Yunnan Economy

In 2003, China’s gross domestic product (GDP) of the year topped the 10 trillion yuan level to reach 11,689.8 billion yuan, up by 7% over the previous year at comparable prices. The value-added of the primary industry was 1,488.3 billion yuan. The value-added of the secondary industry was 5,298.2 billion yuan. The value-added of the tertiary industry was 3,867.5 billion yuan.

I. Energy Industry

China is the largest coal producer and the second largest electricity producer in the world. So far, it has preliminarily formed an energy production system which takes coal as the mainstay and in which various forms of energy supplement one another. In 2003, China’s energy production totaled 16.03 billion tons standard coal, up by 11% over the previous year.      

1. Power Industry

In 2003, the power consumed by the whole society amounted to 1900 billion kilowatt-hours, rising 15.5% over last year; with the installed capacity for power generating reaching 380 million kilowatts. At present, both China’s installed capacity for power generating and the generated energy rank second in the world.

Construction of the electrified wire netting has entered into the fastest stage of development in history, with all major electrified wire nettings covering all cities and most rural areas in the country. The 500-kilovolt main wire netting frame is beginning to take the place of the 220-kilovolt wire netting, undertaking the power transport and exchange between provinces and regions. The international state-of-the-art computer-dominating dispatching automation system has universally adopted and arrived at the level of practicality. China has stepped into a new era with its power industry being dominated by the major generating units, large-scale power plants, major electrified wire nettings, super high-tension and automation.

2. Coal Industry

The technological level of China’s coal industry is now imbued with the capacity to design, construct, install and control 10000000-ton opencut coal mines and large and medium-sized mining areas. In 2003, the total output of China’s raw coal amounted to 1.667 billion tons, rising 15.0%.

3. Oil Industry

Oil and natural gas are important energies of China. China’s output of crude oil reached 170 million tons in 2003, rising 1.8% and ranking fifth in the world. The development of oil industry has mobilized the development of the local economies and of the relevant industries, such as machine building, iron and steel, and communications and transportation. As China’s economy is developing fast, its own crude oil is unable to completely satisfy the needs. Thus, since the mid-1990s China has begun to import crude oil from abroad.

China’s output of natural gas reached 34.1-plus billion cubic meters in 2003. Growth of the output of oil and natural gas has evidently increased their proportions in energy consumption structure. China has increased the proportions of its consumption of oil and natural gas in China’s total disposable energy consumption from 17.5% and 1.8% in 1995 to 22.7% and 2.8% in 2003.

II. Communications and Transportation Industry

China owns fairly complete and perfect transportation system, including airport and seaport facilities equipped with advanced technologies, highways radiating in all directions, convenient railway networks, as well as many important inland waterways, basically forming a fast-way framework for passenger transport and freight transport centered on Beijing, Shanghai and Guangzhou. In 2003, circulation of passengers throughout the country totally amounted to 1381.1 billion person-kilometers and the cargo circulation amounted to 5385.9 billion ton-kilometers in all.

1. Highway

China has always been taking construction of highways as one of the important contents in terms of accelerating construction of the infrastructure. In the first nine months of 2003, an accumulative total investment of 280.68 billion yuan was put into construction of China’s infrastructure, rising 21.4% as compared with the same period of last year. As of the end of 2003, mileage open to traffic throughout China had amounted to 1.8098 million kilometers, of which mileage of the expressways representing the modern transportation development level amounted to 29.7 thousand kilometers, leaping to the second place in the world. Meanwhile, the country has quickened the construction of highways in central and western regions, thus greatly improving the highway conditions in these regions. At present, the density of the nation-wide highway network has amounted to 17.7 kilometers / hundred square kilometers.

75% of the arterial national highways composed of 12 high-level highways with a total length of 35 thousand kilometers crossing the east and west parts and the north and south borders has been completed, with about 20% being under construction. By 2008, a network of arterial national highways in China will be completely constructed. By then, Beijing, Shanghai and all other province-level municipalities, provincial capitals and capitals of the autonomous regions will be connected by the high-level highways dominated by expressways, making the total number of cities to be connected to reach more than 200.

2. Railway

By the end of 2003, the total operating mileage of the nation-wide railways amounted to 73 thousand kilometers, of which mileage of the double-tracking railways amounted to 22.6 thousand kilometers and that of the electric railways to 17 thousand kilometers.

Railway transportation has always been the main force in China’s transportation industry. In 2003, the railway passenger circulation registered 478.9 billion person-kilometers and the freight circulation registered 1724.7 billion ton-kilometers. At present, China’s railway transportation accounts for 6% of the world total railway operating mileage, but with the completion of 25% of the world railway workload, becoming one of the biggest countries completing the amount of the world railway transportation. China is also a country with its transportation amount growing the fastest and its use of transportation equipment the most efficient.

The Qinghai-Tibet railway, at the highest sea level in the world and with a total length of 1142 kilometers, will be completed by 2006. Canton-Hainan railway, the first railway spanning the strait in China, was open to traffic on January 7, 2003. The Canton-Hainan railway starts at the city of Zhanjiang in Guangdong Province, through Leizhou Peninsula and across Qiongzhou Strait, and reaches the existing railways in Chahe in the west of Hainan Province and ends at Sanya. The total length is 345 kilometers.

3. Waterways

China’s waterway transportation includes deep-sea transport and inland water transport, centralizing at east coastal areas and in the south areas. In 2003, the freight circulation of the waterway transportation amounted to 2871.6 billion ton-kilometers, topping railway transport and highway transport.

The mileage of China’s inland water lanes is 124000 kilometers, of which over 7800 kilometers are for the navigation of thousand-tonnage vessels, with the main inland water lanes including the Yangtze River, the Pearl River and the Heilong River. There are over 8000 berths at the inland water ports and docks, of which over 40 berths are for 10-thousand-tonnage vessels. Important river ports include Chongqing, Wuhan, Nanjing, Shanghai, Guangzhou and Harbin.

Along the coastal areas in China, there are over 60 seaports, with the possession of over 3800 berths for production use and 700 berths for 10-thousadn-tonnage vessels. The volume of freight handled reached 1.965 billion tons in 2003. In 2003, the main ports with a volume of freight handled exceeding 100 million tons include Shanghai, Ningbo, Guangzhou, Shenzhen, Tianjin, Qingdao, Dalian, Qinhuangdao and Shenzhen. In 2003, volume of freight handled of the main coastal ports amounted to 2011260000 tons, rising 344980000 tons over last year.

Construction of China’s coastal ports is focused on the transportation system like coal, container, imported iron ore, foodstuff, land and island ro-ro and deep water outbound courses, with the construction of container transport system being specially strengthened. Efforts have been intensified by the government in the construction of a number of deep water container docks at Dalian, Tianjin, Qingdao, Shanghai, Ningbo, Xiamen and Shenzhen, laying the foundation for the formation of China’s hub container ports. Construction of coal transportation system has been further strengthened and a number of docks have been set up for the loading and discharging of coal. Meanwhile, a number of docks have been transformed and extended for the import of crude oil and iron ore. In 2003, the whole country fulfilled a volume of containers handled reaching 47350000 TCU, rising 35.4% over last year. Of which the coastal ports fulfilled 44520000 TCU, rising 36.7%. In 2003, 8 ports with their volume of container handled exceeding 1 million TCU are Shanghai, Shenzhen, Qingdao, Tianjin, Ningbo, Guangzhou, Xiamen and Dalian.

4. Civil Aviation

By the end of 2003, number of air routes for regular airliners of CAAC reached 1155. Of which the domestic lines reached 961, with a passage to 130 cities; the international lines reached 194, connected to 62 cities of 33 countries. The mileage of the air lines reached 1.7495 million kilometers. Domestic airports open to traffic reached 126. Number of civil aeroplanes reached 1190, with the completion of airway cargo transportation reaching 5.79 billion ton-kilometers throughout the year and the completion of passenger transportation reaching 126.3 billion person-kilometers and the volume of cargo transportation reaching 2.19 million tons.

III. Telecommunication Service
As of the end of 2003, China’s international entry and exit band width was estimated to reach 20G and the total number of web-sites to top 500 thousand. Number of areas registered at China CN was close to 400 thousand, computers connected with Internet arrived at 30 million and the Internet subscribers reached 78 million, ranking the second place in the world. Internet service based on fee explorer was on the increase and the Internet industrial ecological chain has taken shape. The new round construction and use of wide-band network was on the rise.

At the same time, China has also participated in the construction of several international land optical cables and submarine optical cables, such as construction of Sino-Japanese, Sino-Korean and Asia-Europe sea cables and Asia-Europe and Sino-Russia land optical cables. The Asia-Europe land optical cable stretching 27000 kilometers was sponsored and constructed by China, starting at Shanghai, China in the east and arriving in Frankfort, Germany in the west by way of over 20 countries, which is currently the longest land optical cable system in the world. At present, countries and regions opening telecommunication business with China have reached over 200.

 At the end of 2003, the total capacity of the exchange machines used by local telephone offices arrived at 354 million, with the scale of the telecommunication network ranking second in the world. In 2003, the total amount of telecommunication business throughout the country reached 673.93 billion yuan.

In 2003, China’s electronic information industry fulfilled a sales income of 1800 billion RMB yuan, with the export amount exceeding 120 billion and the industrial scale ranking third in the world. China has currently established a relatively excellent industrial structure for the electronic information industry, making a contribution to China’s GDP accounting for 8-10% and with the export accounting for 30% of the total exports. Information industry has become the first pillar industry in the Chinese industries.

IV. Postal Communication Service

As of the end of 2003, post offices and sub-offices throughout China had reached over 63 thousand places. There were over 20 thousand post offices and sub-offices providing various functional services, making up 28% or more of all the post offices and sub-offices. Countries and regions receiving China’s postal services reached 185.

Section  II:  Commercial  Environment

Over the 20-odd years since China’s reform and opening to the outside world, income level of the Chinese people has been ever increasing and their personal assets have been continually growing. Houses, cars, computers, stock and travelling abroad have become the main contents of the people’s investments or consumption in the daily life. By 2003, calculated at the prevailing foreign exchange rate, China’s per-capita GDP has topped 1000 US dollars.

The 20 years after 1997 was the period in which China’s economy was growing the fastest and the residents’ income was increasing the most. Statistics have shown that in 2003 the per-capita net income of the rural residents was 2622 yuan, rising actually 5.9% over last year; while the per-capita disposable income of the residents in cities and towns was 8472 yuan, an actual increase of nearly 10%.

In terms of the Engel’s coefficient ( proportion of the expenditure on foods in the total expenditure for consumption ) for the consumption of the residents, the coefficient for residents in cities and towns dropped from 57.5% in 1978 to 37.1% in 2003, a drop of 0.6% over last year; the coefficient for rural residents dropped from 67.7% to 45.6%, a drop of 0.6% over last year.

I. Pricing Policies

China currently applied a mechanism of market-based pricing under macro-economic adjustment.  There were presently three types of prices:  government price, government guidance price and market-regulated price.

The government price was set by price administration authorities and could not be changed without the approval of these authorities. Products and services subject to government pricing were those having a direct bearing on the national economy and the basic needs of the people’s livelihood, including those products that were scarce in China. Meanwhile, government pricing was productor service-specific, regardless of the ownership of the enterprises concerned. National treatment was applied in the areas of government pricing for all imported goods.

The government guidance price mechanism was a more flexible form of pricing.  The price administration authorities stipulated either a basic price or floating ranges. The floating range of guidance pricing was generally 5 per cent to 15 percent.  Enterprises could, within the limits of the guidance and taking into account the market situation, make their own decisions on prices.  With market-regulated prices, enterprises were free to set prices in accordance with supply and demand to the extent permitted by generally applicable laws, regulations and policies concerning prices.

China would apply its current price controls and any other price controls upon accession in a WTO‑consistent fashion, and would take account of the interests of exporting WTO Members as provided for in Article III: 9 of the GATT 1994.

 
II. Diversified Economic Forms Co-existing
 By 2003, economies under blended ownership have accounted for 40% or so of the China’s overall economy. After another 5-10 years, such a percentage will reach 80% or so. Experts think that economies under blended ownership will become a public ownership dominating the basic socialist economic system.

 In 2003, the National Asset Supervision and Management Commission approved the assignment of properties and equities undergoing in 48 state enterprises, concerning national asset and equities amounting to 22.5 billion yuan. A series of practices have shown that the strategic readjustment of the layout and structure of the Chinese national economies in real sense has just begun, and merger and restructuring will become the main forms in realizing the strategic readjustment of the national economies.

III. Policies on Competition
 The Chinese government encourages fair competition and opposes various kinds of unfair competitions. [ Law of the People’s Republic of China Against Unfair Competition ], formulated on September 2, 1993 and implemented on December 1st of the same year, is now a basic law safeguarding market competition order. Besides, [Price Law], [ Law on Inviting Tenders and Tender Bidding], [ Criminal Law] and other relevant laws also embody regulations against monopoly and against unfair competition. China now is drawing up [Law against Mon- opoly].

Section III:  Finance
 

I. Bank
At present, China has basically formed a financial system regulated and supervised by the central banks, dominated by state banks, with policy finance and commercial finance functioning separately, with diversified financial institutions co-operating with each other and with the functions complementing each other. By the end of 2003, the total asset of all China’s financial institutions added up to over 40000 billion yuan.

On April 28, 2003, the Chinese Banking Supervision and Management Commission ( short for CBSMC ) came into being officially. The establishment of the CBSMC marked that China’s banking supervision and management work has entered into a new stage. The supervision and management system for financial division of labor has been set up, with definite division of labor and mutual coordinating between CBSMC, Securities Supervision Commission and Insurance Supervision Commission.

By the end of 2003, balance of broadened money supply was 21922.6 billion yuan, rising 18.5% as compared to the end of last year; while balance of money supply in a narrow sense amounted to 8411.9 billion yuan, rising 18.7%; balance of the RMB deposits and foreign exchange deposits in all financial institutions amounted to 22036.4 billion yuan, rising 20.2% as compared with the end of last year; balance of loans in RMB and in foreign currencies by all financial institutions reached 16977.1 billion yuan, rising 21.4% over the end of last year.

II. RMB and Foreign Exchange Rate System
Renminbi is the legal tender of China, issued and controlled by the People’s Bank of China in a unified way. Conversion rate of RMB is worked out by the People’s Bank of China and released by the State Administration of Foreign Exchange Control. China operates foreign exchanges in a unified way and the State Administration of Foreign Exchange Control exercises its functions and powers on foreign exchange control.

The China’s current exchange rate system came into being in 1994. Between 1994 and 1997, the exchange rate appreciated from 8.7 RMB yuan vs. 1 US dollar to 8.3 RMB yuan vs. 1 US dollar and the RMB conversion rate to US dollar appreciated by about 4.8%. Afterwards, change in RMB conversion rate began to shrink. Especially after the Asian financial crisis, under the appeal of the neighboring countries and international institutions, the fluctuation space of the RMB conversion rate was narrowed greatly. The fact that the Chinese economy has been developing continually, rapidly and healthily in consecutive years has proved that such arrangement of exchange rate fits in with the periods of the Chinese economic development, financial supervision and management level and the enterprises’ bearing capacity and is in line with the present-day system under China’s present national conditions. By the end of 2003, China’s foreign exchange reserve reached 403.251 billion US dollars, giving rise to an increase of 116.8 billion US dollars as compared to the end of last year. The RMB conversion rate remained stable and the annual average exchange rate was 1 US dollar to 8.277 RMB yuan, keeping unbiased with last year.

To sum up, the present Chinese RMB exchange rate system is “ a single and controlled floating rate system based on market supply and demand ”. Its functioning and the basis for its existence lie in two aspects: one is the bank system for the settlement and sales of the exchanges and added to this is the realization of convertibility of RMB under current account; the other is the establishment of the unified inter-bank foreign exchange market throughout the country, with the foreign exchange rates being decided by market supply and demand.

III. Banking Industry’s Opening to the Outside World

The opening up of China’s banking industry has undergone an evolutionary opening process of developing from cities in coastal special economic zones to central cities, then to all regions and from operating foreign currencies to opening up RMB business. Over more than 20 years since foreign financial institutions came to China, they have become an important integral part of the Chinese financial system. By the end of November of 2003, 62 foreign banks from 19 countries and regions have set up 191 operational institutions in China, of which 84 have been allowed to get involved in RMB business. In addition, upon approval, the foreign banks have set up 211 representative offices in China. The total amount of the assets of the foreign banks in China has reached over 47 billion US dollars, accounting for 1.4% of the total amount of the assets owned by the financial institutions in China’s banking industry. Balance of the loans by foreign banks has exceeded over 20 billion US dollars, of which balance of the foreign exchange loans has reached 16.4 billion US dollars, making up 13% of all foreign exchange loans by financial institutions in the banking industry.

Since its accession to WTO, China has eliminated all restrictions on foreign banks’ operation of foreign exchange business and regions where foreign banks can operate RMB and variety of customers are also expanding rapidly. In order to further push forward the opening up of the banking industry in a steady way, CBSMC has implemented a series of significant measures one after another since November of 2003, which include: first, allowing foreign banks to expand regions where they can operate RMB business to Jinan, Fuzhou, Chengdu and Chongqing, thus increasing number of cities where RMB business are opened up to 13. Second, allowing foreign banks satisfying legal conditions to offer RMB service to various kinds of Chinese enterprises in above-mentioned areas where RMB business are opened up. Before, foreign banks could only offer various kinds of RMB services to foreign enterprises, foreign people and Hong Kong, Macao and Taiwan compatriots in regions where RMB business were opened up. Thirdly, in order to further promote the opening up and strengthen the supervision and management, the CBSMC decided to reduce the highest amount of the funds operated by the branches of the foreign banks from 600 million yuan to 500 million yuan, the original 400 million yuan of the fifth level to 300 million yuan, and shrank the operational funds of the foreign banks with sole proprietorship and banks on joint venture basis registered in China from the original 6 levels to 3 levels and funds were respectively reduced to 100 million RMB yuan, 200 million RMB yuan and 300 million RMB yuan. Market accession procedures of all foreign banks will be further simplified. Fourthly, as an important aspect in deepening financial reform, China welcomes qualified overseas strategic investors to participate in the restructuring and transforming of the financial institutions in the Chinese banking industry according to the voluntary and commercial principle. Approved by the State Council, the CBSMC decided to increase the ratio of the individual foreign institutions participation in the stock of the Chinese financial institutions from the originally stipulated 15% to 20%. If the total amount of the foreign investment is lower than 25%, the nature of the Chinese domestic financial institutions with foreign investment and the all its business scope shall not change. Fifthly, in order to execute China抯 commitment to its accession to WTO and to standardize automobile consumption credit business, the CBSMC recently released and implemented《Automobile Finance Company Management Measures》 and《The Detailed Rules on Implementation》.

IV.      Securities Industry
 China has only two stock exchanges at present: the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Business includes the independently-operated purchase and sales, the purchase and sales on commission basis, subscription and marketing of the valuable securities. Valuable securities listed on the stock exchanges mainly include: (1) various kinds of bonds issued by the state; (2) various kinds of construction bonds issued by the provincial governments or local people抯 governments at the provincial level; (3) various kinds of bonds issued by financial institutions; (4) corporate bonds issued openly in various places of the country; stock and various kinds of beneficial equity vouchers. According to the statistics in 2003, now there are 1287 domestic listed companies ( A share and B share ) on China抯 stock market, 93 overseas listed companies ( H share ), with the stock release amounting to 30.41 billion shares and the fund-raising amount reaching 135.78 billion yuan in the same year.

China exercises centralized and unified supervision and management system. The Chinese Securities Supervision and Management Commission is the management authority for securities market.

At present, securities companies and trust and investment companies have all set up operational institutions in big and medium-sized cities in China, which are called securities trading offices, for people to buy and sell various kinds of listed securities.

V. Insurance Business
In 2003, practitioners in insurance sector amounted to nearly 200 thousand, the insurance premium income amounted to 388 billion yuan and repayments and payments amounted to 84.6 billion yuan.

At present, 34 foreign insurance institutions are allowed to do business in China and 112 foreign insurance companies from 19 countries and regions have set up 199 representative offices in 14 cities in China, waiting to get access to China’s insurance market.

Section IV: The Taxation
 

Sine 1994, China has practiced a financial system based on separate tax system; and according to the principle of unifying the right of finance and work, it has divided rationally the financial revenue of the central and local administrations. The central government, through the system of tax rebate and transfer payment regulates the financial revenue of various districts. At the same time, two sets of taxation institutions have been set up to carry out separate management.

The existing taxation system of China

Kinds of taxation                         Contents        

Turnover tax                        Value-added tax, consumption tax, business tax           

Income tax                        Enterprise income tax, foreign-invested enterprise and foreign enterprise income tax, and

                       individual income tax                          

Resources tax                        Resources tax, and city and town land use tax                    

Special purpose tax                        City maintenance and construction tax, tilling land possession tax, fixed assets investment        

                       orientation regulated tax, and land value-added tax       &, ;, ;, ;, ;nbs, p;                  

Financial tax                        Housing property tax, city real estate tax, and inheritance tax (not yet collected)               

Act tax                        Car and boat use tax, car and boat license tax, stamp tax, contract tax, securities trading

                       tax, slaughter tax, and banquet tax      

Agricultural tax                        Agricultural tax, and husbandry tax 

Customs duty 

The above-mentioned taxes are not to be collected from every enterprise, unit or individual. Generally speaking, industrial and commercial enterprises should pay value added tax; communications and transport, construction and installation, financial and insurance, and service enterprises should pay industrial and agricultural taxes; agricultural producers should pay agricultural tax, and profit-making enterprises should pay enterprise income tax. Besides, enterprises producing consumption good that should be taxed should pay consumption tax; mining enterprises should pay resources tax; enterprise engaged in fixed asset investment should pay fixed asset investment orientation regulated tax, enterprises should pay stamp tax for their  production, business account and contracts signed with others, and enterprises owing houses and cars should pay housing tax and car use tax. Citizens with an income surpassing a certain limit should pay individual income tax. According to tax regulations, some taxpayers can enjoy tax exemption or reduction.

Among the current taxation laws and administrative regulations published in China, 14 of which can be used on foreign-invested enterprises, foreign enterprises or foreigners, and these include value added tax, consumption tax, business tax, income tax of foreign-invested enterprises and foreign enterprises, individual income tax, resources tax, land value added tax, city housing property tax, car and boat license tax, stamp tax, contract tax, slaughter tax, car and boat license tax, stamp tax, contract tax, slaughter tax, agricultural tax and Customs duty. Apart from the taxes applicable to foreign foreign-invested enterprises, foreign enterprises and foreigners, such as income tax, city housing property tax and car and boat license tax, they pay other taxes the same as the domestic enterprises and Chinese citizens.

Enterprises invested by compatriots from Hong Kong, Macao, Taiwan and overseas Chinese and taxation in relation to them shall be handled in reference to foreign-invested enterprises, foreign enterprises and foreigners.

At the same time, to maintain the State rights and interests, to promote the interest of the investors, and to avoid double taxation and prevent tax evasion, China has signed agreements with 74 countries on avoiding double taxation and tax evasion (till Dec. 31, 2001).     

Section V: Medium and Small-Sized

Enterprises and Privately-Run Enterprises

As the momentum of China’s economic development grows continually, China’s privately operated economies are thus in a period of great development and the civil enthusiasm for investment and venturing is reaching an all-time high. Statistics from the State Administration for Industry and Commerce have shown that as of the end of 2003 number of privately-run enterprises had increased by 570 thousand over last year, with an increase rate of 23%, and the total number of such enterprises has exceeded 3 million.

In recent years, there has come up a tendency that individual privately-operated economies are penetrating into and mixing with the economies of public ownership, promoting the formation of blended ownership. According to the 2002 survey of the private enterprises throughout China by All-China Federation for Industry and Commerce, 8.0% and 13.9% respectively of the privately-run enterprises have merged and purchased or are prepared to merger and purchase state-owned enterprises. 25.7% of the private enterprises were changed into private enterprises from original state-owned enterprises and collectively-owned enterprises through institutional reform. In addition, some private enterprises have participated in the stock of state-owned enterprises, including state-owned enterprises in civil aviation and financial fields. From this tendency we can see that the future blended economic compositions will go up significantly. General survey report by the National Statistical Bureau has also shown that development of Chinese private enterprises is heading toward the rising service sector. Private enterprises involved in rising consultation service, such as notarization, lawyer, accounting, auditing and statistics are developing rapidly. Number of such enterprises has scored an average annual growth rate of 115.3%; number of the private enterprises involved in applied service industry such as real estate, tourist industry and computer technology has also registered an average annual growth rate of 70% or so.

Section VI: China’s Industrial Policies and

 Regional Economic Development

I. China’s Industrial Policies

China has divided its economic activities into three industries and each industry involves several trades: the primary industry is agriculture ( including forestry, animal husbandry and fishery ). The secondary industry is industry ( including excavating industry, manufacturing industry, power supply, water supply and heat supply ) and architectural industry. The tertiary industry includes various trades other than those in the primary and secondary industries, such as service industry, as well as includes government institutions.

The goal for the readjustment of the industrial structure during the tenth five-year plan period of the national economy is: to consolidate and strengthen the basic footing of the agriculture, to quicken the industrial restructuring and the upgrading of structural optimization, to go all out to develop service industry, to accelerate national economy and social informationization, to continually strengthen the construction of infrastructure. By 2005, the added value of the primary the secondary and the tertiary industries will account for 13%, 51% and 36% respectively of the GDP. Number of the practitioners will account for 44%, 23% and 33% respectively of the practitioners from all walks of life.

At present, the Chinese government uses 5 categories of industrial policies to promote and realize the goal for structural readjustment.

The first category is called inclinable industrial policies, or otherwise called supportive industrial policies. The subjects supported by these policies are those specialized industries, specialized enterprises and specialized products that play an important role in improving national competitive power and in industrial upgrading. Thus, the state will support the development of these trades and enterprises by means of injecting capital funds, conducting financial discount, issuing bonds and changing debts into stock.

The second category is called encouraging industrial policies, or otherwise called supportive industrial policies. In terms of the traditional industrial restructuring encouraged by the state, as well as the growing strategic industries and the growing strategic products, within given time, the state will exercise tax exemption measures, so as to encourage the upgrading and replacement of the traditional industries. Such practice will not only favor investment encouragement and the mobilization of the internal initiatives, but also favor the absorption of investments from various sides.

The third category is called competitive industrial policies, or otherwise called functional industrial policies. Other than trades concerning national security, naturally-monopolized trades, trades providing important public products and services, as well as pillar industries and key enterprises in high-tech industries, most trades, most enterprises and most products belong in the scope of competitive industries. For the competitive industries, the state will create a fair, just and transparent policy environment in terms of fair investment and taxation policies, rigorous technical quality standards, standardized anti-monopoly laws and regulations and quick market information service, so as to realize the survival of the fittest.

 The fourth category is called restrictive industrial policies. Restrictive industrial policies will be carried out against the products causing environmental pollution, with backward technical level and with supply seriously exceeding demand, so as to resolutely eliminate them.

 The fifth category is called protective industrial policies. Aiming at agriculture and service industry with comparatively weak competitive power, especially aiming at some young industries, protective industrial policies will be carried out  without violating laws and regulations laid down by WTO, but will properly protect the industries and help accelerate the development of the young industries and agriculture and service industry.

 In 2003, the investments in fixed asset from all walks of life amounted to 5511.79 billion yuan, rising 26.7% over last year and, in terms of the capital construction, investment in the primary industry reached 105.97 billion yuan, rising 1.6% over last year; investment in the secondary industry amounted to 778.42 billion yuan, rising 38.1% over last year; investment in the tertiary industry amounted to 1388.51 billion yuan, rising 26.4% over last year. In 2003 GDP, the primary industry accounted for 14.6%, the secondary industry for 52.3% and the tertiary industry for 33.1%.

II .      Regional economic development

China’s eastern region covers 12 provinces (municipalities and autonomous region), that is,Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Shandong, Zhejiang, Fujian, Guangdong, Guangxi and Hainan. The region accounts for about 14% of China’s land mass and 40% of its population. It has easy access to transportation, a dense population and started up at an early date in economic development. It is also rich in high-quality labor resources.

For a considerably long period of time since China initiated reforms and opening up in 1978, the focus of the state investment has been gradually shifted to the eastern coastal areas. Furthermore, most of the reform measures formulated since 1978 were tried out first in the eastern region. As the measures help spur economic growth, they have all the more promoted faster economic development in the region. Since the region was opened to the outside world at an early date and has all the special economic zones and most open cities in China, more than 85% of direct foreign investment has been made there, thus all the more propelling the region’s development. Therefore, since the initiation of reforms and opening up, the region has been the most developed area in China. It made up 69.75% of China’s GDP in 2003.

China’s western regions involve 10 provinces, regions and cities such as Gansu, Guizhou, Ningxia, Qinghai, Shanxi, Sichuan, Tibet, Xinjiang, Yunnan and Chongqing, owning 64% of the country’s land area and 22.8% of the total population. China’s western regions are rich in mineral resources and advantageous in energy ( including water energy ), tourism and land resources. It can be seen from an overall view that the east at the lower reaches of the rivers owns 14000 kilometers of coastal areas; while the west at the upper reaches of the rivers adjoins more than 10 countries, owning 3500 kilometers of land frontiers and are regarded as the second golden area for China’s opening up to the outside world.

 Since 1996 when China began to implement the ninth five-year plan, the Chinese government has intensified efforts to make investment in the western regions. Given the same conditions, priority has been given to the arrangement of resources development and the basic construction projects in western regions and, unless otherwise demanded, loans from foreign governments and the multilateral and bilateral recipient projects have basically been arranged in western regions.

In recent years, “ revitalizing the old industrial bases in northeast China ”is beginning to step into the development strategies of the state and the three provinces in northeast China ( Heilongjiang, Jilin and Liaoning ) are becoming the new hotspot regions for economic development. The northeast China is China’s industrial base and had ever made great contributions to the establishment of independently-owned industrial system and the national economy system in China. The first 100 projects for the revitalization of the old industrial bases in northeast China have now been started, with a total investment of 61 billion yuan. These projects are mainly scattered in equipment manufacturing industry, raw material industry and farm products processing industry. In terms of fund-raising, other than the diversified channels such as bank loans, corporate fund-raising and absorption of foreign investments, the state will also grant loans on discount basis to the project construction.

Section VII: The Tenth Five-Year Plan

for National Economy and

 Social Development

During the tenth five-year plan period ( 2001—2005 ), the main goals for China’s national economy and social development include:
 

——The national economy will maintain a faster development pace, the strategic readjustment of economic structure will result in remarkable returns, the economic growth quality and the returns will improve notably, so as to lay a solid foundation for the 2010 GDP to double over 2000; establishment of modern corporate system in state-owned enterprises will achieve great progress, the social security system will be made complete and perfect, substantial steps will be taken in improving socialist market economy system, so as to participate in international economic co-operation and competition to a larger extent and in a deeper degree.

——The economic growth rate is estimated to be around 7% annually, by 2005, the GDP calculated at the 2000 prices will reach 12500 billion yuan or so and the per-capita GDP will reach 9400 yuan; in five years’ time, the new employments and the shift of rural laborers in cities and towns will reach 40 million people respectively and the unemployment rate registered in cities and towns will be controlled at around 5%; the overall price level will remain basically stable; and the balance of international payments will maintain its balance basically.

——The optimization of industrial structure will be upgraded and the international competitive power will be enhanced; in 2005, the added value of the primary, the secondary and the tertiary industries will account for 13%, 51% and 36% respectively of the GDP, number of the practitioners will account for 44%, 23% and 33% respectively of all the practitioners in the society; the national economy and the level of social informationization will improve evidently.