ABSTRACT
In summer 1998, China was hit by severe floods which were rarely encountered in history. The floods not only caused enormous damage to people’s wealth, but also lowered the productivity to a certain extent. The government encouraged the financial sector to commit more for economic development. The national commercial banks and policy-oriented banks were encouraged to increase their lending speed in projects related to infrastructure, and effective and marketable production, under the condition of guaranteeing the quality of loans. Despite the various measures and policies undertaken by the central and the local governments to stimulate the economy, there was no obvious sign of recovery. China’s actual rate of economic growth therefore depends on: first, the growth in consumer spending, especially rural consumers; second, the amount of investment from the non-state sector.
