ABSTRACT
At the same time, three problems, directly related to the defl ation that was to emerge later, loomed large. First, economic growth gradually became dependent on exports, and the contribution rate of net exports, which used to be negative, became positive, reaching its peak in 1997. Second, production of agricultural products went into surplus. In 1996, China’s grain output unexpectedly exceeded 0.5 trillion kilograms, leading to an oversupply and decline in prices of farm products. The production capacity of major industrial products also became excessive, as evidenced by a marked drop in the equipment utilization rate. Third, residents were prepared for the likely effects of reform; in particular, the housing reform that was about to be introduced resulted in higher saving rates among residents.
