Economy of China

The economy of the People's Republic of China is the 4th largest in 2005 with approximately US $2.22 trillion which is approximately 18% of the US economy. It is the second largest in the world when measured by Purchasing Power Parity, with a GDP (PPP) of US $9.412 trillion in 2005. It is the world's fastest growing major economy, and its continued growth is critical to the overall health of the world economy and to the welfare of its population of 1.3 billion (most of whom have yet to enjoy western style affluence). Its per capita GDP in 2005 was approximately US $1,709 (US $7,204 with PPP), still low by world standards, but rising rapidly. As of 2005, 70% of China's GDP is in the private sector. The smaller public sector is dominated by about 200 large state enterprises concentrated mostly in utilities, heavy industries, and energy resources.

Since 1978 the People's Republic of China (PRC) government has been reforming its economy from a Soviet-style centrally planned economy to a more market-oriented economy but still within the political framework, provided by the Communist Party of China. This system has been called "Socialism with Chinese characteristics" and is one type of mixed economy. These reforms started since 1978 has helped lift millions of people out of poverty, bringing the poverty rate down from 53% of population in 1981 to 8% by 2001.

To this end the authorities have switched to a system of household responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprise in services and light manufacturing, and opened the economy to increased foreign trade and foreign investment. The government has emphasized raising personal income and consumption and introducing new management systems to help increase productivity. The government also has focused on foreign trade as a major vehicle for economic growth. While the accuracy of official PRC figures remain the subject of much debate, Chinese officials claim the result has been a tenfold increase in GDP since 1978. Some international economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by private enterprises.