anhui 61.18
Fujian 35.81
Jiangxi 43.68
Shangdong 93.67
Henan 93.60
Hubei 56.99
Hunan 63.55
Guangdong 94.49
Guangxi 47.68
Hainan 8.45
Chongqing 28.16
Sichuan 81.27
Guizhou 37.62
Yunnan 45.14
Tibet 2.84
Shaanxi 37.48
Gansu 26.17
Qinghai 5.52
Ningxia 6.10
Xinjiang 20.95

China Population: Densely Populated Cities

China is home to some of the most populated cities in the world. The country’s most populated
cities and their population figures are given below:

Total Urban Population (in

City
millions)
Shanghai 17
Beijing 13.2
Guangzhou 12
Shenzhen 8.615
Tianjin 8.2
Chongqing 7.5
Dongguan 6.95
Nanjing 6.8
Wuhan 6.6
Hangzhou 6.3
Shenyang 5.06
Harbin 4.75
Chengdu 4.75
Zhengzhou 4.36
Jinan 4
Qingdao 3.8

To conclude, China’s population growth has always been unbalanced, despite the nation’s rigid
one-child policy and stringent population control policy.
 China Population Growth
Think about vast population and China is the first country that comes to mind. It is also the
world’s most populous country but has achieved tremendous success in controlling China
population growth. In mid 2008, the country’s population stood at 1.3 billion.

China’s population growth and uneven distribution span two periods. From 1949 to 1970, the
population growth was dispersed evenly but from 1970 to 1990, the population disparity increased
and concentrated in the east of China.

China Population Growth: Some Facts and

Factors
Factors that influenced the China population growth are:

 Composition of the ethnic population

 Regional urbanization and economic trends

 Physical and environmental conditions

Other interesting facts are:

 About 20% of the world’s population resides in China.

 The country’s population is estimated to reach 1.4 billion by the latter part of 2010.

 In 2030, China population growth is predicted to peak further and then decline.

China Population Growth Magnitude

China population growth increases by almost 13 million people. This growth rate surpasses the
total population of countries like Cambodia, Ecuador and Belgium. The efforts to control the
fertility behavior of its people have improved population control in China.

China Population Growth: Main Chinese Provinces

The following China population growth data pertains to its major provinces:

Sichuan 87,250,000 (2007 figures)

Henan 98,690,000 (2007 figures)

Shandong 94,000,000 (2008 figures)

Jiangsu 75,495,000 (2006 figures)

Hebei 70,000,000 (2009 figures)

Impact of One-Child Policy on China

Population Growth
China population growth is unbalanced but its rigid one-child policy marked a period of stringent
penalties, forced abortions and infanticide. Till 2000, this policy is estimated to have prevented
over 250 million births. However, this policy resulted in gender imbalance due to female
infanticides.

China Population Growth Chart

China population growth chart as indicated by ChinaToday.com:

Year Total Population 1950 1960 1970 1980 1990 2000

55,19 66,20 82,54 98,70 114,33 126,74
Unit: 10000 Birth Rate
6 7 2 5 3 3
Per thousand Death
37 20.86 35.07 18.26 21.06 14.03
Rate
Per thousand Increase
18 17.91 7.6 6.34 6.67 6.45
Rate
Per thousand 19 2.95 27.47 11.92 14.39 7.58

A 2008 survey conducted by the Pew Research Center indicates that over 75% of the Chinese
favor the one-child policy. Undoubtedly, China’s demographic transformation has been remarkable.