Since the commencement of economic reforms in 1979, China has moved away from traditional central planning and has become the fastest growing economy in the world. GDP averaged 9.8 per cent annually in the period 1979-95. Along with rapid economic growth, the living conditions of ordinary people have improved substantially. The average growth rate of real per capita consumption rose from 2.2 per cent in 1952-78 to 7.4 per cent in 1978-94. Despite such achievements, however, the Chinese economy in the reform period has been troubled by the recurrence of a ‘boom-and-bust’ cycle that has threatened the stability and sustainability of China’s economic growth (see Figure 4.1).