NCPA - National Center for Policy Analysis

Where Is China's Economy Headed?

October 11, 1999

While China's private-sector entrepreneurs have been racking up impressive achievements of late, state-run companies still produce goods destined to rot or rust in warehouses, and some 45 percent of state-run industries are losing money, according to Gerald Segal of the International Institute of Strategic Studies.

When that lost production is factored in, China's economic growth may be closer to 6 percent than the 9 percent official figure, some analysts conclude. Futhermore, outside investors are becoming more cautious.

  • The U.S.-China Business Council expects total foreign direct investment in China to drop as much as 20 percent by year's end -- after stalling out last year at $45.5 billion.
  • U.S. investment contracts with China peaked at 6,750 in 1993 -- then fell to 2,181 by last year.
  • Only 28 percent of senior executives at America's fastest growing companies view China's market as "very important," according to a recent poll conducted for Investor's Business Daily -- underlining the fact that China takes in only 1.8 percent of total U.S. exports.

Among the negatives in dealing with China are its high tariffs -- which average 35 percent and range up to 150 percent on some goods. Other factors which discourage commerce are burdensome trade rules, corruption, weak property laws and unreliable courts.

Source: Paul Sperry, "China Economy: Miracle or Mirage?" Investor's Business Daily, October 11, 1999.


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