China's macroeconomy: Review and perspective

This article attempts to analyze China's economic development since 1980 by examining major macroeconomic issues. The analyses focus on a central issue: will the Chinese economy maintain high growth and low inflation in the period 1998–2010? To answer this question, the article examines GNP growth, unemployment, external balance, inflation, government budget deficit, and structure changes during the period 1980–1997, and provides an outlook on the economy. If the political situation is stable, China will achieve annual economic growth of 6–7% during 1998–2010, because the major factors that contributed to the high growth during the period 1980–1997 will continue to exist. However, it is less likely that the economic growth will continue at two‐digit level, because new and greater challenges have emerged in the economy: there has been excessive capacity in the industrial sector; it is difficult to maintain a high export growth; and the weak financial sector is highly likely to cause financial instability. Moreover, the increasingly large unemployed population will become a serious problem for both economic development and political stability.