China - Overview
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The global recession interrupted China’s dynamic of continuous growth. Chinese economy however showed itself very resilient to the crisis and its economic recovery surprised the observers by both its rapidity and its vigor. After the euphoria of the recovery, the GDP growth slowed down during the first two quarters of 2010, especially as an effect of the austerity measures adopted by the government in the field of bank lending, real estate and currency exchange. Since then, there has nonetheless been a resumption of more dynamic growth which should continue in 2011. For 2010, economic growth is estimated at 10.5%.
Chinese economy is driven by investment and domestic consumption, which is itself boosted by the increase in salaries and the new housing policy. In order to avoid the overheating of the economy, the government has announced new measures to fight inflation and to stabilize prices of basic agricultural commodities. Among Beijing’s priorities are also: infrastructure, industry modernization, opening the country to new technologies, healthcare, education and support for the countryside.
A large gap remains between the living standard of the cities and the countryside, between urban zones on the Chinese coast and the interior and western parts of the country, as well as between the urban middle classes and those who have not been able to profit from the growth. These inequalities are becoming increasingly worrisome for both the Chinese authorities and the investors. Although poverty has largely decreased in China, almost 10% of the population, i.e. more than 120 million people, continue to live on less than 1 USD a day.
The agricultural sector employs almost 40% of the active population and contributes up to about 10% to the GDP, although only 15% of the Chinese soil (about 1.2 M km ²) is arable. China is the most populated country in the world and one of the largest producers and consumers of agricultural produce. China is the leading global producer of cereals, rice, cotton, potatoes and tea. In terms of livestock, it also dominates sheep and pork livestock farming and the world’s production of fish products.
The mining sector occupies an important place in the Chinese economy, since the country’s subsoil is rich in energetic resources. China has significant coal reserves (the country's primary energy source), which account for two-thirds of the total primary energy consumption. It is the world leader in the production of certain ores (phosphate and titanium) and also has significant petrol and natural gas reserves. It is the world’s fifth biggest oil producer with 3.8 million barrels a year.
The industry and the construction sectors contribute approximately half of China's GDP. China has become one of the preferred destinations for the relocation of global manufacturing units because of a cheap labor market, even though the cost of labor has been increasing. China’s economic development has coincided primarily with the development of a competitive and outward-oriented manufacturing sector. More than half of the Chinese exports are made by companies with foreign capital. Their share in the sector's added-value varies according to the sector: more than 60% for electronics and less than 20% for the majority of producer goods. The Government sector still contributes approximately 40% to the GDP.
The services sector has not progressed, encumbered by public monopolies and restrictive regulations. The tertiary sector's share has remained at nearly a third of the GDP in the last 15 years.
Foreign trade overview
China's main trade partners are the countries of South East Asia, the United States and the European Union.
China is an unexploited market and a potential for considerable growth due to several reasons:
- It's the biggest internal market in the world with 1.3 billion potential customers;
- it's a rapidly growing market (minimum 8% growth per year); and
- the labor costs are low even if this situation is changing in certain areas;
- with the development of the Western provinces, China offers new opportunities, particularly in the Sichuan province.
Nevertheless, certain factors can hinder investments, such as China’s lack of transparence, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which privilege local businesses.