The Economic Environment at the Turn of the Century

This chapter reviews China's economic environment at the turn of the century, and also economic policies that may affect MNC operations, and elaborates on managerial implications for foreign companies that are active in the Chinese market. China is the fastest growing economy in the world, with per capita income more than quadrupling since 1978. Interactive reform is the basic mechanism of China's transition. Lack of progress in reforming state-owned enterprises is a major bottleneck hampering reform in China. Meanwhile China is acting to deter imports by administrative means, including what may be a rather liberal interpretation of the concept of smuggling. Despite the continuation of various forms of subsidy, agents throughout China's economy are increasingly forced to live with market-generated financial outcomes. The resulting financial pressures continue to push enterprises and policy-makers in the direction of innovation, cost reduction, and shifting toward a market economy.