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1 1 (October 10, 1997)

handle is hein.crs/crsaant0001 and id is 1 raw text is: 97-932 E October 10, 1997 CRS Report for Congress Received through the CRS Web China's Economic Development: An Overview Wayne M. Morrison Specialist in International Trade and Finance Economics Division Summary Since the initiation of economic and trade reforms in 1978, China has been one of the world's fastest growing economies. According to Chinese data, real GDP grew at an average annual rate of 10% between 1979 and 1996, increasing the real size of the Chinese economy by five times its 1978 level and substantially raising Chinese living standards. Much of China's recent economic growth has been driven by a high rate of capital accumulation and large productivity gains, both largely the result of economic reforms. Foreign investment and trade have played a major role in China's economic growth. U.S.-China commercial relations have sharply expanded; China is now the 4th largest U.S. trading partner. Many analysts predict that China's economy will likely continue to experience rapid growth in the near future, especially if economic reforms are expanded and deepened. As a result, the importance of China as a U.S. trading partner could be greatly enhanced. U.S.-Chinese economic relations have been a major issue in the annual congressional debate on extending China's most-favored-nation (MFN) status, as well as congressional oversight of the Administration's policy towards China's application to join the World Trade Organization (WTO). Introduction China's rapid rise as an economic and trade power has been of great interest to U.S. policymakers, especially because such growth has led to a substantial increase in U.S- China economic relations (as well as friction over a number of issues). The prospect of future high levels of Chinese economic growth could have important ramifications for U.S. economic interests. An overview of the causes of China's rapid growth is useful in understanding the implications of China's future economic development. China's Economy Prior to Economic Reforms Prior to 1978, China maintained a relatively centrally planned, or command, economy. Most of the country's production (industry, agriculture, etc.) was directed and controlled by the central government which set production goals and controlled prices for nearly all goods and services. The Chinese government sought to make China's economy Congressional Research Service *** The Library of Congress