People's Republic of China

Zhonghua Renmin Gongheguo

CAPITAL: Beijing (Peking)

FLAG: The flag is red with five gold stars in the upper left quadrant; one large star is near the hoist and four smaller ones are arranged in an arc to the right.

ANTHEM: March of the Volunteers.

MONETARY UNIT: The renminbi, or "people's money," denominated in yuan (y), is equivalent to 10 jiao or 100 fen. There are coins of 1, 2, and 5 fen, 1, 2, and 5 jiao, and 1 yuan, and notes of 1, 2, and 5 fen, 1, 2, and 5 jiao, and 1, 2, 5, 10, 50, and 100 yuan. y1 = $0.12210 (or $1 = y8.19) as of 2005.

WEIGHTS AND MEASURES: The metric system is the legal standard, but some Chinese units remain in common use.

HOLIDAYS: New Year's Day, 1 January; Spring Festival (Chinese New Year), from the 1st to the 3d day of the first moon of the lunar calendar, usually in February; International Women's Day, 8 March; May Day, 1 May; Army Day, 1 August; Teachers' Day, 9 September; and National Day, 12 October.

TIME: 8 pm = noon GMT.


The People's Republic of China (PRC), the third-largest country in the world after the former USSR and Canada and the largest nation in Asia, claims an area of 9,596,960 sq km (3,705,406 sq mi), including Taiwan, which the PRC claims as a province; the major administrative divisions, excluding Taiwan and the offshore islands, cover 9,444,292 sq km (3,646,448 sq mi). Comparatively, the area occupied by China is slightly larger than the United States. If the area of Taiwan is excluded, China is the fourth-largest country in the world, after Russia, Canada, and the United States. The mainland has an extension of 4,845 km (3,011 mi) enewsw and 3,350 km (2,082 mi) ssennw. The mainland's 5,774 km (3,588 mi) coastline, extending from the mouth of the Yalu River in the northeast to the Gulf of Tonkin in the south, forms a great arc, with the Liaodong and Shandong peninsulas in the north protruding into the Yellow Sea and the Leizhou Peninsula in the south protruding into the South China Sea. China's territory includes several large islands, the most important of which is Hainan, off the south coast. Other islands include the reefs and islands of the South China Sea, extending as far as 4° n. These reefs and islands include Dongsha (Pratas), to which Taiwan has also laid claim. China's claims to the Xisha (Paracel) and Nansha (Spratly) archipelagoes are also in dispute. In 1986, the United Kingdom agreed to transfer Hong Kong to the PRC in 1997; in March 1987, the PRC and Portugal reached an agreement for the return of Macau to the PRC on 20 December 1999.

China is bordered on the n by Mongolia (Mongolian People's RepublicMPR) and Russia; on the ne by the Democratic People's Republic of Korea (DPRK); on the e by the Yellow and the East China seas; along the southern border are Hong Kong, Macau, the South China Sea, the Gulf of Tonkin, Vietnam, and Laos; on the sw by Myanmar, India, Bhutan, and Nepal; on the w by India, Jammu and Kashmir (disputed areas), Pakistan (west of the Karakoram Pass), and Afghanistan; and on the nw by Tajikistan, Kyrgyzstan, and Kazakhstan. China's total boundary length, including the coastline (14,500 km/9,010 mi) is 36,647 km (22,771 mi). China's capital city, Beijing, is located in the northeastern part of the country.


China may be divided roughly into a lowland portion in the east, constituting about 20% of the total territory, and a larger section consisting of mountains and plateaus in the west. The principal lowlands are the Manchurian (Dongbei) Plain, drained by the Songhua (Sungari) River, a tributary of the Amur (Heilongjiang), and by the Liao River, which flows to the Yellow Sea; the North China Plain, traversed by the lower course of the Yellow (Huang He) River; the valley and delta of the Yangtze (Chang Jiang) River; and the delta of the Pearl (Zhu) River surrounding Guangzhou (Canton). West of these lowlands, the country's topography rises to plateaus of 1,2001,500 m (about 4,0005,000 ft): the Shanxi and Shaanxi loess plateaus, in central China, and the Mongolian Plateau, in the north.

Beyond lie the high plateaus of Tibet, with an average elevation of 4,600 m (15,000 ft), and the great mountain ranges. The highest mountains are the Kunluns and the Himalayas. North of Tibet are two plateau basins of Central Asia, the Tarim and the Junggar, which are separated from each other by the Tian Mountains. The Chinese portion of the Tian range, which also extends into the former USSR, rises above 7,000 m (23,000 ft).

The great rivers of China flow eastward toward the Pacific. In the northeast, the Amur drains a great part of the Manchurian Basin as it winds along its 4,350 km (2,719 mi) course. Other north-eastern rivers include the Liao, the Tumen, and the Yalu, the last two both rising in Mt. Paaktu, flowing respectively northeast and southwest, and forming the boundary between China and the DPRK. The main river of north China, and the second-largest in the country, is the Yellow River (Huang He). From Gansu it winds about 4,671 km (2,903 mi) eastward to Shandong Province, where it empties into Bo Hai (Gulf of Zhili, or Chihli). The valley of the Yellow River covers an area of 1,554,000 sq km (600,000 mi).

Central China is drained mainly by the Yangtze and its tributaries. The largest river in China, the Yangtze travels 5,525 km (3,434 mi) and drains 1,808,500 sq km (698,300 sq mi) of land. As China's only long river with no natural outlet, the Huai River, flowing between the Yangtze and the Yellow (Huang He) and roughly parallel to them, is subject to frequent flooding. To the southwest are the upper courses of the Mekong (Lancang) and Brahmaputra (Yarlung Zangbo) rivers.

Northern China is in a major earthquake zone with some of the most destructive earthquakes on record. On 28 July 1976, a tremor measuring 7.5 on the Richter scale struck the city of Tangshan (145 km/90 mi east of Beijing), causing widespread devastation and the deaths of over 650,000 people. On 3 February 1996, a 6.6 magnitude quake occurred at Yunnan causing death for 322 people and injury to over 16,000. About 358,000 homes were completely destroyed and over 654,000 others were damaged. On 24 February 2003, a 6.4 magnitude quake in Southern Xinjiang killed at least 260 people and injured 4,000. It was recorded as the deadliest earthquake of the year worldwide.


Although most of China lies within the temperate zone, climate varies greatly with topography. Minimum winter temperatures range from -27°c (-17°f) in northern Manchuria to -1°c (30°f) in the North China Plain and southern Manchuria, 4°c (39°f) along the middle and lower valleys of the Yangtze, and 16°c (61°f) farther south. Although summer temperatures are more nearly uniform in southern and central China, with a July mean of about 27°c (81°f), northern China has a shorter hot period and the nights are much cooler.

Rain falls mostly in summer. Precipitation is heaviest in the south and southeast, with Guangzhou receiving more than 200 cm (80 in), and diminishes to about 60 cm (25 in) in north and northeast China, and to less than 10 cm (4 in) in the northwest. Approximately 31% of the total land area is classified as arid, 22% as semiarid, 15% as sub-humid, and 32% as humid.


Much of China's natural vegetation has been replaced or altered by thousands of years of human settlement, but isolated areas still support one of the world's richest and most varied collections of plants and animals. Nearly every major plant found in the tropical and temperate zones of the northern hemisphere can be found there. In all, more than 7,000 species of woody plants have been recorded, of which there are 2,800 timber trees and over 300 species of gymnosperms. The rare gingko tree, cathaya tree, and metasequoia, long extinct elsewhere, can still be found growing in China. Among flowering plants, 650 of the 800 known varieties of azalea occur in China, while 390 of the 450 known varieties of primrose and about 230 of the 400 known varieties of gentian are also found there. The tree peony, which originated in Shandong Province, appears in 400 varieties.

The richest and most extensive needle-leaf forests occur in the Greater Hinggan Ling (Khingan) Mountains of the northeast, where stands of larch, Asian white birch, and Scotch pine flourish, and in the Lesser Hinggan Ling (Khingan) Mountains, with stands of Korean pine and Dahurian larch. In the Sichuan (Szechuan) Basin, vegetation changes with altitude to embrace a variety of conifers at high levels, deciduous trees and cypresses at middle elevations, and bamboo in lower elevations. Farther south, in subtropical Fujian and Zhejiang provinces, broadleaf evergreen forests predominate. Forests give way to natural grasslands and scrub in drier western and northwestern areas, especially in the semiarid regions of Shanxi and Shaanxi, in the steppes of Inner Mongolia, and along the desert margins of the Tarim and Junggar basins.

China's most celebrated wild animal is the giant panda, a rare mammal now found in the wild only in remote areas of Sichuan, Gansu, and Shanxi provinces; as of 1994, just over 500 wild pandas were still in their natural state. Other fauna unique to China include the golden-haired monkey, found in remote parts of Shaanxi, Gansu, Sichuan, Guizhou, and Yunnan; the northeast China tiger, found in the Lesser Hinggan Ling and Changbai mountains along the Korean border; the Chinese river dolphin and Chinese alligator, both found along the middle and lower Yangtze River; the rare David's deer and the white-lipped deer, the latter found mainly in Qinghai Province and Tibet; a rare kind of white bear found in Hubei Province; and the lancelet, an ancient species of fish representing a transitional stage between invertebrate and vertebrate development, now found only in Fujian Province. In addition, more than 1,000 species of birds have been recorded. Among the rarer kinds are the mandarin duck, the white-crowned long-tailed pheasant, golden pheasant, Derby's parakeet, yellow-backed sun-bird, red-billed leiothrix, and red-crowned crane.


It is estimated that China has lost one-fifth of its agricultural land since 1957 due to economic development and soil erosion. Since 1973, China has taken significant steps to rectify some of the environmental damage caused by rampant use of wood for fuel, uncontrolled industrial pollution, and extensive conversion of forests, pastures, and grasslands to grain production during the Cultural Revolution. Reforestation, including construction of shelter belts, has emphasized restoration of the erosionprone loesslands in the middle reaches of the Yellow River. In 1979, the Standing Committee of the Fifth National People's Congress adopted an Environmental Protection Law and a Forestry Law. In 1989, China began a nationwide program called the Great Green Wall of China which began to accelerate the rate of reforestation. In 2000, about 17.5% of the total land area was forested.

Water supplies are limitedper capita consumption in China's cities is about 34 gallons a day, less than half that in many developing countriesand conservation, reclamation, and redistribution of water constitute major national priorities. Safe drinking water is unavailable to much of the population (as much as one-third, according to some estimates). By 1989, 436 of 532 rivers were polluted. In 1994, the World Health Organization reported that Chinese cities pollute water supplies more than those of any other country in the world. Legislation provides for the protection of aquatic resources, including water quality standards for farmland irrigation and fisheries.

To alleviate water shortages in the heavily populated Beijing-Tranjin region, a massive water transfer project began in 1994 by construction of the Three Gorges Dam on the Yangtze River. The project aroused considerable controversy. Project managers faced technological problems and higher-than-expected costs. Completion of the project (scheduled for 2009) will create a reservoir that will flood prime farm land and leave the ecology of the river area damaged. By early 2005, one million people had already been displaced by construction. An additional 900,000 people were expected to be displaced by completion of the project.

The use of high-sulfur coal as a main energy source causes air pollution and contributes to acid rain. In the mid-1990s, China had the world's second-highest level of industrial carbon dioxide emissions, totaling 2.67 billion metric tons per year, a per capita level of 2.27 metric tons per year. In 2000, the total increased to 2.7 billion metric tons. Investment in pollution-reducing technology is required of all industrial enterprises. Penalties are imposed for noncompliance and incentives, in the form of tax reductions and higher allowable profits, are available for those enterprises that meet environmental standards. Beijing has implemented programs for controlling discharges of effluents, smoke and soot emissions, and noise pollution. Special success has been claimed for the recovery of oil from effluents of the Daqing oil field in Heilongjiang, refineries, and other oil-processing establishments; use of electrostatic precipitators and bag collectors by the cement and building industries; recovery of caustic soda and waste pulp from effl uents of the pulp and paper industries; introduction of nonpolluting processes into the tanning and depilating of hides; use of nonmercuric batteries; recovery of fine ash from coal-burning power plants for use in the manufacture of bricks, tiles, cement, and road-surfacing materials; and development of new methodologies for recycling coal wastes and marine oil discharges.

To protect the nation's botanical and zoological resources, a program was adopted in 1980 to establish 300 new reserves, with a total area of 9.6 million ha (23.7 million acres). That goal was achieved by the end of 1985, one year ahead of schedule. In 2003, about 7.8% of the total land area of China was protected. The largest reserve, covering 800,000 ha (1,980,000 acres), is the Changbai Mountain Nature Reserve, in the northeast. Others include the Wolong reserve in Sichuan Province, covering 200,000 ha (494,000 acres) and famous for its research on the giant panda; the Dinghu Mountain reserve in Guangdong Province, where a subtropical evergreen broadleaf monsoon forest that has remained virtually untouched for four centuries provides opportunities for ecological studies; and the Nangun River area in Yunnan Province, where the principal focus of protection is the tropical rain forest. There are 30 Ramsar wetland sites and eight natural and mixed properties designated as UNESCO World Heritage Sites.

According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 80 types of mammals, 82 species of birds, 31 types of reptiles, 86 species of amphibians, 47 species of fish, 1 type of mollusk, 3 other invertebrates, and 443 species of plants. Endangered species in China include Elliot's pheasant, Cabot's tragopan, yarkand deer, Shansi sika deer, South China sika, North China sika, the Chinese alligator, the Amur leopard, Javan rhinoceros, Thailand brow-antlered deer, the white-lipped deer, Bactrian camel, the giant panda, and the Siberian white crane. There are about nine extinct species, including the Yunnan box turtle and the wild horse.


The population of China in 2005 was estimated by the United Nations (UN) at 1,303,701,000, which ranked first in population among the 193 nations of the world. In 2005, approximately 8% of the population was over 65 years of age, with another 22% of the population under 15 years of age. There were 106 males for every 100 females in the country. According to the UN, the annual population rate of change for 200510 was expected to be 0.6%, a rate the government viewed as satisfactory. The government has emphasized family planning since the 1970s, and has accomplished a significant reduction in population growth. The projected population for the year 2025 was 1,476,000,000. The population density was 136 per sq km (353 per sq mi), but the distribution of the population throughout China is extremely uneven. The most densely populated areas near the coast have a population density of more than 154 people per sq km (400 per sq mi), while the western plateaus are sparsely populated.

China, as the most populous country in the world, accounts for 21% of the estimated world population. Until 2001, it was also the only country to have attained the status of demographic billionaire, but in March that year, India also reached a one billion population. The government policy, launched in the 1990s calling for an extensive family planning program to limit population growth, has been successful.

The UN estimated that 37% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 2.79%. Government policy has sought to limit the growth of the large eastern cities, especially the capital city, Beijing (Peking), Shanghai, and Tianjin, and to promote the growth of smaller cities away from the coast. China has over 60 metropolitan areas with populations greater than 750,000. As of 2005, the largest urban centers were Shanghai, 12,665,000; Beijing, 10,849,000; and Tianjin, 9,346,000. Other large metropolitan areas included Wuhan, 6,003,000; Chongqing, 4,975,000; Shenyang, 4,916,000; Guangzhou, 3,881,000; Chengdu, 3,478,000; Xi'an, 3,256,000; Changchun, 3,092,000; Harbin, 2,898,000; Dalian, 2,709,000; Jinan, 2,654,000; Hangzhou, 1,955,000; and Qingdao, 1,452,000.


The overseas migration of millions of Chinese reached its peak in the 1920s when thousands of farmers and fishermen from the southeastern coastal provinces settled in other countries of South-east Asia. Chinese constitute a majority in Singapore, are an important ethnic group in Malaysia, and make up a significant minority in the Americas. In 1949, after the Communist victory, some two million civilians and 700,000 military personnel were evacuated to Taiwan.

Since in many places abroad the Chinese population has been growing at a rate faster than that of the local non-Chinese population, most countries have been trying to curtail the entrance of new Chinese immigrants. Emigration from China under the PRC government was once limited to refugees who reached Hong Kong, but is now denied only to a few political dissidents, if the state is reimbursed for postsecondary education costs. Immigration is for the most part limited to the return of overseas Chinese. At the end of 1999, the United Nations High Commissioner for Refugees (UNHCR) reported 285,000 Vietnamese refugees in China, 91% of whom are of Chinese ancestry.

During the Cultural Revolution of the 1960s and 1970s, more than 60 million students, officials, peasant migrants, and unemployed were sent "down to the countryside" in a gigantic rustication movement. The goals of this program were to relocate industries and population away from vulnerable coastal areas, to provide human resources for agricultural production, to reclaim land in remote areas, to settle borderlands for economic and defense reasons, and, as has been the policy since the 1940s, to increase the proportion of Han Chinese in ethnic minority areas. Another purpose of this migration policy was to relieve urban shortages of food, housing, and services, and to reduce future urban population growth by removing large numbers of those 1630 years of age. However, most relocated youths eventually returned to the cities.

Efforts to stimulate "decentralized urbanization" have characterized government policy since the late 1970s. Decentralized urbanization and the related relocation of industries away from established centers has also been promoted as a way for China to absorb the increasing surplus labor of rural areas, estimated at 100 million in 2000. However, China's economic boom of the 2000s led to rapid growth of coastal provinces attracting inland rural males for construction and females to work in factories. This contrast extends to how children are perceived. Urban parents call their only child "little sun" (as in "center of the universe"), compared with rural parents, who call their child or children "left behind," (with their grandparents, as parents travel distances for work). For rural areas another split has developed: migrant work for the young and farming for the old.

On 1 July 1997, the sovereignty of Hong Kong reverted back to China. As of 1999, some 1,562 refugees and screened-out nonrefugees still remained in the Hong Kong Special Administrative Region (SAR). In 2004, there were 299,305 refugees living in China, all but 135 in camps. In addition, 44 people sought asylum in China. The main countries to which Chinese emigrated in 2004 were the United States, Canada, South Africa, France, and the United Kingdom. Chinese sought asylum in India, the United States, Germany and Canada. In 2005, the net migration rate for China was estimated as -0.4 migrants per 1,000 population. The government views the migration levels as satisfactory.


According to the latest estimates, the largest ethnic group, accounting for 91.9% of the total population, is the Han. The Han form a majority in most of the settled east and south but remain a minority, despite continuing immigration, in the west.

The remaining 8.1% of the population is comprised of minority groups. Because of their predominance in strategically sensitive border areas, they hold a political and economic importance disproportionate to their numbers. The largest minority, at last estimate was the Zhuang, a Buddhist people, related to the Thai, who are primarily concentrated in Guangxi, Yunnan, and Guangdong. Other large minorities were the Manchu, concentrated in Heilongjiang, Jilin, and Liaoning; the Hui, a Chinese-speaking Muslim people concentrated in Ningxia, Gansu, Henan, and Hebei; the Uygur, a Muslim Turkic people of Xinjiang; the Yi, formerly called Lolo, a Buddhist people related to the Tibetans and concentrated in Yunnan, Sichuan, and Guizhou; the Miao, in Guizhou, Hunan, Yunnan, and Guangxi; and the Tibetans, concentrated in Xizang (Tibet), Qinghai, and Sichuan. Other minority nationalities, with estimated populations of more than one million, included the Mongolians; Tujia; Buyi; Koreans; Dong; Yao; Bai; Hani; Li; and the Kazaks, concentrated in Xinjiang, Gansu, and Qinghai.


Chinese, a branch of the Sino-Tibetan linguistic family, is a monosyllabic tone language written by means of characters representing complete words. The Chinese script is not phonetic and remains constant throughout China, but the spoken language has regional phonetic differences. Spoken Chinese falls into two major groups, separated roughly by a northeast-southwest line running from the mouth of the Yangtze River to the border of Vietnam. North and west of this line are the socalled Mandarin dialects, based on the Beijing dialect and known as putonghua ("common language"). The most important dialect south of the linguistic divide is that of Shanghai, the Wu dialect spoken in the Yangtze River Delta. Hakka and Hokkien are dialects of the southeastern coastal province. Cantonese, the Yue dialect spoken in southern China, is the language of the majority of Chinese emigrants. Others include the Minbei or Fuzhou dialect, the Xiang, and Gan dialects. Mandarin Chinese was adopted as the official language of China in 1955.

To communicate in written Chinese, thousands of Chinese characters must be memorized. Since the establishment of the PRC in 1949, reform of the written language has been a major priority. A simplified system of writing, reducing the number of strokes per character, has been adopted, and the language restructured so that anyone familiar with the basic 2,0003,000 characters is functionally literate (defined as being able to read a newspaper).

A number of systems have been developed to transcribe Chinese characters into the Latin alphabet. The principal romanization scheme was the Wade-Giles system until 1979, when the PRC government adopted Pinyin, a system under development in China since the mid-1950s. Inside China, Pinyin is used in the schools to facilitate the learning of Chinese characters, in minority areas where other languages are spoken, and on commercial and street signs. Pinyin has replaced the Wade-Giles system in all of China's English-language publications and for the spelling of place names. In general, pronunciation of Pinyin follows standard American English, except that among initial sounds, the sound of q is like the sound of ch as in chart, the sound of x like the sound of sh as in ship, and the sound of zh like the sound of j as in judge, and among final sounds, the sound of e is like the sound of oo as in look, the sound of eng like the sound of ung as in lung, the sound of ui like the sound of ay as in way, and the sound of uai like the sound of wi as in wide.

Of the 55 recognized minority peoples in China, only Hui and Manchus use Chinese as an everyday language. More then 20 minority nationalities have their own forms of writing for their own languages. Minority languages are used in all state institutions in minority areas and in all newspapers and books published there.


Three faithsConfucianism, Buddhism, and Taoismhave long been established in China and the religious practice of the average Chinese traditionally has been an eclectic mixture of all three. Confucianism has no religious organization but consists of a code of ethics and philosophy; filial piety, benevolence, fidelity, and justice are among its principal virtues. Taoism, a native Chinese religion that evolved from a philosophy probably founded in the 6th century bc by Laotzu (Laozi), and Buddhism, imported from India during the Han dynasty, both have elaborate rituals. Tradition-minded Chinese base their philosophy of life on Confucianism, but such old habits of thought came under strong attack during the Cultural Revolution.

Suppression of religion and the introduction of programs of antireligious indoctrination began in 1949 and intensified, with the closure of temples, shrines, mosques, and churches, from the mid-1960s through the mid-1970s. Overt antireligious activity eased in 1976, and the government reactivated its Bureau of Religious Affairs. The constitution of 1982 provides for freedom of belief and worship; however, the government restricts religious practices and maintains a great deal of control over the growth of various religious organizations. The State Administration for Religious Activities and the United Front Work Department monitor religious organizations and supervise the implementation of government regulations for religious groups and activities. All groups are required to register with the government in order to legally participate in worship. Many groups refuse to register, however, either out of protest for government policies and control over religion or from fear of providing the names of religious leaders to government authorities.

As of 2004, the country had five officially recognized religions, Buddhism, Taoism, Islam, Catholicism, and Protestantism. About 8% of the population were Buddhists, 1.4% were Muslims, 1.2% were Protestants, and less than 1% were Catholics. Nearly all of the nation's Muslims are members of the ethnic minority nationalities; most belong to the Sunni branch, but the Tajiks are Shias. The tiny Jewish minority has virtually disappeared through emigration and assimilation. A majority of the population does not claim official religious affiliation.

"House churches," a term that typically applies to unregistered Christian groups that meet in homes or businesses for prayer meetings and Bible studies, are somewhat common. Small groups of a dozen or so members are usually allowed to gather without registration as long as the meetings are small, private, and unobtrusive. As membership grows however, these house churches face difficulties in finding ways to continue conducting religious activities without attracting the notice and control of the government. Tensions between the Vatican and the Chinese government have caused difficulties for the nation's Catholics. The state forbids the official Catholic church from recognizing the authority of the Papacy and in matters where government policy and traditional Catholic faith differ, such as abortion, the state takes precedence. This has had a major impact on recruiting, appointing, and retaining the Catholic clergy within the country.

Falun Gong (also known as Falun Dafa) is a combination of Taoism, Buddhism, meditation techniques, and the physical exercises of quigong. Though spiritual in content, it is considered more of a general practice than a religion, since there are no clergy and no places of worship. The group has been considered a heretical cult by the Chinese government and reports indicate that thousands of adherents have been arrested and imprisoned since 1999. It is believed that several hundred have died while in detention.


Railways, roads, and inland waterways all play an important role in China's transportation system, which has undergone major growth since the 1940s. China's rail network forms the backbone of the transportation system. Chinese railways increased in length from 21,989 km (13,663 mi) in 1949, to 71,898 km (44,721 mi) in 2002, of which 18,115 km (11,267 mi) were electrified. In the rush to expand rail facilities during the "Great Leap Forward," the Chinese laid rails totaling 3,500 km (2,175 mi) in 1958, with some 4,600 km (2,900 mi) added in 1959. Many major projects had been completed by the 1970s, including double-tracking of major lines in the east; the electrification of lines in the west, including the 671 km (417 mi) Baoji-Chengdu link; and the addition of several new trunk lines and spurs, many providing service to the country's more remote areas. While the total rail network is more than twice what it was in 1949, the movement of freight is more than 25 times that of 1949. Increased freight volumes have been achieved by loading freight cars up to 20% over their rated capacity and by containerization. Shortages of freight and tank cars continue to delay deliveries of coal and other industrial raw materials to their destinations. In 1991, China invested $8 billion for infrastructure improvements, including the upgrade of 309 km (192 mi) of double-track railway and the electrification of 849 km (528 mi) of track.

Road transportation has become increasingly important. Motor roads grew from about 400,000 km (249,000 mi) in 1958 to 550,000 km (342,000 mi) in 1964 and to 1,809,829 km (1,125,714 mi) by 2003. About 1,447,682 km (900,458 mi) were paved, including at least 29,745 km (18,501 mi) of expressways. Major roads completed in the 1970s included the 2,413 km (1,499 mi) Sichuan-Tibet Highway, the 2,100 km (1,305 mi) Qinghai-Tibet Highway, and the 1,455 km (904 mi) Xinjiang-Tibet Highway. Between 1981 and 1985, 50,000 km (31,000 mi) of highways and more than 15,000 bridges were built. By 2003, an estimated 6,789,000 passenger automobiles used the highway system, up from 50,000 in 1949. In addition, there were some 17,222,000 commercial vehicles operating in the same year. Bicycles are the chief mode of transport in large cities. In Beijing, there are an estimated eight million bicycles, accounting for 83.5% of the city's road traffic.

As of 2002, China had 121,557 km (75,608 mi) of navigable inland waterways. About 25% of the waterways are navigable by modern vessels, while wooden junks are used on the remainder. The principal inland waterway is the Yangtze River. Much work was done in the early 1980s to dredge and deepen the river, to improve navigational markers and channels, and to eliminate the treacherous rapids of the Three Gorges section east of Yibin. Steamboats can now travel inland throughout the year from Shanghai, at the river's mouth, upstream as far as Yibin, and 10,000ton oceangoing vessels can travel inland as far as Wuhan in the high-water season and Nanjing in the low-water season. Major ports on the river include: Chongqing, the principal transportation hub for the southwest; Wuhan, its freight dominated by shipments of coal, iron, and steel; Wuhu, a rice-exporting center; Yuxikou, across the river from Wuhu and the chief outlet for the region's coal fields; Nanjing; and Shanghai. The Pearl River is navigable via a tributary as far as Nanning. The ancient Grand Canal, rendered impassable by deposits of silt for more than 100 years, has been dredged and rebuilt; it is navigable for about 1,100 km (680 mi) in season and 400 km (250 mi) year-round.

China's merchant fleet expanded from 402,000 gross registered tonnage (GRT) in 1960 to over 10,278,000 GRT in 1986, and to 18,724,653 GRT in 2005. China's 1,649 merchant ships of 1,000 GRT or over can accommodate most of the country's foreign trade. The balance is divided among ships leased from Hong Kong owners and from other foreign sources. The principal ports are Tianjin, the port for Beijing, which consists of the three harbors of Neigang, Tanggu, and Xingang; Shanghai, with docks along the Huangpu River channel; Lüda, the chief outlet for the northeast and the Daqing oil field; and Huangpu, the port for Guangzhou, on the right bank of the Pearl River. Other important ports include Qinhuangdao; Qingdao; Ningbo, the port for Hangzhou; Fuzhou; Xiamen; and Zhanjiang.

The Civil Aviation Administration of China (CAAC) operates all domestic and international air services. Operations have grown significantly with the purchase, since the 1970s, of jet aircraft from the United States, United Kingdom, and other Western sources. In 2004, there were an estimated 472 airports. As of 2005, a total of 389 had paved runways and there were also 30 heliports. Principal airports include Capital at Beijing, Shuangliu at Chengdu, Hongqiao at Shanghai, Baiyun at Guangzhou, Wujiaba at Kunming, and Gaoqi at Xiamen. From Beijing there are scheduled daily flights to Shanghai, Guangzhou, Kunming, Chengdu, Shenyang, Changchun, Changsha, Wuhan, Zengzhou, and Harbin. The total scheduled international and domestic service performed in 2003 included 5,651 million freight tonkm, as well as 86.041 million passengers carried.


Fossils attest to hominid habitation in China more than 500,000 years ago, and Paleolithic cultures appeared in the southwest by 30,000 bc. Neolithic peoples appeared before 7000 bc; by 3000 bc there were millet-growing settlements along the Yellow River (Huang He). The original home of the Chinese (Han) people is probably the area of the Wei, Luo (Lo), and middle Yellow rivers. According to tradition, the Xia (Hsia) dynasty (c.2200c.1766 bc) constituted the first Chinese state. Its successor, the Shang, or Yin, dynasty (c.1766c.1122 bc), which ruled over the valley of the Yellow River, left written records cast in bronze or inscribed on tortoiseshell and bone. The Shang was probably conquered by the Western Zhou (Chou) dynasty (c.1122771 bc), which ruled a prosperous feudal agricultural society. Fleeing foreign attack in 771 bc, the Western Zhou abandoned its capital near the site of Xi'an and established a new capital farther east at Luoyang (Loyang). The new state, known as the Eastern Zhou dynasty (771256 bc), produced the great Chinese philosophers including Confucius (K'ung Futzu or Kong Fuzi) and the semi-historical figure, Lao Tzu (Lao Zi). Between 475 and 221 bc, the Qin (Ch'in) dynasty (221207 bc) gradually emerged from among warring, regional states to unify China. Shi Huangdi (Shih Huang Ti, r.221210 bc), the first Qin emperor (the outer edges of whose tomb, opened in the 1970s, were discovered to contain stunningly lifelike terracotta armies), ended the feudal states and organized China into a system of prefectures and counties under central control. For defense against nomadic proto-Mongolian tribes, Shi Huangdi connected walls of the feudal states to form what was later to become known as the Great Wall. By this time, the Yellow River had an irrigation system, and cultivation had begun in the Yangtze Valley; at the end of Shi Huangdi's reign, China probably had close to 40 million people. During the period of the Han dynasties (206 bcad 8, ad 25220), China expanded westward, nomadic tribes from the Mongolian plateau were repelled, and contacts were made with Central Asia, the West, and even Rome. The Han saw the invention of paper. Under the later Han, Buddhism was introduced into China. After the Han period, the Three Kingdoms (Wei, Shu, and Wu) contended for power, and nomadic tribes from the north and west raided northern China. From the 4th century ad on, a series of northern dynasties was set up by the invaders, while several southern dynasties succeeded one another in the Yangtze Valley, with their capital at Nanjing (Nanking). Buddhism flourished during this period, and the arts and sciences were developed. The empire was reunited by the Sui (589618) dynasty, which built the Grand Canal, linking the militarily strategic north with the economic wealth of the south and laying the basis for the Tang (T'ang, 618907) dynasty.

Under the early Tang, especially under Emperor Taizong (T'aitsung, r.62749), China became powerful. The bureaucratic system, begun by the Han, was further developed, including the regular use of an examination system to recruit officials on the basis of merit. Handicrafts and commerce flourished, a system of roads radiated from the capital (at the site of Xi'an), successful wars were fought in Central Asia, and China became the cultural and economic center of Asia. Poetry and painting flourished, particularly under Emperor Xuan-Zong (Hsüantsung, r.71256). Civil wars and rebellion in the late Tang led to a period of partition under the Five Dynasties (r.90760) which was followed by the Northern and Southern Song (Sung) dynasties (9601127, 11271279), distinguished for literature, philosophy, the invention of movable type (using clay and wood), the use of gunpowder in weapons, and the improvement of the magnetic compass. However, Mongol and Tatar tribes in the north forced the Song to abandon its capital at Kaifeng in 1126 and move it to Hangzhou (Hangchow). In 1279, Kublai Khan (r.127994) led the Mongols to bring all of China under their control and became the first ruler of the Mongols' Yuan dynasty (12791368). The Mongols encouraged commerce and increased the use of paper money. The Grand Canal was reconstructed, and a system of relay stations ensured safe travel. Many European missionaries and merchants, notably Marco Polo, came to the Mongol court.

After a long period of peasant rebellion, Mongol rule was succeeded by the native Chinese Ming dynasty (13681644). The famous Ming admiral, Zheng He (Cheng Ho, 13711433) led seven naval expeditions into the South China Sea and the Indian Ocean between 1405 and 1433, reaching as far as the east coast of Africa. The Portuguese reached China in 1516, the Spanish in 1557, the Dutch in 1606, and the English in 1637. The Ming dynasty was overthrown by the Manchus, invaders from the northeast, who established the last imperial dynasty, the Qing (Ch'ing or Manchu, 16441911). The first century and a half of Manchu rule was a period of stability and expansion of power, with outstanding reigns by Kang xi (K'anghsi, 16621722) and Qian long (Ch'ienlung, 173696). Although the Manchus ruled as conquerors, they adopted indigenous Chinese culture, administrative machinery, and laws. Under Manchu rule, Chinese territories included Manchuria, Mongolia, Tibet, Taiwan, and the Central Asian regions of Turkestan. The population of over 300 million by 1750 grew to over 400 million a century later.

By the close of the 18th century, only one port, Guangzhou (Canton), was open to merchants from abroad, and trade was greatly restricted. Demands by the British for increased trade, coupled with Chinese prohibition of opium imports from British India, led to the Opium War (183942), which China lost. By the Treaty of Nanjing (1842), the ports of Guangzhou, Xiamen (Amoy), Fuzhou (Foochow), Ningbo, and Shanghai were opened, and Hong Kong Island was ceded to Britain. The T'aiping Rebellion (185064), nearly overthrew the Manchus and cost 30 million lives. A second war (185660) with Britain, joined by France, resulted in the opening of Tianjin (Tientsin) to foreign trade. The West's interest then turned from trade to territory. Russia acquired its Far Eastern territories from China in 1860. China's defeat in the Sino-French War (188485), in which it came to the defense of its tributary, Vietnam, resulted in the establishment of French Indo-China. In the First Sino-Japanese War (189495), Japan obtained Taiwan, the opening of additional ports, and the independence of Korea (which Japan subsequently annexed in 1910). This was a major turning point and led to the "scramble for concessions." In 1898, Britain leased Weihai in Shandong and the New Territories (for 99 years) of Hong Kong, Germany leased part of Shandong, Russia leased Port Arthur at the tip of Liaedong Peninsula, and France leased land around Guangzhou Bay in the south. The Boxer Rebellion, an uprising in 18991901 by a secret society seeking to expel all foreigners and supported by the Manchu court, was crushed by the intervention of British, French, German, American, Russian, and Japanese troops.

A revolution that finally overthrew Manchu rule began in 1911 in the context of a protest against a government scheme that would have handed Chinese-owned railways to foreign interests. City after city repudiated the Manchus, and in February 1912, the dowager empress, Ci Xi (Tz'u Hsi), signed an abdication document for the infant emperor, Puyi (P'uyi). The Chinese republic, ruled briefly by Sun Zhongshan (Sun Yatsen), followed by Yuan Shikai (Yuän Shihkai), entered upon a period of internal strife. Following Yuan's death in 1916, the Beijing regime passed into the hands of warlords. The Beijing regime joined World War I on the Allied side in 1917. In 1919, the Versailles Peace Conference gave Germany's possessions in Shandong to Japan, sparking the May Fourth Movement as student protests grew into nationwide demonstrations supported by merchants and workers. This marked a new politicization of many social groups, especially those intellectuals who had been emphasizing iconoclastic cultural change.

Meanwhile, civil war grew more intense. In the south, at Guangzhou, the Nationalists (Guomindang, Kuomintang) led by Sun Zhongshan in alliance with the Communists (whose party was founded in Shanghai in 1921) and supported by Russia, built a strong, disciplined party. After Sun Zhongshan's death in 1925, his successor, Chiang Kaishek (Jiang Jieshi), unified the country under Nationalist rule in 1928 with the capital in Nanjing. In 1927, the Nationalists began a bloody purge of the Communists, who sought refuge in southern Jiangxi Province. Their ranks severely depleted by Nationalist attacks, the Communists embarked on their arduous and now historic Long March during 193435. The Communists eventually reached Shaanxi Province in north-western China, where, under the leadership of Mao Zedong (Tsetung), they set up headquarters at Yan'an (Yenan). Japan, taking advantage of Chinese dissension, occupied Manchuria (Dongbei) in 1931.

Increasing Japanese pressure against northern China led, in July 1937, to the second Sino-Japanese war, which continued into World War II and saw Japanese forces occupy most of China's major economic areas. Nationalist China, established in the south-western hinterland with its capital at Chongqing, resisted with US and UK aid, while the Communists fought the Japanese in the northwest. Japan evacuated China in 1945 and both Communist and Nationalist forces moved into liberated areas. The rift between the two factions erupted into civil war. Although supported by the United States, whose mediation efforts had failed, the Nationalists steadily lost ground through 1948 and 1949, were expelled from the mainland by early 1950, and took refuge on Taiwan.

The People's Republic

The Communists, under the leadership of Mao, as chairman of the Chinese Communist Party (CCP), proclaimed the People's Republic of China (PRC) on 1 October 1949, with the capital at Beijing. A year later, China entered the Korean War (195053) on the side of the Democratic People's Republic of Korea (DPRK). In the fall of 1950, China entered Tibet, which had asserted its independence after the overthrow of the Manchu dynasty, despite formal claims to it by all subsequent Chinese governments. In 1959, the Dalai Lama fled to India during a Tibetan revolt against Chinese rule. Tibet became an autonomous region in 1965. The Nationalists held, in addition to Taiwan, islands in the Taiwan (Formosa) Strait: the Pescadores, Quemoy (near Xiamen), and the Matsu Islands (near Fuzhou).

In domestic affairs, a rapid program of industrialization and socialization up to 1957 was followed in 195859 by the Great Leap Forward, a crash program for drastic increases in output and the development of completely collectivized agricultural communes. The program ended in the "three bad years" of famine and economic crisis (195961), which produced 20 million deaths above the normal death rate, followed by a period of restoration and retrenchment in economics and politics. In the early 1960s, Chinese troops intermittently fought with Indian border patrols over conflicting territorial claims in Ladakh and the northeastern Indian state of Assam. Mediation attempts failed, but in 1963, the Chinese withdrew from the contested areas that they had occupied, and war prisoners were repatriated. Meanwhile, growing discord between China and the former Soviet Union had become more open, and in 1960, the USSR withdrew its scientific and technical advisers from China. Public polemics sharpened in intensity in the succeeding years, as the two powers competed for support in the world Communist movement.

After the Chinese economy recovered in 1965, Mao again steered the country onto the revolutionary path, and gradually built up momentum for the Great Proletarian Cultural Revolution, one of the most dramatic and convulsive periods in modern Chinese history. It continued until Mao's death in 1976, but the most tumultuous years were from 1966 to 1969, during which the cities witnessed a chaotic and violent pattern of factional fighting, accompanied by attacks on bureaucrats, intellectuals, scientists and technicians, and anyone known to have overseas connections.

Increasing confrontation between Mao and the party establishment, beginning in the fall of 1965, culminated in August 1966 with the CCP Central Committee's "16Point Decision" endorsing Mao's Cultural Revolution policy of criticizing revisionism. In response to Mao's initiative, high levels of urban protest demonstrated widespread dissatisfaction with bureaucracies and privilege. In the latter half of 1966, the Red Guard movement of radical students attacked educational and state authorities and split into competing factions. Amid the rising conflict, the party institution collapsed in major cities. Liu Shaoqi, second to Mao in the political hierarchy and Chairperson of the People's Republic, was ousted from power as the chief target of the Cultural Revolution. In 1968, Liu was formally dismissed from all positions and expelled from the party. He died at the end of 1969. From January 1967 through mid-1968, the discredited political establishment was replaced by Revolutionary Committees, comprised of the new radical organizations, the officials who remained in power, and representatives of the army. Finally, the army was told to restore order. In 1968 and 1969, students were sent out of the cities into the countryside. Colleges did not reopen until 1970. At the Ninth Party Congress in April 1969, the military's role was confirmed when Lin Biao, the Minister of Defense, was named Mao's successor.

Estimates place the number of dead as a direct result of the Cultural Revolution from 1966 to 1969 at 400,000. Much of the countryside, however, was unaffected and the economy, despite a setback in 1968, suffered little. The remaining years of the Cultural Revolution decade, up to 1976, were marked by a legacy of struggles over policies and over political succession to the aging Mao (83 at his death in 1976). In September 1971, Lin Biao died in a plane crash, allegedly while fleeing to the former USSR following an abortive coup. The decade from 1966 to 1976 left persistent factionalism in Chinese politics and a crisis of confidence, particularly among the young.

These years of domestic upheaval also brought profound changes in international alignments. In 1969, Chinese and Soviet forces clashed briefly along the Amur River frontier of eastern Heilongjiang Province. Throughout the late 1960s and early 1970s, China played a major role in supporting the Democratic Republic of Vietnam (North Vietnam) in the Vietnamese conflict. In November 1971, the PRC government replaced Taiwan's Nationalist government as China's representative at the UN and on the Security Council, following a General Assembly vote of 7635, with 17 abstentions, on 25 October. Following two preliminary visits by US Secretary of State Henry Kissinger, President Richard M. Nixon journeyed to China on 21 February 1972 for an unprecedented state visit, and the two countries took major steps toward normalization of relations as the two nations sought common ground in their mutual distrust of Soviet intentions. In the period following the Nixon visit, US-China trade accelerated and cultural exchanges were arranged. In May 1973, the two countries established liaison offices in each other's capital and full diplomatic relations were established by 1979.

In 1975 at the Fourth National People's Congress, Zhou Enlai (Chou Enlai) announced a reordering of economic and social priorities to achieve the Four Modernizations (of agriculture, industry, national defense, and science and technology). Factional strife reminiscent of the late 1960s emerged between radical party elements led by Mao's wife, Jiang Qing (Chiang Ch'ing), and three associates (later collectively dubbed the Gang of Four), who opposed the modernization plans, and veteran party officials, such as Deng Xiaoping (previously associated with Liu Shaoqi and restored to power in 1973), who favored them. When Zhou died on 8 January 1976, the radicals moved to block the appointment of Deng (Zhou's heir apparent) as premier, with Mao resolving the impasse by appointing Hua Guofeng, a veteran party official and government administrator, as acting premier. Attacks on Deng continued until he was blamed for spontaneous disorders at a Beijing demonstration honoring Zhou on the Festival of the Dead, 5 April 1976, and, for the second time in his career, Deng was removed from all official positions.

After Mao

When Mao Zedong died on 9 September 1976, Hua Guofeng was quickly confirmed as party chairman and premier. A month later, the Gang of Four was arrested, and in early 1977, the banished Deng Xiaoping was again "reinstated." By 1978, Deng Xiaoping had consolidated his political dominance, and a new era of economic reforms began. The Third Party Plenum and the Fifth National People's Congress in 1978 adopted a new constitution and confirmed the goals of the Four Modernizations. Another new constitution in 1982 again confirmed policies of economic reform and emphasized legal procedure. The Cultural Revolution was officially condemned and Mao's historical role reevaluated. After a show trial from November 1980 to January 1981, the Gang of Four, together with Mao's former secretary and five others associated with Lin Biao, were convicted of crimes of the Cultural Revolution. Jiang Qing, whose death sentence was commuted to life imprisonment, committed suicide in 1991 after being diagnosed with cancer.

In 1980, Zhao Ziyang, a protégé of Deng Xiaoping, replaced Hua Guofeng as premier, and Hu Yaobang, another Deng protégé, became general secretary of the CCP while Hua resigned as party chairperson (a position which was abolished) in 1981. The 1980s saw a gradual process of economic reforms, beginning in the countryside with the introduction of the household responsibility system to replace collective farming. As the rural standard of living rose, reforms of the more complex urban economy began in the mid-1980s in an attempt to use the economic levers of the market instead of a command system of central planning to guide the economy. These included, with varying degrees of success, reforms of the rationing and price system, wage reforms, devolution of controls of state enterprises, legalization of private enterprises, creation of a labor market and stock markets, the writing of a code of civil law, and banking and tax reforms. At the same time, the Chinese pursued a policy of opening toward the outside world, establishing Special Economic Zones, and encouraging joint ventures and foreign investment.

In the 1980s and 1990s, China attempted to settle its relations with neighboring states. After a border clash with Vietnam in 1979, there were agreements with Great Britain in 1984 for the return of Hong Kong to China in 1997, and with Portugal in 1987, for the return of Macaua Portuguese colony since the 16th centuryin 1999. In May 1989, Soviet President Mikhail Gorbachev visited Beijing in the first Sino-Soviet summit since 1959. Top Vietnamese leaders came to China in 1991, normalizing relations between the two countries after a gap of 11 years. In the early 1990s, China and South Korea established regular relations, with China also maintaining a relationship with North Korea.

Until 1989, economic reforms were accompanied by relatively greater openness in intellectual spheres. A series of social and political movements spanning the decade from 1979 to 1989 were critical of the reforms and reacted to their effects. In the Democracy Wall movement in Beijing in the winter of 197879, figures like Wei Jingsheng (imprisoned from 1979 to 1994 and subsequently reimprisoned) called for democracy as a necessary "fifth modernization." A student demonstration in Beijing in the fall of 1985 was followed in the winter of 198687 with a larger student movement with demonstrations of up to 50,000 in Shanghai, Beijing, and Nanjing, in support of greater democracy and freedom. In June 1987, blamed for allowing the demonstrations, Hu Yaobang was dismissed as party General Secretary, and several important intellectuals, including the astrophysicist Fang Lizhi and the journalist Liu Binyan, were expelled from the party. At the 15th Party congress of November 1987, many hardline radicals failed to retain their positions, but Zhao Ziyang, who was confirmed as General Secretary to replace Hu, had to give up his position as Premier to Li Peng. By the end of 1988, economic problems, including inflation of up to 35% in major cities, led to major disagreements within the government, resulting in a slowdown of reforms. In December 1988, student disaffection and nationalism were expressed in a demonstration against African students in Nanjing.

On 15 April 1989, Hu Yaobang died of a heart attack. Students in Beijing, who had been planning to commemorate the 70th anniversary of the May Fourth Movement, responded with a demonstration, ostensibly in mourning for Hu, demanding a more democratic government and a freer press. Student marches continued and spread to other major cities. The urban population, unhappy with high inflation and the extent of corruption, largely supported the students and, by 17 May, Beijing demonstrations reached the size of one million people, including journalists, other salaried workers, private entrepreneurs and a tiny independent workers' organization, as well as students. On 19 May, martial law was imposed to no effect, and the government attempted to send troops to clear Beijing's Tiananmen Square, where demonstrators were camped, on 1920 May and 3 June. Finally, in the early hours of 4 June 1989, armed troops, armored personnel carriers, and tanks, firing on demonstrators and bystanders, managed to reach the Square. Firing continued in the city for several days and estimates of the total number killed range from 200 to 3,000. The events of 4 June sparked protests across the country, and thousands were arrested as the movement was suppressed. On 24 June, Zhao Ziyang was dismissed as General Secretary and Jiang Zemin, the mayor of Shanghai, was named in his place.

Following 4 June 1989, economic reforms were curtailed and some private enterprises closed down as the leadership launched an anticorruption drive. Ideological expression, higher education, and the news media were more tightly controlled in the ensuing years. The move toward a market oriented economy began again, with increased speed, after Deng Xiaoping made a publicized visit in the spring of 1992 to the most developed areas in southern China. China's economy became one of the most rapidly growing in the world but continued to be plagued by inflation, corruption, and a growing disparity among the provinces. With a high rate of tax evasion, state revenues were shrinking and one-third went to subsidize state enterprises. Having been at the forefront of change in the early 1980s, peasants in the early 1990s were being left behind. In 1993 and 1994, there were peasant protests and riots over receiving IOUs for their produce and over local corruption. There were workers' disputes and strikes (250,000 between 1988 and 1993) in response to low pay and poor working conditions.

Labor unrest continued into 1997 as thousands of workers in several impoverished inland provinces rioted when promises of back pay went unfulfilled. A March 1997 labor protest involving 20,000 workers in Nanchong was the largest since the Communist revolution. China's uneven economic development also led to the growth of a migrant worker class. By 2005, it was estimated that some 100150 million peasants left their homes in northern and western provinces in search of menial work along the coast. The unemployment in urban areas was 9.8% for 2004 with an overall unemployment rate of 20%; the unemployment rate does not include underemployment which also is a serious problem.

Parallel to but separate from the student and labor movements were ongoing demonstrations by ethnic minorities; there are 56 officially recognized minority groups in China. The most visible were those of the Tibetans (Buddhists), due to their international connections, but there have also been protests by other minorities, such as the Uyghurs (Muslims) in Xinjiang province. Violent Tibetan demonstrations in the fall of 1987 and spring of 1988 were forcibly suppressed, and from March 1989 to April 1990, martial law was imposed in Lhasa, Tibet. A Uyghur uprising in Xinjiang was met with force by the Chinese military in February 1997, leaving an estimated 100 ethnic Uyghur and 25 Chinese dead. But the situation in Tibet posed the most difficulty for Beijing. China's efforts to control Tibet and dilute its culture led in 1995 to the indefinite detention of the six-year-old boy chosen by the exiled Dalai Lama as his reincarnation, or Panchen Lama. Beijing selected another six-year-old and forced Tibetan leaders to accept him. According to the CCP the Panchen Lama and his family are living in 'protective custody,' however, no international organization has been able to visit the family to verify their whereabouts since he was taken in 1995.

In September 1997, the CCP's 15th National Congress elected a Central Committee, which selected the 22member Politburo. Jiang Zemin became the General Secretary of the party in addition to his title of president. Li Peng was appointed prime minister, and Zhu Rongji, deputy prime minister. During this Congress, political power was consolidated in the triumvirate, with Jiang Zemin officially taking the deceased Deng Xiaoping's position.

As the government prepared for the 50th anniversary of the proclamation of the People's Republic of China, it witnessed the return of Hong Kong (1 July 1997) and Macau (20 December 1999). Both former colonies were designated Special Administrative Regions (SAR) and Jiang stated that each SAR would continue to operate with a considerable degree of economic autonomy.

Also in 1999, Chinese nationalism increased with the US bombings of the Chinese Embassy in Belgrade, Yugoslavia in May as an outpouring of government-sanctioned anti-American demonstrations took place in Beijing. Despite rising nationalism, the political leadership felt threatened by a small but rapidly growing religious sect, the Falun Gong. On 22 July 1999, Chinese authorities banned the sect and arrested its leaders despite international human rights watch groups' criticism. The country celebrated its 50th anniversary on 1 October 1999 with a 500,000person military parade showcasing its new technological achievements in armaments.

In February and March 1996, China testfired missiles near Taiwan's two main ports, which caused the United States to send two aircraft carrier groups to the Taiwan Strait. It was the largest US naval movement in the Asia-Pacific region since the Vietnam War. The missile firings and accompanying military exercises were considered to be responses to Taiwan's presidential elections of March 1996, which President Lee Tenghui, whom China accused of supporting Taiwanese independence, won.

In the runup to Taiwanese presidential elections in March 2000, Chen Shuibian of the Democratic Progressive Party, the eventual winner, issued proindependence campaign speeches advocating "one country on each side," contradicting China's "one-country, two systems" policy. In March 2000, Zhu Rongji, the deputy prime minister, warned Taiwan and the United States that Taiwanese independence could lead to armed conflict. A Chinese newspaper also quoted a government white paper stating that war with the United States is inevitable in the future and that if the United States intervened on behalf of Taiwan, the Chinese may use nuclear weapons. Meanwhile, China began construction of military bases on the mainland across the Taiwan Strait. In 1996, China had fewer than 50 shortrange missiles within striking distance of Taiwan. In April 2002, it was estimated that China's military forces had more than 350 missiles in the region and by 2005 the number had escalated to 700.

On 1 April 2001, a US Navy EP-3 reconnaissance aircraft survived a midair collision with a Chinese F-8 fighter jet over the South China Sea. The Chinese fighter pilot was lost. The EP-3 conducted an emergency landing on Hainan Island, and the 24-member crew was detained there for 11 days in a standoff between the two countries. The United States and China blamed each other's aircraft for the crash. The EP-3 was later disassembled for transport back to the United States.

China expressed deep sympathy toward the United States following the 11 September 2001 terrorist attacks on the World Trade Center in New York and the Pentagon in Washington, DC. It has backed the Americanled war on terrorism, and cited its own problems with what it considers to be terrorist activities led by ethnic Uyghurs fighting for an independent homeland in the northwest Xinjiang province. China has detained thousands of Uyghurs since 11 September 2001. China voted in favor of UN Security Council Resolution 1441 on 8 November 2002, which required Iraq to immediately disarm itself of weapons of mass destruction (chemical, biological, and nuclear weapons), to allow UN and International Atomic Energy Agency (IAEA) arms inspectors into the country, and to comply with previous UN resolutions regarding Iraq.

On 11 December 2001, China formally became a member of the World Trade Organization, representing international recognition of China's growing economic power. Several nongovernmental organizations and individuals worldwide protested China's accession to the body, due to its record on human rights violations. Another formidable problem for China, in regards to acceptance of WTO regulations, is the lack of adherence to intellectual property rights which involves industries as different as films to computer software. Most concerning is the availability of counterfeit medicine; thousands of Chinese are reported to have died from the ill effects of fake medicine. WTO regulations forbid counterfeiting although this has not yet affected China's membership in the organization.

In November 2002, China and the ten members of ASEAN signed an accord to resolve any conflicts over the Spratly Islands without armed force. The Spratlys are claimed by China, Taiwan, Brunei, Malaysia, the Philippines and Vietnam, and are home to some of the world's busiest shipping lanes; they are also believed to be rich in oil and natural gas. Signatories to the accord agreed to cease further occupation of the islands, to help anyone in distress in the area, to exchange views with one another on defense issues, and to give advance warning of military exercises.

At the 16th Communist Party Congress held 814 November 2002, what is considered to be a "fourth generation" of Chinese leaders emerged, led by Hu Jintao, Jiang Zemin's replacement as Communist Party General Secretary. In addition to Hu, the other eight members of the 9-member Politburo Standing Committee were new appointees. In 2005 Hu advised the CCP not to focus solely on economic growth and instead integrate social and environmental factors into decision making. Hu also took a number of high profile trips to the poorer areas of China as well as made the minutes of the Politburo Standing Committee meetings public.


On 4 December 1982, China adopted its fourth constitution since 1949, succeeding those of 1954, 1975, and 1978. In theory, the highest organ of state power is the National People's Congress (NPC), in which legislative power is vested. The constitution stipulates, however, that the congress is to function under the direction of the Chinese Communist Party, headed by the general secretary. The NPC meets annually for about two weeks to review major new policy directions, to adopt new laws, and to approve the national budget submitted to it by the state council. Each congress consists of more than 3,000 deputies elected indirectly for a term of five years. The NPC elects a standing committee as its permanent working organ between sessions. The state council, the executive organ of the NPC, consists of a premier (the head of government), five vicepremiers, ministers, and heads of other major government agencies. The state council issues administrative regulations and both formulates and executes economic policy and the state budget. The 1982 constitution restored the largely ceremonial post of state chairman, or president, a position abolished by Mao Zedong in 1968. The eighth National People's Congress in March 1993 elected Jiang Zemin as president and reelected Li Peng, first elected in 1988, to a second five-year term as premier. At the ninth National People's Congress in March 1998, Li Peng was elected chairman of the NPC standing committee, and Zhu Rongji became premier. Since the 1980s, the NPC has slowly increased its function as a locus for discussion of issues instead of merely being a rubber stamp. The 1992 debate on the Yangtze River (Chang Jiang) dam project is an example of this.

The death of Communist Party patriarch Deng Xiaoping in February 1997 brought to a head the infighting between Jiang Zemin, Li Peng, and Zhu Rongji. At the 15th National People's Congress, Jiang was chosen to succeed Deng Xiaoping. The political leadership settled into one of shared leadership. At the 16th party congress held in November 2002, Jiang Zemin, Li Peng and Zhu Rongji resigned their posts in the Politburo standing committee, and the three gave up their positions as president and general secretary, chairman of the NPC standing committee, and premier, respectively, at the 10th NPC held in March 2003. Hu Jintao was named president (he had already been named general secretary of the Communist Party) and Wen Jiabao was named premier.

Democratic elections are held at the village level, but are forbidden above that level. The one lone opposition party, China Democratic Party, is acknowledged by the CCP, but it exists in theory only. Corruption, embezzlement, and bribery are all aspects of contemporary Chinese political life. The government owns all forms of media, including television, radio stations, and most newspapers. However, access to the Internet is widespread, especially in large cities and Western news outlets can be reached.


The Chinese Communist Party (CCP) has been the ruling political organization in China since 1949. Eight other minor parties have existed since 1949 as members of a United Front, but their existence has been purely nominal. The party, with 55 million members (1999 estimate), plays a decisive role in formulating broad and detailed government policies and supervising their implementation at all levels of administration. Party supervision is maintained not only through placement of CCP members in key government posts, but also through specialized organs of the central committee of the CCP, which focus their attention on given subjects (e.g., propaganda or rural work). The CCP also forms branches within individual government units, as well as in factories, communes, schools, shops, neighborhoods, and military units.

Theoretically, the highest organ of party power is the National Party Congress, which usually meets once every five years. At each party congress a central committee is elected to oversee party affairs between sessions. The central committee (356 members198 full members and 158 alternate members) meets annually in a plenary session to elect a political bureau, or Politburo (with 24 members as of 2006), and its standing committee, the party's most powerful organ (9 members in 2006). Directing day-to-day party affairs at the highest level is the secretariat, headed by Hu Jintao as general secretary since November 2002. In 1982, the post of party chairman, formerly the most powerful in the nation, was abolished; the title had been held by Mao Zedong until his death in 1976, by Hua Guofeng from 1976 until his ouster in 1981, and by Hu Yaobang thereafter.

Deng Xiaoping, China's acknowledged political leader since 1977, retired from the central committee in 1987, retired as chairperson of the party's central military commission in 1989, and retired as chairperson of the state's central military commission, his last formal position, in 1990. A new CCP charter adopted at the 12th Communist Party congress in September 1982 forbids "all forms of personality cult" and, in an implicit criticism of Mao, decrees that "no leaders are allowed to practice arbitrary individual rule or place themselves above the party organization." A major purge of party members in the early 1980s sought to exclude elements opposed to Deng's modernization policies. The 13th party congress, convened in October 1987, affirmed Deng's reform policies and the drive for a younger leadership.

In the wake of the June Fourth massacre in 1989, Deng Xiaoping declared that Jiang Zemin, former mayor of Shanghai, should be the "core" of collective leadership after Deng's death. The Politburo announced prohibitions, largely ineffectual, against some forms of party privileges and nepotism, the corruption that had sparked the 1989 protests. The 14th party congress in October 1992 removed Yang Shangkun, state president (198893), from the Politburo, weakening the power of his clique in the military. In 1993, the National People's Congress reelected Jiang Zemin, already party general secretary, as chairperson of the central military commission and elected him as state president. This was the first time since the late 1970s that top, formal positions in the party, government, and military were concentrated in one leader's hands.

After the 15th Communist Party congress, a highly publicized anticorruption drive resulted in the execution of several prominent cases. In addition, Jiang began to remove the Communist Party from state-owned enterprises through an aggressive privatization strategy. In 2000, Jiang introduced a theory revamping the image of the Communist Party. Called the "three represents," it was written into the party constitution at the 16th party congress in November 2002. Seen as a reorientation of the party away from its sole mission to serve the proletariat, the theory of the "three represents" emphasizes the importance of the middle class, stating that the party will represent not only workers and peasants, but the "advanced productive forces, advanced culture, and the broad masses of the people." Jiang resigned as chairman of the Central Military Commission in September 2004, his last official post.

Hu, who became state president at the National People's Congress in March 2003, was a protégé of Deng Xiaoping, chosen as the "core" of the younger generation. Seen as moderate and cautious, he was expected to proceed with Jiang's slow but steady policy of economic liberalization, and perhaps to introduce some administrative and political reform. Soon into his tenure, the SARS (severe acute respiratory syndrome) crisis broke out and Hu was criticized for not taking action quickly enough. Hu also chose to move China away from a policy of favoring rapid economic growth and toward a more balanced view of growth, most notably by establishing a "green" GDP, taking into consideration the degradation of both natural resources and the environment.


The People's Republic of China (PRC) consists of 22 provinces (sheng the PRC claims Taiwan as its 23rd province), five autonomous regions (zizhiqu ), and four centrally administered municipalities (zhixiashi ). Provinces and autonomous regions, in turn, are divided into "special districts," counties (xian ), and cities (shi ) under provincial jurisdiction, as well as into autonomous minor regions (zhou ) and autonomous counties (zizhixian ), where non-Han Chinese minority groups reside. Counties, autonomous counties, and autonomous zhou are divided into townships (xiang ), autonomous townships (for small minority groups), towns, and rural communes. Hong Kong and Macau are designated as Special Administrative Regions (SAR).

From 195882, local administrative authority formerly held by the xiang was transferred to the communes and their local people's councils. In 1988, Hainan Island, formerly part of Guangdong, was made China's newest province. The 1982 constitution returned local administrative control to the xiangs as the communes began to be disbanded. Local revolutionary committees, which replaced the local people's councils during the Cultural Revolution and under the 1975 constitution, were abolished in 1980. The restored local people's councils have the power to formulate local laws and regulations. The local people's governments are administrative organs of the state and report to the State Council.

In the 1980s an emphasis was placed on recruiting and promoting younger and better-educated officials in local party and government posts. Many provinces along the coastal regions have adopted more decentralized forms of administration while interior provinces remain highly beholden to the central party. Local elections involving multiple candidates have taken place, especially in the more urbanized coastal areas. Elections began on a trial basis in 1987, and in over 730,000 villages, peasants were scheduled to go to the polls every three years to elect local committees.


China's legal system, instituted after the establishment of the PRC in 1949, is largely based on that of the former USSR. However, after 1957, Mao Zedong's government consistently circumvented the system in its campaign to purge the country of rightist elements and "counter-revolutionaries." The Ministry of Justice was closed down in 1959, not to reopen until 1979, and the excesses of the Cultural Revolution wrought havoc on legal institutions and procedures. Efforts to reestablish a credible legal system resumed in 1977 (when there were no lawyers in China), as party moderates came to power. These efforts were accelerated in the early 1980s as China sought to provide the legal protection required by foreign investors.

The highest judicial organ is the Supreme People's Court, which, with the Supreme People's Procuratorates, supervises the administration of justice in the basic people's courts and people's tribunals (courts of first instance), intermediate people's courts, and higher people's courts. The judiciary is independent but subject to the Communist Party's policy guidance. The legal profession was still in an incipient stage of development in the mid-1980s. Over 25 law departments at universities and four special schools for training legal officials were in operation in 1987, when China had 26,000 lawyers. By 2000, there were 112,000 lawyers with plans to increase this number to 200,000 by 2010.

A major anticrime campaign during the autumn of 1983 resulted in public executions at the rate of at least 200 a month; capital punishment may be meted out for 65 offenses, including embezzlement and theft. Under the Chinese criminal codes, as revised in 1979, local committees may sentence "hoodlums" to terms in labor camps of up to four years, in proceedings that grant the suspect no apparent opportunity for defense or appeal. Government records for 1990 indicated that nearly 870,000 persons were assigned to such camps during the 1980s. In 2003, there were 250,000 people reported to be incarcerated in these camps. China does not permit international observation of prisons or labor camps. Since 1990, sentences to labor camps may be judicially challenged under the Administrative Procedures Law. In practice the review of such a sentence is rarely sought.

Due process rights are afforded in the 1982 constitution, but they have limited practical import. The Criminal Procedural Law requires public trials, with an exception for cases involving state secrets, juveniles, or personal privacy. Cases are rapidly processed and conviction rates are about 99%. The 1976 Criminal Code contained 26 crimes punishable by death. A 1995 law raised this number to 65, including financial crimes such as passing fake negotiable notes and letters of credit, and illegal "pooling" of funds. Appeal is possible but with little chance of success. However in 1996, the National Peoples' Congress passed new legislation to reform criminal procedure and the legal profession. The new legislation recognized for the first time that lawyers represent their clients, not the state. Under the new system lawyers may establish private law firms. Defendants may also ask near relatives or guardians to provide additional defense.

Amendments to the criminal procedure became effective in January 1997. The amendments state that suspects may retain a lawyer after being first interrogated by an investigative organ. Attorneys may conduct limited investigation, call defense witnesses, and argue their client's cases in open court. According to the amendments, defendants will enjoy a presumption of innocence.

Beginning in 1998, the government began a comprehensive "internal shakeup" of the judiciary, resulting in the punishment or dismissal of over 4,200 judicial branch employees. In January 1999, the former head of the Anticorruption Bureau of the Supreme People's Procuratorate was dismissed for corruption.

China is party to many international organizations such as the UN, the ICC, ASEAN, and most recently the World Trade Organization. China's entry into the World Trade Organization (WTO) in December 2001 has caused China to undertake a full-scale revision of its laws and regulations in order to adhere to WTO rules. In opening its market up to sectors involving finance, insurance, telecommunications, commerce, transportation, construction, tourism, and other services, China will require its judicial system to perform in accordance with international standards. As of 2003, China's lawyers were adhering to a new policy to wear black suits in court, in an attempt to promote professionalism and as a step toward integration with international practices.

Independent trade unions are illegal. Striking is also illegal although there have been increased use of strikes as a method of bargaining with mixed results. Sometimes leaders are arrested but other times not.

The oft misunderstood "one-child policy" has been clarified in recent years. The Population and Family Planning Law requires couples to employ birth control measures and technically limits the couple to only one child. This is well enforced in the cities, but less so in more rural areas. However, there are many avenues through which couples may have a second child. Two examples are as follows: ethnic minorities and farming families are able to have more than one child and couples in urban areas that are both the product of a one child family are entitled to produce a second child.

In March 2005, the State Council passed the Regulation on Religious Affairs which human rights groups believe sharply curtailed both freedom of religious belief and freedom to express one's belief. However, Chinese officials claimed that the regulation safeguards "normal" religious activities, places of religious worship, and religious believers. At the same time religious believers are expected to abide by the government's laws. Religious activities that are banned if deemed "nonnormal" include publishing and distributing texts, selecting leaders, raising funds and managing finances, organizing training, inviting guests, independently scheduling meetings and choosing venues, and communicating freely with other organizations.


In 2005, China's active military forces totaled 2,255,000 personnel, with around 800,000 reservists. China has been modernizing its military at a rapid pace even as it reduces personnel. The Army had 1,600,000 personnel, whose major weaponry included more than 7,580 main battle tanks, 1,000 light tanks, 1,000 armored infantry fighting vehicles, over 3,500 armored personnel carriers, and over 17,700 artillery pieces (14,000 towed). The Army's air arm included 31 attack helicopters and eight assault helicopters. The Army is deployed over seven regions. The Chinese Navy in 2005 consisted of an estimated 255,000 personnel, including an estimated 10,000 Marines and a naval aviation arm of 26,000 personnel. Major naval units include 68 tactical submarines including 5 nuclear-powered attack submarines (SSNs), 21 destroyers, 42 frigates, 331 patrol/coastal craft, 130 mine warfare vessels, and various types of amphibious craft and logistics/support vesels. The Navy's aviation arm had 436 combat capable aircraft including 68 bombers, 74 fighters, and 274 fighter ground attack aircraft. Chinese naval forces are deployed into three fleets. The air-force had a total of 400,000 personnel including 210,000 assigned to air defense and 40,000 assigned to China's strategic forces. The Air Force's arsenal had 2,643 combat capable aircraft, including up to 222 bombers, 1,252 fighters, and 1,169 fighter ground attack aircraft.

Chinese military strength also includes a nuclear capability. It is suspected that China possesses 410 strategic and nonstrategic nuclear weapons. There are more than 100,000 personnel assigned to the nation's Strategic Missile Forces.

China's paramilitary forces in 2005 had about 1.5 million active personnel, which made up the People's Armed Police; these forces are under the Ministry of Public Security. In addition, there are over 100,000 border defense and 69,000 communications personnel. There are also an estimated 800,000 Internal Security personnel. The Chinese are involved in UN peacekeeping missions in 10 countries or regions around the world.

China's defense budget for 2005 was reported to be $29.5 billion. However, that figure may be misleading. In 2004, the defense budget totaled $25 billion, but actual defense spending was estimated at $62.5 billion.


China has held a seat in the United Nations since 24 October 1945. After the Communist victory in 1949, UN representation was exercised by the Republic of China (ROC) government on Taiwan until November 1971, when the PRC replaced the ROC in the world organization and its member agencies. As of January 1988, the PRC belonged to ESCAP and several nonregional specialized agencies. The PRC displaced the ROC in the World Bank and IMF in 1980. China acceded to WTO membership on 11 December 2001. China also participates in APEC, the African Development Bank, the Asian Development Bank, and G-77. The country is an observer in the OAS and the Latin American Integration Association (LAIA), a nonregional member of the Caribbean Development Bank, and a dialogue partner in ASEAN.

The United States extended recognition to China on 15 December 1978 and resumed full diplomatic relations as of 1 January 1979. Continued US links with Taiwan in the 1980s, however, remained an irritant in USPRC relations. The future of Hong Kong, for which part of the lease (the New Territories) expired in 1997, dominated UK-Chinese discussions, and in 1984, an agreement to give Hong Kong back to China in 1997 was formally signed. Relations with the USSR, severed during the Sino-Soviet split in the 1960s, improved somewhat in the 1980s but remained strained over China's support of anti-Soviet forces in Cambodia and Afghanistan. By the end of 1985, more than 130 nations had extended full diplomatic recognition to the PRC, with a parallel drop to about 10 in the number recognizing Taiwan's government. By the mid-1980s, the PRC had achieved normal relations with most of its Asian neighbors, including Japan, India, Pakistan, Malaysia, Thailand, and Singapore.

Relations with Vietnam, Cambodia, and Laos (all allies of the former USSR) were tense after the late 1970s, but improved in the 1990s. At the Eighth Summit of the Association of Southeast Asia Nations held in November 2002, China forgave the debts of Vietnam, Laos, Myanmar, and Cambodia. Following the collapse of the Soviet Union in late 1991, China established diplomatic relations with the republics of the former Soviet Union. China normalized relations with the Republic of Korea in 1992. At an "ASEAN+3" (China, Japan, and the Republic of Korea) summit meeting held in November 2000, the three countries agreed to promote human and cultural exchanges between them. As of January 2003, a proposed ASEAN-China Free Trade Area was being planned, to begin in 2010.

China is part of the Nuclear Suppliers Group (London Group), the Zangger Committee, and the Organization for the Prohibition of Chemical Weapons and participates as an observer in the Nonaligned Movement. In 2001, China joined with Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan to establish the Shanghai Cooperation Organization (SCO), a cooperative security partnership focused on combating terrorism, extremism, and separatism. China is also a member of the Permanent Court of Arbitration.

In environmental cooperation, China is part of the Antarctic Treaty, the Basel Convention, Conventions on Biological Diversity and Whaling, Ramsar, CITES, the London Convention, International Tropical Timber Agreements, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on the Law of the Sea, Climate Change, and Desertification.


Traditional China was predominantly agricultural. Adhering to farming patterns developed over a score of centuries, China could sustain a harsh level of self-sufficiency, given surcease from natural calamities. For almost three decades prior to 1949, the incessant ravages of civil disorder, foreign (principally Japanese) invasion, and gross economic neglect virtually decimated China's frail abilities to sustain itself. The first task of the new PRC government thus was to restore the flow of natural resources to prewar levels. By the early 1950s, the government had succeeded in halting massive starvation. Almost all means of production and distribution were brought under state control, and vast parcels of land were redistributed to the peasantry. During 195357, China's first five-year plan stressed heavy industry. Economic development was aided by imports of machinery and other industrial equipment from the former USSR and East European countries. In return, China exported agricultural produce to them. A major geological prospecting drive resulted in the discovery of mineral deposits that provided a major thrust toward industrialization.

The Great Leap Forward of 195859 initially produced sharp gains in industry and agriculture, but the zeal for increased quotas quickly resulted in undue strain on resources and quality. The Great Leap was followed by "three bitter years" of economic crisis brought on by bad harvests and the economic dislocation of the previous period. By 1961, the GNP had fallen to an estimated $81 billion, roughly the level reached in 1955. By 1965, however, a readjustment of expectations, coupled with a careful program of industrial investment, helped the economy to recover. China's trade patterns, meanwhile, had shifted radically away from the USSR and toward Japan and Western Europe.

During the late 1960s, in the Cultural Revolution period, long-range central economic planning was abandoned in favor of policies promoting local self-reliance. Self-sufficiency in grain production was particularly stressed. The negative impact of this emphasis on agricultural development, together with the turmoil of the Cultural Revolution, resulted in a drop in industrial production of 1020%, while agricultural output, aided by good weather, improved only marginally.

Centralized planning resumed in 1970 with Zhou Enlai's announcement of key goals for the fourth five-year plan (197175), including an increase in grain output. The fifth five-year plan (197680), disrupted during the political upheaval that followed the deaths of Mao and Zhou in 1976, was restructured in 1978 to embody the Four Modernizations, with the use of Western technology as necessary. At the same time, a 10-year plan (197585) calling for the traditional expansion of agriculture and heavy industry was revamped to emphasize the growth of light industries and the accelerated development of industrial raw materials. Trade with the United States expanded after full diplomatic relations were restored in 1979, and four special economic zones were established as centers for foreign investment. The sixth five-year plan (198185), adopted in 1982, reflected this new pragmatic approach to economic development by emphasizing agriculture, light industry, energy, and improved transportation facilities. During the 1980s, the Chinese economy underwent a major restructuring under the leadership of Zhao Ziyang. Rural reforms launched in 1979, which linked remuneration to output and centered on household responsibility, had a profound and beneficial impact on the rural economy, and output and income rose to record levels for rural residents. The commune system was disbanded in 198384 and replaced by a system of townships, and the household or family became the main unit of rural production. In the wake of the success of these rural reforms, the CCP Central Committee published "A Decision on the Reform of the Economic Structure" in October 1984, with the goal of totally overhauling the national economy and bringing urban industrial organization in line with rural practice. The main points of the decision were that all urban enterprises would be responsible for their own profits and losses, managers would have greater decisionmaking authority, and national and local governments would relinquish direct control over enterprises and assume a regulatory and supervisory position. Remuneration would be based on productivity, subsidies would be abolished, wages and prices would find their own level, and private and collective enterprises would be encouraged.

The seventh five-year plan (198690) made reform its paramount concern. The reforms put forth in 1984 and firmly anchored in the 1988 Enterprise Law proved remarkably successful, leading to much higher rates of industrial and general economic growth than previously expected. Real GNP grew by an average of 9.6% annually between 197988, reaching 11% in 1988. By this time, however, indicators of a seriously overheated economy were also clearly emerging; inflation accelerated to 20.7% and shortages in raw material and energy supply, as well as transportation capacity, rapidly worsened. Growth fell to only 4% in 1989 before austerity measures initiated by the government brought inflation to below 10% and eventually restored growth to double digit levels.

Infrastructure development was given special priority in the China's eighth plan covering 199195. During this period economic growth accelerated, averaging more than 10% annually, giving China one of the fastest growing economies in the world. With growth came rising inflation and infrastructural bottlenecks, which highlighted the need for further improvements in macroeconomic management. The 19962000 economic plan, which called for economic growth of 910% through 2000, reaffirmed the importance of the private sector and opening the economy to the outside world. To attract and maintain foreign investors China needed to reform its legal and financial institutions. Despite the government's endorsement of market reforms, the plan continued to affirm the role of state-owned enterprises, which still accounted for more than one-third of total industrial output. In 1996, China committed two-thirds of fixed-asset investment to state-owned enterprises even though most were heavily in debt. By propping up the state sector China risked continuing budget deficits and the higher debt service that came with the borrowing necessary to pay for those expenditures. Investment in the state sector accounted for nearly all of the new investment in 1998, in the form of a special infrastructure-spending package forwarded by the government, supporting a GDP growth rate of 7% in 1999. Economic growth, which slowed during the late 1990s, recovered after China gained entrance to the WTO in 2002.

International analysts warn that reports of the GDP issued by the government may be suspect, pointing to historical inconsistencies between government-reported GDP statistics and those reported by other economic analysts. Mid-way through 2005, the Economist Intelligence Unit's estimates of a GDP increase of 9.3% appeared to be accurate. Also in that year, draft proposals for the eleventh five-year plan specified several objectives, including the promotion of energy efficiency, doubling percapita GDP, and encouraging "harmonious development."


The US Central Intelligence Agency (CIA) reports that in 2002 China's gross domestic product (GDP) was estimated at $6 trillion. The per capita GDP was estimated at $4,600. The annual growth rate of GDP was estimated at 8%. The average inflation rate in 2005 was -0.8%. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange. It was estimated that agriculture accounted for 18% of GDP, industry 49%, and services 33%.

According to the United Nations, in 2000 remittances from citizens working abroad totaled $556 million, accounting for approximately 0.1% of GDP. Worker remittances in 2001 totaled $912 million. Foreign aid receipts amounted to about $1 per capita.

The World Bank reports that in 2001 per capita household consumption (in constant 1995 US dollars) was $399. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the same period private consumption grew at an annual rate of 5%. The richest 10% of the population accounted for approximately 30.4% of household consumption and the poorest 10% approximately 2.4%. It was estimated that in 2001 about 10% of the population had incomes below the poverty line.


In 2005, China's labor force was estimated at 791.4 million. As of 2003, an estimated 49% of civilian employment was in agriculture, 22% in industry, and 29% in services. Although unemployment in urban areas was officially put at 4.2% in 2004, there was substantial unemployment and underemployment in rural areas. In 2003, it was estimated by an official Chinese journal that unemployment overall, which included the country's rural areas, was 20%.

Although workers in China are legally allowed the freedom of association, as of 2005, in reality they cannot organize or join a union of their own choosing. Instead, workers are represented by the AllChina Federation of Trade Unions (ACFTU), which is controlled by the Chinese Communist Party (CCP) and is headed by a top party official. The ACFTU controls all union activities and organizations, including those at the enterprise level. Independent unions are illegal. As of the end of 2004, it was reported by the ACFTU that its membership totaled 136.9 million, or 53% of the country's 264 million workers in urban areas. A total of 38% of all corporate units and 25% of private firms in China are thought to be registered with the ACFTU. Union officials working outside the official confines of the ACFTU have reported being harassed and detained by authorities.

Unlike their urban counterparts, China's estimated 540 million rural labor force (including 300 million primary sector workers) were unorganized, with no similar organization to represent the nation's farmers. In addition, only a small number of the 130 million rural residents that work in village and township enterprises were unionized.

While collective bargaining for workers in all enterprise types is legal, in reality it falls way short of international standards.

Although forced and compulsory labor is prohibited by law, it was a serious problem in penal institutions. Those held in reeducation-through-labor facilities were frequently forced to work often with no or little remuneration. In some cases they were contracted to nonprison enterprises to the profit of the facilities and their respective managers.

There is a minimum working age of 16, but compliance with this is irregular, especially in the burgeoning and unregulated private economy. The huge surplus of adult labor reduces the incentive to employ children. Children are most often found working on farms in poorer, isolated areas. Those between the ages of 16 and 18 are considered "juvenile workers" and were prohibited from certain types of physical work, including laboring in mines. The minimum wage varies depending on the area of the country. There is no set national minimum wage rate. It generally provides a decent standard of living for a family. The Labor Law provides that the standard workweek is 40 hours, with a mandatory 24-hour rest period weekly.


With some 50% of the economically active population engaged in farming, agriculture forms the foundation of China's economy. Limitations in topography, soil, and climate, however, have restricted cultivation to only about 15% of the total land area. Despite recent advancesgrain crops totaling an estimated 377 million tons were produced in 2003 (18.2% of the world's total)the enormous pressures of feeding and clothing China's vast and growing population remain among the country's most compelling concerns. From 1980 to 1990, agricultural output grew at an average annual rate of 5.9%, above the population growth rate and the first sustained expansion of agriculture since 1966; output increased at an average annual rate of 4.1% from 1990 to 2000. By 2003, agricultural production was up another 9% from 19992001.

The PRC government expropriated large landholdings in a land reform carried out in 195152, redistributing the land among poor peasants. By the end of 1954, 11.5% of all peasant households had been collectivized; by 1955, 65%; and by 1965, 99%. The Chinese collective farms had virtually no mechanical equipment, but the peasants pooled their labor in various projects, such as water management, which were beyond the capacity of individual peasants. In 1958, the collective farms were merged into larger units as people's communes. The communes were concerned not only with agricultural output but also with subsidiary farm activities, such as light industry and handicrafts, usually produced for local consumption.

Far-reaching changes in the organization of communes took place during 196162. Formerly, the production brigade (the major division of a commune), of which there were about 719,438 in 1982, was regarded as the commune's "basic accounting unit." In 1962, however, the production team (the subdivision of a commune) became the commune's basic organizational element. The average production team consisted of 33 households and cultivated about eight hectares (20 acres). Production teams functioned almost autonomously, making basic decisions on production and distribution of income, while the commune mainly exercised the functions of a township government. Households, the final link in the system, were permitted the use of private plots, which made up about 5% of the arable land assigned to a team. In the early 1980s, these private holdings accounted for 19% of total agricultural output and the bulk of the country's production of vegetables, fruits, hogs, and poultry. Under the "responsibility system," which was introduced in 1978 and by 1983 was operating in 90% of rural China, all production in excess of assigned levels could be sold on the open market to yield a profit for individual production teams. In 1982, in addition to the rural communes, which provided most of China's agricultural output, there were 2,078 state farms working approximately 4.5% of all farmland. These farms, under the Ministry of State Farms and Reclamation, generally served as commodity production centers and as research units for the improvement of crop and livestock yields.

In 198384, a major reform of the agricultural system was launched. The 50,000 communes were disbanded and replaced by 92,000 townships, and the six million production brigades were broken up. Production decisions were now made by the household, which sets production targets in contracts with the government; households could sell their surpluses in the open market for cash. Crop diversification was encouraged. By the late 1980s, 60% of agricultural output was free of state controls, and most of China's peasants practiced the household responsibility system.

Grains are the chief crop, accounting for 70% of the total value of crop output and occupying 80% of all land under cultivation. Shandong, Jiangsu, and Henan together account for about 25% of the total crop value.

The main food crops are rice, wheat, and corn, followed by kaoliang (a type of sorghum), millet, potatoes, and soybeans. China is the world's leading producer of rice, with production increasing from 106.6 million tons in 1970 to an estimated 177.4 million tons (29% of the world's total) in 2004. Over 90% of all rice is produced in southern China, with two (and in the far south, three) crops being grown each year where irrigation facilities permit. Early rice is planted in April and harvested in July; single-crop rice is planted in May and harvested in September; and late double-cropped rice is planted in June and harvested in October. The total wheat crop in 2004 amounted to 91.3 million tons, more than double the 1970 output. Wheat is cultivated throughout the country, often as a dry-season crop in the rice-growing south, with specialized production centered in the Yangtze Valley and North China Plain. Output of other coarse grains, including corn in the southwest and drought-tolerant millet and kaoliang in northern and north-eastern China, exceeded 140.6 million tons in 2004. Production of roots and tubers, including sweet potatoes grown as a second crop in areas south of the Yellow River (Huang He) and white potatoes in cooler areas north of the Great Wall, totaled 181.4 million tons in 2004. In 2004, China's agricultural exports (including fish and forestry products) were valued at $28 billion, with 24% shipped from the port of Qingdao, 13% from Dalian, and 13% from Shanghai.

Industrial crops occupy only 89% of the cultivated areas. Among the most important are cotton (the chief raw material for the important textile industry), various oil-bearing crops, sugar, tobacco, silk, tea, and rubber. Cotton output totaled 6.3 million tons in 2004, up from 5.6 million tons in 1991, with production concentrated along the middle and lower reaches of the Yangtze River and on the plains of the Yellow and Huai rivers. Oilseed output in 2004 was derived from a diverse assortment of widely grown industrial crops, including sunflower seeds (1,750,000 tons) and rapeseed (13,040,000 tons). Other oilseed products included 250,000 tons of castor beans, 650,000 tons of sesame seeds, and 460,000 tons of linseed in 2004. Sugar production reached 90.6 million tons in 2004; an estimated 84% of all sugar is derived from sugarcane grown in the south, and the remaining 16% from sugar beets grown in the north and northeast. Production of tea, also an important traditional export, increased from 120,000 tons in 1956 to 861,000 tons in 2004 (26% of world production), with most of the tea grown in hilly regions of the south and southeast. Most tobacco is produced as a sideline by commune householders working private plots; output was 2.4 million tons in 2004 (37% of world production). Most natural rubber is produced on specialized state farms; production totaled 600,000 tons in 2004.

The irrigated area is estimated to have increased from about 15.3 million hectares (37.8 million acres) in 1950 to 55 million hectares (137 million acres) in 1998, making China the world's leader in irrigated land. The expansion of fertilizer production is viewed as a key to major growth in the agricultural sector. Toward this end, China during 197274 contracted for the purchase of 13 large urea plants from Japan, the United States, and Western Europe. China's use of chemical fertilizers increased from 184 kg per hectares in 1984 to about 258 kg per hectares in 2002. Farm machinery in 2002 included 926,031 tractors and 197,000 combines.


Except in outlying areas, nearly all of China's arable land is devoted to crops. Most agricultural units, however, also support the raising of large quantities of hogs and poultry. Natural grasslands for the grazing of sheep and cattle occupy 4 million sq km (1.5 million sq mi), or 43% of China's total area; the four major pasture areas are Xinjiang, Gansu, Qinghai, and Inner Mongolia. In an effort to improve these pastures, 303 million hectares (749 million acres) were planted with improved forage seed strains from 1976 to 1980. Nonetheless, animal husbandry continues to be the weak link in the agricultural economy.

China leads the world in swine production, the total number of hogs reaching about 472.9 million as of 2004 (55% of the world's total), as compared with 89.8 million in 1952. The provinces with the largest hog populations are Sichuan, Hunan, Henan, and Shandong. Pig raising, often pursued as a private sideline by peasants, is the fastest-growing sector of the livestock industry, and hogs and pork products are becoming valuable export earners.

The number of sheep expanded from 36.9 million in 1952 to nearly 155.7 million in 2004. Most sheep are raised by pastoral herders, mostly the ethnic minorities, in the semiarid lands of Xinjiang, Inner Mongolia, Gansu, and Sichuan (Szechuan). Goats, also raised primarily in semiarid areas but increasingly promoted throughout China as a profitable household sideline for milk and dairy production, increased in number from 24.9 million in 1952 to 183.4 million in 2004. Provinces with the greatest numbers of sheep and goats include Shandong, Inner Mongolia, Xinjiang, and Itenan. In 2004 there were also 128 million head of cattle and buffalo, up from 66.6 million in 1965; 7.9 million horses (792,000 in 1965); and 265,000 camels (448,000). Chickens and ducks are raised throughout China on private plots and constitute, together with fish and pork, China's chief sources of dietary protein. The provinces with the largest cattle populations are Itenan, Shandong, Sichuan, and Guangxi. China produced 306,000 tons of honey in 2004, more than any other nation. China also led the world in silk production in 2004, at some 95,000 tons (75% of world production).

In 2004, China produced 74.4 million tons of meat, ranking first in the world with 27% of the total. Some 14.7 million tons consisted of poultry, second only to the United States and accounting for 18% of world production. Pork production in 2005 amounted to 50 million tons (first in the world), equivalent to 49% of global production.


With a coastline of some 6,500 km (4,000 mi) adjoining a broad continental shelf, China has excellent coastal fisheries. A vast number of inland lakes and ponds, covering a total area of about 300,000 sq km (116,000 sq mi), are also used for fish culture, and a 30 km (19 mi) section of the Yangtze below Gezhouba Dam at Yichang is a designated sturgeon preserve. The principal marine fisheries are located on the coast of southern and southeastern China, in the provinces of Guangdong, Fujian, and Zhejiang. The total catch in 2003 was 16,755,653 tons, the highest in the world and 18% of global production. China typically accounts for about 10% of the world's catch, but per capita Chinese consumption of fish amounts to only 9.3 kg (20.5 lb) per year (live weight equivalent), one of the lowest amounts in Asia. China's leading aquacultural products are carp, kelp, oysters, and scallops. Chinese aquaculture produced 28,892,005 tons of fish products in 2003, valued at $31.4 billion, 68% of world aquacultural production by weight and 52% by value.

Exports of fisheries products in 2003 accounted for 8.3% of the commodity's world exports, and were valued at over $5.2 billion (second after Thailand). Regulations for the protection of aquatic resources were enacted in 1979.


Forest cover has grown from 8.6% of the land base in 1949 to over 18.2% in 2005. Mature stands are decreasing, however, while the share of plantation and commercial forests continues to rise in response to government policies. Coniferous forest accounts for 47%; deciduous, 50%; and mixed, 3%. Most of the forests are in remote regions, however, and lack of transportation limits exploitation. China has three major forest areas: the northeast (Heilongjiang, Jilin, and Inner Mongolia); the southwest (Sichuan and Yunnan); and the southeast (Guangdong, Guangxi, Fujian, Jiangxi, and Hainan). Fujian, Zhejiang, Anhui, and Guangdong together account for about 30% of the total value of the forestry sector. Coniferous stands, which yield the most valuable commercial timber, are found mainly in the northeast and adjoining parts of Inner Mongolia. Deciduous trees are felled in Sichuan and Yunnan. Between 1990 and 1995, however, the northeast's share of production fell from 38% to 30%, as production shifted from state-owned forests in the north to plantation forests in the south. While China is a major producer of softwood logs and lumber, virtually all of its production is domestically consumed. Paper production, which has benefited from the substitution of rice-straw and other non-wood materials for wood pulp, nearly tripled during the 1980s. Special forestry products originating in southwestern China include tung oil, cassia oil, and aniseed oil. Wood imports can vary widely from year to year. China is the largest timber importer in the worldimports of timber and related products reached $17 billion in 2003. China's domestic industrial round-wood production is divided into two partsstate quota production accounting for about 50 million cu m, and production from illegal over-quota logging, which contributes an additional 40 million cu m. About 60% of state quota timber production comes from plantations. Private mills dominate China's wood processing sector. There are more than 200,000 mills in China (located mostly in Hebei, Shandong, Jiangsu, Zhejiang, Guangdong, and Fujian), of which more than 90% are private.

Deforestation has been a persistent and serious problem in China, leading to massive erosion and desertification. The government has, from the start of its first five-year plan in 1953, given high priority to campaigns for afforestation. By 1980, 26 million hectares (64 million acres) of new forests had been planted, and during the 1980s, afforestation proceeded at the rate of 4.55 million hectares (11.24 million acres) per year. However, cutting of trees for fuel continued in rural areas, and many of the trees planted as part of afforestation efforts were lost because of neglect after planting. During 19902000, the forested area grew by an annual average of 1.2%. In its tenth five-year plan commencing in January 2001, the Ministry of Forestry set the annual allowable timber cut at 223.1 million cu m (7.88 billion cu ft), however illegal logging remains a considerable problem, with annual logging exceeding the quota by 75.54 million cu m (2.67 billion cu ft), or 34%.


China produced more than 70% of the world's tungsten, was the largest producer and exporter of rare earths, the largest producer of cement, tin, and steel, and a world leader in the production of antimony. Intensive geologic exploration has yielded greatly expanded mineral reserves. This increase in known subsurface resources was reflected in production rises for China's most important mineral productscoal, petroleum, iron ore, copper, lead, zinc, tungsten, mercury, antimony, tin, molybdenum, barite, fluorspar, magnesite, and rare earths. In 2000, China produced a total of 7.51 million tons of 10 nonferrous metals, 14.6% more than in 1999; production in all 10 metals increased. The production of iron and steel was China's leading industry in 2002, coal production ranked second, and petroleum, cement, and chemical fertilizers were among the top eight. Mineral fuels ranked fifth among export commodities.

Iron ore production in 2004 (gross weight) was 310 million metric tons, up from 261 million metric tons in 2003. Virtually all iron mining was carried out north of the Yangtze River, and the country's total resources totaled 55,000 million tons, the largest reserves being in Liaoning, Hebei, and Sichuan. The largest producersAnshan Mining Co. (in Liaoning, Anshan) and Shoudu (Capital) Mining Co. (Beijing)had annual capacities of 30 million tons and 20 million tons, respectively. As domestic iron deposits were of a low ore grade (less than 35% on the average) and required concentration, China has imported more than 50 million tons of ore in the past several years, and steel enterprises continued to look for jointventure possibilities for iron mines in other countries.

Tungsten output in 2004, mainly from Jiangxi, was 67,000 metric tons (metal content), up from a revised figure of 55,500 metric tons in 2003.

Copper output (metal content) was 610,000 metric tons in 2004, unchanged from 2003, but up from 568,000 metric tons in 2002.

Other metallic ore outputs in 2004 were: tin (chiefly in Yunnan), 110,000 metric tons, up from 102,000 metric tons in 2003; antimony (from Guangxi, Guizhou, and Hunan), 110,000 metric tons; bauxite (gross weight), 15 million metric tons, 13 million metric tons in 2003; lead (metal content), 950,000 metric tons, down from 955,000 metric tons in 2003; molybdenum, 29,000 metric tons; mercury, 425 metric tons, down from 610 metric tons in 2003; and zinc, 2.1 million metric tons, up from 2.03 million metric tons in 2003. China also mined alumina, bismuth, cobalt, gallium, germanium, gold, indium, manganese, nickel, platinum-group metals, silver, uranium, and vanadium. Henan geologists discovered a bauxite deposit in western Hunan Province that could contain reserves of 50 million tons and a significant amount of gallium. Another bauxite discovery, in Jingxi County, Guangxi Province, could contain reserves of 82 million tons (37 million tons of which could be economically developed), 100,00 tons of gallium, and a significant amount of niobium, scandium, and titanium.

The government since 2002 has eased restrictions on its gold market, allowing gold producers to sell their gold through the Shanghai Gold exchange, instead of to the Central Bank at a fixed price. However, imports and exports of gold ingot were still controlled by the government. The establishment of gold mining companies that were wholly owned by foreign investors was not permitted. Shandong province was the leading gold-producing province in China, followed by Henan, Fujain, Shaanxi, Liaoning, and Hebei provinces.

The output of rare-earth oxide content60% from Nei Mongol, 18% from Sichuan, and 17% from Jiangxiwas 98,000 metric tons in 2004, up from 92,000 metric tons in 2003. Major portions were exported to France, Japan, and the United States. In Nei Mongol, rare-earth concentrate, known as Baotou rare-earth concentrate, was the by-product of producing iron concentrates, and contained oxides of the light rare-earth grouplanthanum, cerium, praseodymium, neodymium, samarium, europium, and gadolinium. In Mianning and Dechang (Sichuan), rare earths were mainly bastnasite, and, in Ganzhou (Jiangxi), the rare earths were of the ionic absorption type. A joint venture in Jiangsu province was to produce vanillin. The largest producersGansu Rare Earths Co. (in Jiangxi, Nanchang) and Baotou Iron and Steel and Rare Earths Corp. (in Nei Mongol, Baotou)had capacities of 32,000 and 25,000 metric tons, respectively. China's rare-earth processing capacity expanded from 50,000 metric tons per year in 1995 to 130,000 metric tons per year in 2000. Rare earths remained a highly controlled sector, and a rare-earth quota was introduced in 1999 to control exports.

Hydraulic cement production in 2004 was 970 million metric tons, up from 862 million metric tons in 2003. Other industrial mineral production in 2004 included: fluorspar, 2.7 million metric tons; barite, 3.9 million metric tons (2.39 million metric tons of barium sulfate was exported, worth $77.8 million); magnesite, 4.65 million metric tons; gypsum, 7 million metric tons, up from 6.8 million metric tons in 2003; graphite, 700,000 metric tons, down from 710,000 in 2003 (451,735 metric tons exported, for $67,041,000); talc and related materials, 3 million metric tons, unchanged from 2003 (640,000 metric tons exported, for $65,954,000); mine boron (boron oxide equivalent), 135,000 metric tons, up from 130,000 metric tons in 2003; asbestos, 510,000 metric tons; and bromine, 4,300 metric tons, down from 42,000 metric tons in 2003. China also produced diamond, diatomite, dolomite, kyanite and related materials, lithium minerals, nitrogen, phosphate rock and apatite, potash, salt, sodium compounds, and sulfur.

The government in 2000 approved the opening of a diamond exchange market in Shanghai. China in 2000 became the world's eighth-largest consumer of precious stones (actual figures were difficult to ascertain because of smuggling and overseas purchases), and "Greater China," which included Hong Kong and Taiwan, was believed to be the world's third-largest diamond market, after the United States and Japan.

In 2000, the government issued several laws and regulations to improve the country's investment environment and foreign investors' confidence. The laws and regulations dealt with, among other things, mineral resource exploitation planning, land exploitation, mine ownership transfer, customs law, gold mining, Sinoforeign contractual joint ventures, foreign capital enterprises, and mineral-resource deposit size classification standards. The government continued its efforts to restructure the mining and metal sectors, abolishing nine bureaus, transferring responsibilities to industrial associations, dissolving three state-owned nonferrous enterprises, and, to help the industry become more efficient, ceding management to provincial and city governments. The government also offered incentives to companiesexemption from income tax, tariffs, and import value-added tax (VAT)to invest in the poorer western provinces. It also began to phase out the preferential taxes for foreign enterprises, prepared to draft a "zero tariff rate" policy for exports, issued guidelines to allow foreign enterprises to conduct mineral exploration in China, and agreed to eliminate import quotas and dismantle export subsidies. China planned to increase production of cement, copper, fertilizer, iron, lead, nickel, salt, soda ash, and zinc, and expected to retain its dominance in the world market for antimony, barite, fluorspar, magnesite, rare earths, and tungsten.


China's petroleum resources are a key to its industrial development. In 2004, it became the world's second-largest consumer of petroleum products, surpassing Japan. Crude oil production increased from 102,000 barrels per day in 1960 to 3.3 million per day as of 2002, and to an estimated 3.62 million barrels per day in 2004. In 1998, China had proven reserves of 24 billion barrels. As of 1 January 2005, its proven reserves were estimated at 18.3 billion barrels. In 2004, consumption was estimated at 6.53 million barrels per day, with net oil imports estimated at 2.91 million barrels per day in 2004. The major producing centers are the Daqing field in Heilongjiang, which came into production in 1965 and the Liaohe field, located in northeastern China. Although nearly 85% of China's oil production capacity is onshore, and in addition to numerous other mainland finds, China has potential offshore reserves in the Bo Hai area (thought to have reserves of over 1.5 billion barrels) and the South China Sea, especially in the vicinity of Hainan Island.

By the mid-1970s, China no longer had to rely on oil imports; petroleum exports had, in fact, emerged as a major source of foreign exchange earnings. More than 9,740 km (6,050 mi) of long-distance pipelines transport the oil from fields to refineries and other points of consumption and export. China, however, became a net importer of oil in 1996, because rapid increases in oil demand from high economic growth rates outpaced the slower increases in oil production.

After rising dramatically in the early 1980s, owing largely to the discovery and exploitation of vast deposits in Sichuan Province during the late 1950s and early 1960s, natural gas output stagnated somewhat in the late 1980s. As of 2003, natural gas supplied only an estimated 2.6% of the country's energy. However, with proven reserves totaling an estimated 53.3 trillion cu ft, as of 1 January 2005, it was expected that consumption would double by 2010. In 2000, total national production reached 960 billion cu ft. By 2003, that figure had risen to an estimated 1.21 trillion cu ft. A pipeline to transport natural gas from the Xinjiang province in the west to Shanghai in the east was planned, with Shell chosen to lead a consortium of development companies.

Although China's rivers provide a vast hydroelectric potential (an estimated 378 million kW), only a small part has been developed. In the late 1990s, after economic growth slowed due to the Asian economic crisis, the government declared a two- to three-year moratorium on construction of new power plants due to an oversupply problem. The main hydroelectric projects include Ertan in Sichuan Province, Yantan in Guangsxi Zhuang Autonomous Region, Manwan in Yunan Province, Geheyan in Hubei Province, Wuqiangxi in Hunan Province, Yamzho Yumco in Xizang Autonomous Region, and Lijia Xia in Qinghai Province. In April 1992, the government approved the construction of the largest hydropower project in Chinathe Three Gorges Project on the middle reaches of the Chang Jiang. Construction began in 1996, and as of August 2005, was still underway with completion in 2009. The Three Gorges Project will include 26 hydropower generating units, at 700 MW each, producing a total of 18.2 GW of power. The Three Gorges Project will require the relocation of millions of people just in Sichuan Province alone. A second major hydroelectric project, consisting of a series of dams on the upper portion of the Yellow River, was also underway as of August 2005. Plans for this project call for 25 generating stations to be built, having a combined 15.8 GW of installed capacity.

China's electrical generating capacity was estimated as of 1 January 2003 to stand at 338.3 GW, up from 115.5 million kW in 1988. Total output of electricity increased during the 198898 period from 545 billion to 1,098 billion kWh. Output in 2000 was 1,288 billion kWh, of which 81.8% was from fossil fuels, 16.8% from hydropower, and 1.2% from nuclear power. In 2003, electrical power output was estimated at 1,807 billion kWh, of which 1,484 billion kWh hours are from thermal sources, 279 billion kWh from hydroelectric sources, and 42 billion kWh from nuclear sources. Electricity consumption in 2000 was 1,206 trillion kWh. In 2002, consumption rose to 1,452.048 billion kWh. Electric power consumption is forecast to increase at an annual rate of 4.3% through 2025.

Traditionally, coal has been China's major energy source, with auxiliary biomass fuels provided by brushwood, rice husks, dung, and other noncommercial materials. The abundance of coal continues to provide cheap thermal power for electric plants. In 2000, China was both the world's largest coal producer, at 1.27 billion short tons, and the leading consumer of coal, at 1.31 billion short tons. In 2003, China produced an estimated 1.63 billion short tons of coal and consumed an estimated 1.53 billion short tons for the same year. Coal comes from over two dozen sites in the north, northeast, and southwest; Shanxi Province is the leading producer. Recoverable reserves as of 2003, were estimated at over 126.2 billion short tons. In 1996, China accounted for 11.1% of the world's proven reserves of coal. Large thermal power plants are situated in the northeast and along the east coast of China, where industry is concentrated, as well as in new inland industrial centers, such as Chongqing, Taiyuan, Xi'an, and Lanzhou. As of August 2005, it was reported that coal accounted for 65% of primary energy consumption.

The development of nuclear power has become a major factor within China's electricity sector. The 279 MW Qinshan nuclear power plant near Shanghai began commercial operation in 1994. That same year, two 944 MW reactors at the Guangdong facility at Daya Bay also started commercial service. In 1995, Chinese authorities approved the construction of four more reactors. In May 2002, the 1 GW first unit of the Lingao nuclear power plant came online while a second 1 GW unit began operating in January 2003. An additional 600 MW generating unit also came online at Qinshan in February 2002. Net capacity for China's three nuclear reactors was estimated at 2,167,000 kW in 1996. At the start of 2002, installed capacity for nuclear power was placed at 2 GW. By mid-2005, that capacity had risen to 15 GW and further construction is being planned. A 6 GW complex is being planned for Guangdong province at Yangjiang (slated to begin commercial operation in 2010), while a second facility is being planned for Daya Bay. By 2020, plans call for the completion of 27 GW of additional nuclear power generating capacity. Although China touts nuclear power as a way to cut its dependence upon fossil fuels and as a source of clean energy, by 2020 nuclear power will account for less than 5% of the nation's installed electric generating capacity.


China achieved a rapid increase in the gross value of industrial output (used before China switched to GNP accounting in 1986), which, according to official Chinese statistics, rose by 13.3% annually between 1950 and 1979. The greatest sustained surge in growth occurred during the first decade, with the rate averaging 22% annually during 194960. During 196174, the yearly growth rate fell to about 6%, partly as a result of the disruptions brought on by the collapse of the Great Leap Forward (which accompanied the withdrawal of Soviet technicians in mid-1960) and of work stoppages and transportation disruptions during the Cultural Revolution. Growth averaged 10% from 1970 to 1980 and 10.1% from 1979 to 1985. Major policy reforms of 1984 further accelerated the pace of industrial growth, which reached 20.8% by 1988. After a brief retrenchment period in 198990 as government policies prioritized inflation control over other concerns, expansion of the country's industrial sector resumed apace, exceeding 20% in 1992 and 18% in 1994. Industrial output was officially up 13.4% in 1995, with state enterprises contributing the majority.

While approximately 50% of total industrial output still derives from the state-owned factories, a notable feature of China's recent industrial history has been the dynamic growth of the collectively owned rural township and village enterprise as well as private and foreign jointventure sectors. Also apparent has been the spatial unevenness of recent industrial development, with growth concentrated mainly in Shanghai, the traditional hub of China's industrial activity, and, increasingly, a number of new economic centers along the southern coast. The coastal provinces of Jiangsu, Guangdong, Shandong, Shanghai, and Zhejiang together account for close to 33% of the country's total industrial output and most of its merchandise exports. One key factor in this industrial geography has been the government's establishment of several Special Economic Zones in Guangdong, Fujian, and Hainan provinces, and its designation of over 14 "open coastal cities" where foreign investment in export-oriented industries was actively encouraged during the 1980s.

Before the first five-year plan (195357), China had only one major steel centerAnshan, in the northeastand several minor ones. All these produced 1.93 million tons of pig iron and 1.35 million tons of steel in 1952. By 1995, China was producing 92,970 million tons of crude steel and 101,700 million tons of pig iron. Anshan continues to be the hub of the industry, but other huge steel complexes have been constructed at Baotou, Benxi (about 50 km/30 mi east of Anshan), Taiyuan, Wuhan, and Ma'anshan (near Nanjing).

China's cotton textile industry is the largest in the world, producing yarn, cloth, woolen piece goods, knitting wool, silk, jute bags, and synthetic fibers. Laborintensive light industries played a prominent role in the industrial boom of the late 1980s and early 1990s, accounting for 49% of total industrial output, but heavy industry and high technology took over in the late 1990s. In addition to garments and textiles, output from light industry includes footwear, toys, food processing, and consumer electronics. Heavy industries include iron and steel, coal, machine building, armaments, petroleum, cement, chemical fertilizers, and autos. High technology industries produce high-speed computers, 600 types of semiconductors, specialized electronic measuring instruments, and telecommunications equipment.

Since 1961, industry has been providing agriculture with farm machines, chemical fertilizers, insecticides, means of transportation, power, building materials, and other essential commodities. Handicraft cooperatives also have been busy making hand-operated or animal-drawn implements. Production of a variety of industrial goods has expanded, increasingly in order to supply the country's own expanding industrial base. In addition to fertilizers, the chemicals industry produces calcium carbide, ethylene, and plastics. Since 1963, great emphasis has been placed on the manufacture of transportation equipment, and China now produces varied lines of passenger cars, trucks, buses, and bicycles. In 1995, output included 1,452,697 motor vehicles (more than double the 1991 figure). Output for 1997 was over 1.6 million units. The industry underwent a major overhaul in the late 1990s in order to stimulate efficiency and production.

From 19932002, the growth in manufacturing was 11.4% each year. Contributing to this growth in the early 1990s was an increase in agriculture-related industry, as promoted by local governments in town and village enterprises (TVEs) in which agricultural surpluses were invested in low-tech and labor-intensive manufacturing processes. By the end of the 1990s, during an economic slowdown, TVEs began to employ fewer rural workers. Foreign and private enterprises (FIEsforeign-invested enterprises) became increasingly important to industry, while the state-controlled sector declined.

At the end of the 1970s, 80% of manufacturing output was attributed to state-owned enterprises (SOEs); by 2004, SOEs contributed only 35% of gross industrial output. Whereas there were 118,000 recorded SOEs in 1995, the number had decreased to 31,750 in 2004; those that exist are plagued by outdated equipment and a lack of skilled workers.

High-tech manufacturing gained ground, supplanting the low-technology, assembly-line production of the early 1990s. Though textiles still contribute largely to China's production output, industrial growth is increasingly in sectors producing advanced electronic goods such as cell phones, integrated circuits, and cars.


Modern China is the heir to a remarkably inventive civilization that pioneered in the development of the abacus (the first mechanical calculating device), paper (and paper money), printing by movable type, gunpowder, the magnetic compass, and the rocket. Contact with the West during the 19th century however, revealed how technologically backward China had become, and it is only in recent decades that the nation has begun to catch up.

China detonated its first fission device in 1964 and its first hydrogen bomb in 1967; the nation now possesses a variety of nuclear weapons mounted on missiles, bombers, submarines, and other delivery systems. Its first satellite was launched in 1970. By 1992, the PRC had launched an INTELSAT satellite on a Chinese launch vehicle. Other priorities have been the development of high-energy physics, laser research, powerful computer memory chips, color television broadcasting technology, and laser infrared devices, although the PRC still relies heavily on outside investment and technology transfer. Major advances have also been claimed in rice hybridization, insecticides, fertilizers, biogas digesters for rural electrification, and pollution control technology.

Two scientific exchange agreements between the United States and China were signed in January 1984 during Premier Zhao Ziyang's visit to Washington, D.C. China has proposed to several Western nations that it provide long-term storage facilities in remote provinces for radioactive wastea proposal that Western observers believed would provide China not only with hard currency but also with nuclear materials for possible reprocessing.

China's principal technological handicap is lack of skilled personnel. Only 1% of the PRC's 127 million 22-year-olds receive a university degree. However, 37% of all Chinese degrees are in engineering, the highest ratio in Asia. Part of China's response to this shortage has been to send tens of thousands of students overseas for advanced study, especially in the United States. In 198797, science and engineering students accounted for 43% of college and university enrollments. China had 454 scientists and engineers and 200 technicians per million people engaged in research and development (R&D) during the same period. By 2002, the number of scientists and engineers per million people had risen to 633 (excluding Hong Kong). Scientific research is coordinated by the prestigious Chinese Academy of Sciences, founded in 1949 and headquartered in Beijing. China in 1996 had 90 specialized learned societies in the fields of agriculture, medicine, science, and technology. Most are affiliated members of the China Association for Science and Technology, founded in 1958. International science and technology cooperation is also increasing. However, concerns over human rights issues have had the effect of cooling USPRC science and technology exchanges. In 1996, China had 105 universities and colleges offering courses in basic and applied science.

In 1998, high-technology exports were valued at $23.3 billion and accounted for 15% of manufactured exports. By 2002, high technology exports (excluding Hong Kong) had risen to $68.182 billion, accounting for 23% of manufactured exports. In 2002, R&D expenditures totaled $72.014 billion, or 1.23% of GDP. In 2000, the biggest spender on R&D was business at 57.6%, followed by government at 33.4%, and foreign sources at 2.7%. The remainder was undistributed.


Three types of retail trade outletsthe periodic market, the peddler, and the urban shopconstituted the basis of the traditional commercial structure. In the early 1950s, however, a number of state trading companies were established for dealing in commodities such as food grains, cotton, textiles, coal, building materials, metals, machinery, and medicines. These companies, under the control of the Ministry of Commerce, have established branch offices and retail stores throughout the country.

In the 1960s, the establishment of state-owned department stores and cooperative retail outlets virtually replaced private trade. There was a resurgence of periodic open markets and private traders when domestic trading regulations were relaxed in 1978. In addition, the government has progressively loosened or eliminated many of its former price controls; an estimated 90% of all retail sales are no longer controlled.

In 2003, about 50% of the work force was employed in agriculture, keeping the country basically self-sufficient in grain production, even though only about 15% of the land is arable. Farm-lands and the agricultural industry, however, remain under state control.

The China Export Commodities Fair, usually held each spring and fall in Guangzhou, was for more than 20 years an important point of contact for Westerners doing business with China. Though still important as an initial introduction to the full range of China's potential suppliers, the decentralization of trading activities in recent years has greatly reduced the fair's role in mediating sustained contact between producers and buyers.

Local foreign trade commissions in various industrial centers of the country have taken on a much more active role in organizing many of the services associated with the commodities fair, while any domestic enterprise with foreign trading rights may now participate directly in all events related to trade promotion. Guangzhou still hosts two annual trade fairs, though on a reduced scale. In the major cities, Friendship Stores and other restaurants, hotels, service bureaus, and taxis cater exclusively to foreign visitors; payment is made in foreign exchange certificates.

By the mid-1980s, international credit cards could be used to obtain cash advances in selected outlets and for direct purchases in Friendship Stores. Internet commerce was initiated in China in the late 1990s, and by 2005, there were more than 100 million computer Internet users.


Though China has only recently become a major trading nation, its enormous trading potential is attracting great attention by both

Country Exports Imports Balance
World 438,227.8 412,759.8 25,468.0
United States 92,626.3 33,944.2 58,682.1
China, Hong Kong SAR 76,274.4 11,118.7 65,155.7
Japan 59,408.7 74,148.1 -14,739.4
Korea, Republic of 20,094.8 43,128.1 -23,033.3
Germany 17,442.1 24,291.9 -6,849.8
Netherlands 13,501.2 1,933.1 11,568.1
United Kingdom 10,823.7 3,570.3 7,253.4
Other Asia nes 9,004.5 49,360.6 -40,356.1
Singapore 8,863.8 10,484.9 -1,621.1
France-Monaco 7,329.7 6,102.6 1,227.1
() data not available or not significant.

advanced and newly industrializing nations, shown by the world's interest in China's membership in the WTO. Trade has performed important functions within the economy, providing needed capital goods and modern technology to abet development, as well as primary commodities (such as grains) to supplement local supply in slack years. Foreign trade is under the direction of a single Ministry of Foreign Economic Relations and Trade, created in 1982 through the merger of the former ministries of Foreign Trade and Foreign Economic Relations with the Export-Import and Foreign Investment commissions. A major issue since the early 1980s, however, has been the decentralization of trade management and greater reliance on currency devaluation (major devaluations were implemented in 1989 and 1991) and market incentives rather than direct export and import controls to promote desired trade patterns. After the Asian financial crisis of 1997, officials were tempted to devalue the currency once more; instead the Ministry of Foreign Trade and Economics (MOFTEC) spent massive sums of money on state industry, while dismantling trade barriers in anticipation of WTO membership.

Prior to 1949, some three-fourths of China's exports were agricultural products. This proportion ebbed to a low of 13% during the agricultural crisis of 1961. Foodstuffs and other primary products including crude nonfood raw materials, minerals and fuels averaged about 4350% of exports through 1985, after which the proportion declined steadily to reach only 6% in 1998, as manufactured exports expanded rapidly. Textiles (excluding garments) accounted for 10% of all exports in 1994 and clothing for about 19.7% (up from 7.5% in 1985). However, China's efforts to emulate the success of Japan, British Hong Kong, Taiwan, and the ROK in basing economic expansion on textile and clothing exports encountered protectionist resistance from major potential markets in the United States and European Union.

The textile and clothing industry created the large majority of China's commodity exports in 1998. China's special administrative region of Hong Kong also produces clothes, averaging 12.1% of the world's total clothes exports. Other exports include electrical parts (16%), watches and clocks (2.6%), telecommunications equipment (6.7%), and footwear (3.0%). Hong Kong produces 28% of the world's exports in watches and clocks.

Food imports, which made up only about 2% of the import volume in the 1950s, averaged 20% of the total in 1973 and 1974 but, as total imports rose, fell to less than 4% by 1985 and remained at 2.4% in 1994 and 5% in 1998.

The direction of China's trade has followed three major patterns since the 1930s. Prior to World War II, Japan, Hong Kong, the United States, and the United Kingdom together made up about three-fourths of the total trade volume. With the founding of the PRC in 1949, trade shifted in favor of the former USSR and Eastern Europe. During 195255, more than 50% of China's trade was with the former USSR; during 195660, the proportion averaged about 40%. As Sino-Soviet relations deteriorated during the 1960s, trade exchanges steadily declined, reaching a bare 1% of China's total volume in 1970 (3.6% in 1986). By the early 1980s, most of China's leading trade partners were industrialized non-Communist countries, and China's trade pattern overall reflected a high degree of multilateralism.

In recent years, as China has rapidly enlarged its role on the international market, the importance of Hong Kong as an entrepot and major source of revenue has increased. In 1992, Hong Kong accounted for close to 35% of China's total trade (up from about 21% in 1986). Hong Kong reverted to Chinese rule in 1997, but because of its enormous trade activity, Hong Kong's trade is often measured separate from China. During the 1990s, Japan ranked as the second-largest trading partner, importing oil and other raw material and claiming 15% of China's total trade. The most dramatic change in the mid-1980s was the emergence of the United States as China's third-largest trading partner; by 2000 the United States was China's second-largest trading partner, and the largest importer of Chinese goods.

As of 2005, China exported $752.2 billion in goods, 21.1% of which went to the United States, 17% to Hong Kong, 12.4% to Japan, 4.7% to South Korea, and 4% to Germany. That year, China imported an estimated $631.8 billion in goods, 16.8% from Japan, 11.4% from Taiwan, 11.1% from South Korea, 8% from the United States, and 5.4% from Germany.


Both foreign trade and international financing in China are state monopolies, with policies and transactions administered by the People's Bank of China (PBC). Among its various functions, the PBC sets exchange rates for foreign currencies. The PBC releases foreign exchange to the Bank of China, which plays a major payments role through its branches in Hong Kong, Singapore, and other overseas financial centers. The government has, overall, maintained a record of financial stability, linked to a policy of stringent controls over its international transactions. Adhering generally to a principle of self-reliance, it has resorted to the use of commercial credit at certain junctures but until the 1970s avoided falling into long-term indebtedness as a means of financing major development goals. In the period 195860, the Great Leap Forward and the succeeding years of economic crisis caused a sharp deterioration in China's international payments position. In 1960,

Current Account 17,401.0
     Balance on goods 34,017.0
         Imports -232,058.0
         Exports 266,075.0
     Balance on services -5,933.0
     Balance on income -19,175.0
     Current transfers 8,492.0
Capital Account -54.0
Financial Account 34,832.0
     Direct investment abroad -6,884.0
     Direct investment in China 44,241.0
     Portfolio investment assets -20,654.0
     Portfolio investment liabilities 1,249.0
     Financial derivatives
     Other investment assets 20,813.0
     Other investment liabilities -3,933.0
Net Errors and Omissions -4,732.0
Reserves and Related Items -47,447.0
() data not available or not significant.

large negative clearing account balances with Communist countries (-$625 million) were even more than the foreign exchange reserves of $415 million. By the end of 1964, however, the negative balance with Socialist nations had been reduced to $55 million, and China's net international financial resources stood at a surplus of $345 million, owing to monetary gold holdings of $215 million and foreign exchange balances from trade with non-Communist countries amounting to $185 million. By 1965, the Chinese had completely cleared their long-term debt to the former USSR, and by 1968, China had redeemed all national bonds and was free of all long-term external and internal debts. Publication of official balance-of-payments statistics was discontinued during the Cultural Revolution and not resumed until September 1985.

According to Western analyses, the period 197881 saw a continuing surplus in current accounts, as rising levels of imports were generally matched or exceeded by increases in exports over the same period. In addition, transfers of an estimated $1.1 billion in 1978 and $1 billion in 1980, derived from increased earnings in tourism, shipping, and remittances from Hong Kong and other sources, resulted in overall current accounts surpluses of $900 million and $1.2 billion in 1978 and 1980, respectively. China's drive to industrialize under the Four Modernizations policy resulted in an unprecedented deficit on capital accounts of $1.1 billion in 1978. The subsequent unilateral decisions to cancel $2.6 billion in contracts with Japan (1979) and $2 billion with Japan and Western nations (1981) were interpreted by some observers as an indication of acute cash-flow problems and a reordering of investment priorities at the highest levels. The trade account was helped by the slow but steady devaluation that occurred after China went to a managed float exchange rate system in January 1991. Tourism receipts and visitor figures also continued to grow, passing pre-Tiananmen levels.

Foreign investment boomed in the 1990s, with a total of nearly $45 billion committed in 1998 alone. Approximately half of China's loans came from the Asian Development Bank, the World Bank, and Japan; external debt reached $159 billion in 1998. A usually positive current account balance stockpiled China's reserves. In 1998, China had some $147 billion in official reserves, but state industries had accumulated a huge amount of what was called triangular debt with the state banks and other lending agencies. Government infrastructure and industrial projects received funding for goods that could not be sold domestically in 1999 due to lower demand, losing money for each party involved. In effect, external trade plays a secondary role in China's economy because of normally high, unsatisfied domestic demand. Agreements with the WTO threaten to increase China's dependence on foreign trade. China's external debt stood at $149.4 billion in 2002.

The Economist Intelligence Unit reported that China's total exports increased from $249 million in 2000 to $593 million in 2004, with an average annual increase of $86 million. Total imports increased from $214 million in 2000 to $534 million in 2004 with an average annual increase of $80 million.


Economic reforms under the Four Modernizations program adopted in 1978 brought major changes in China's highly centralized and tightly controlled banking system. In 1982, the People's Bank of China (PBC) became the central bank and turned over its commercial operations to the new Industrial and Commercial Bank. The State Administration of Foreign Exchange (SAFE) helps set foreign exchange policy. Other specialized agencies include the People's Construction Bank, the Agricultural Bank of China, the Bank of China, the Bank of Communications, the China Development Bank, and the Export-Import Bank of China. The China Construction Bank (CCB) makes payments for capital construction according to state plans and budgets. The Agricultural Bank of China finances agricultural expansion, grants rural loans, supervises agricultural credit cooperatives, and assists in the modernization of agriculture. The Bank of China (BOC) handles foreign exchange and international settlements for the PBC. It has branches throughout China as well as in Singapore, Hong Kong, Paris, London, Luxembourg, New York, and Tokyo. The BOC is charged with financing China's foreign trade and also acquiring and channeling into appropriate areas the foreign capital needed for imports of industrial equipment and other items for modernization.

The foreign-owned Standard Chartered Bank maintains long-established offices in China. Over 90 foreign banks, representing Japan, the United States, France, Italy, Pakistan, and the United Kingdom, received permission to establish offices in Beijing in the early 1980s. In 1985, for the first time, foreign banks were allowed to do business in the four special economic zones (established to attract foreign investment) in foreign currency. In mid-1997, 10 foreign banks were given permission to operate outside of the special zones; and in 1996, foreign banks were given limited authority to do business in rembi (the local currency at the time). The International Monetary Fund reports that in 2001, currency and demand depositsan aggregate commonly known as M1were equal to $745.3 billion. In that same year, M2an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual fundswas $1,889.7 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 3.24%.

In 1987, stock exchanges opened in Shanghai and several other cities, and several stock and bond issues were floated domestically. Securities exchanges are controlled by the PBC, and trading in securities is very limited. In 1997, China accelerated stock-market listings of about 50 large and medium-sized state-owned enterprises (SOEs) and considered raising the number of enterprises piloting group holding structures from 57 to 100. In November 1996, the Shanghai Stock Exchange President, Yang Xianghai, predicted that China's two exchanges (Shanghai and Shenzhen) would number in excess of 1,000 companies by 2000. At the time he was speaking, there were 472 companies listed on the stock exchanges. By 2003, there were 746 listed companies and 871 listed securities being traded on the exchange. In 2004, the Shanghai and Shenzhen exchanges listed a combined total of 1,384 companies. Market capitalization of all exchanges in 2004 amounted to $639.765 billion. In that same year, the Shanghai Stock Exchange stood at 1,266.5, down 15.4% from the previous year. China's stock market is split into two sections, the "A" share market and the "B" share market. Foreigners may only participate in the Bshare market, denominated in foreign currencies and consisting predominantly of foreign private companies. The Ashare market is reserved for domestic investors (who are not allowed to participate in the Bshare market) and dominated by state enterprises.


The People's Insurance Co. of China (PICC), formed in 1949, is authorized to handle all kinds of insurance, including the insurance of China's foreign trade and foreign insurance operations in China. In 2001, the People's Insurance Co. of China controlled 78% of China's property/casualty insurance industry, with 4,200 branches and a workforce of 110,000. Two newer domestic Insurance Companies, China Pacific and Ping An, have 11% and 8%, respectively, of the market. Two additional state enterprises, the China Insurance Co. and the Tai Ping Insurance Co., are in operation, and several foreign insurance companies have established representative offices in Beijing. Demand for insurance projects is predicted to grow as economic reforms limit the social security benefits provided by state enterprises. By 2001, life insurance premiums were growing at an average rate of nearly 70% per year, with nonlife premiums growing at around 15% per year. As of 2003, the value of direct premiums written totaled $46.911 billion, of which life premiums accounted for the largest portion at $32.442 billion. PICC was China's top nonlife insurer, with $7,095.6 million in gross nonlife premiums written. China Life was the country's top life insurer, with $19,583.3 million of gross life premiums written in 2003.

Motor-vehicle third-party liability for foreigners and for citizens in certain provinces, workers' compensation (in the Shenzhen Special Economic Zone), old age pension, unemployment insurance, and property (fire) in Shenzhen for commercial risks are compulsory.


The annual state budget is prepared by the Ministry of Finance and approved by the National People's Congress. A major reform in public finance, introduced in 1980, was a new system of allocating revenues and expenditures between local and national levels of government. Previous revenue-sharing procedures allowed the central government to fix maximum spending levels for each

Revenue and Grants 921.2 100.0%
     Tax revenue 811.7 88.1%
     Social contributions
     Grants 59.1 6.4%
     Other revenue 50.4 5.5%
Expenditures 1,381.6 100.0%
     General public services 945.4 68.4%
     Defense 143 10.4%
     Public order and safety 28.4 2.1%
     Economic affairs 189.6 13.7%
     Environmental protection 0.2 0.0%
     Housing and community amenities 6.1 0.4%
     Health 2.1 0.2%
     Recreational, culture, and religion 5 0.4%
     Education 20.9 1.5%
     Social protection 40.8 3.0%
() data not available or not significant.

province, autonomous region, and centrally administered municipality. The new system fixed for a five-year period the proportion of local income to be paid to the central government and (except for emergency appropriations for floods and other such disasters) the level of subsidies to be provided by the central government, as well as the proportion of local income to be retained by local governments. Autonomous regions receive proportionately greater state subsidies than the provinces and centrally administered municipalities, and they are entitled to keep all revenues from local industrial and commercial taxes. During the 1990s, the Chinese consolidated budget deficit grew at a rapidly increasing rate. According to the IMF, the 1998 budget deficit amounted to 4% of GDP, due to rising expenditures and tax evasion. Deficits are largely financed by domestic debt issuance rather than by money creation. In 1999, the central government performed an audit of embezzlement, finding that some $2.4 billion in state funds had been diverted into private bank accounts, and that a total equaling one-fifth of the central government's tax revenues were misused. In all, the government's liabilities were equal to 100% of GDP in 2000, according to some sources. Annual tax revenues equal 13% of GDP, one-fifth of which goes annually to paying interest on government debts.

The US Central Intelligence Agency (CIA) estimated that in 2005 China's central government took in revenues of approximately $392.1 billion and had expenditures of $424.3 billion. Revenues minus expenditures totaled approximately -$32.2 billion. Public debt in 2005 amounted to 28.8% of GDP. Total external debt was $242 billion.

Government outlays by function in 2001 were as follows: general public services, 68.4%; defense, 10.4%; public order and safety, 2.1%; economic affairs, 13.7%; housing and community amenities, 0.4%; health, 0.2%; recreation, culture, and religion, 0.4%; education, 1.5%; and social protection, 3.0%.


China's standard corporate tax rate is 33%, and includes a 3% local corporate income tax. It is applicable to resident as well as those business operations that involve foreign investments, or socalled foreign investment enterprises (FIEs). In addition, local authorities are allowed to collect certain license and registration fees, as well as levy a surcharge. FIEs typically pay taxes at concessional rates, depending upon the type of business and location. Capital gains incurred by companies are generally considered income and are taxed as such.

On 1 January 1994, the PRC Individual Income Tax law came into effect in China. As of 2005, China's individual income tax was progressively rated up to 45% for residents and foreigners, although foreigners listed as nonresidents (those living in China for less than one year) are taxed only on income sourced from China. People resident in China for five or more years are considered residents and are taxed on worldwide income. Capital gains claimed by individuals are taxed at 20%. However, the sale of a private dwelling is exempt from the capital gains tax, if the seller lived in it for at least five years. Nonresidents are subject to a 10% withholding tax. The sale or importation of goods and services are subject to a valueadded tax (VAT) at a standard rate of 17% or at a lower rate of 13%. The lower rate applies to water, grain, edible oils, certain agricultural products such as fertilizers, and books. Small firms are subject to a 6% VAT. The VAT applies to a broad range of services including the sale of immovable property, construction, insurance and entertainment, the latter of which is subject to a 20% rate. Consumption/excise taxes also apply to goods, including cigarettes, motor vehicles, cosmetics, jewelry and alcoholic beverages.


Although China is in the process of aligning its trade system with international standards, prohibitively high tariffs and quotas discourage many imports. It uses the Harmonized System for tariff classification. A minimum tariff rate is granted to countries that have special agreements with China, including the United States. Tariff rates range from 3100% with the highest rates reserved for goods such as automobiles. Raw materials are exempt. In 1996, as a step toward WTO compliance, China reduced tariffs on more than 4,000 products by an average of 30%, and then reduced tariffs even further in 2001 in preparation for WTO accession. In 2000, the USChina Trade Relations Working Group successfully opened trade relations with China, with such agreements as: reducing the automobile tariff from a maximum of 100% to a maximum of 25%; reducing auto parts tariffs from 23.4% to 10%; and eliminating quotas by 2005. In addition, China agreed to a reduction in chemical tariffs from about 15% to 7% and a reduction in textile tariffs from 25% to 12% by 2005 (but a quota safeguard would be available in the event that the industry failed). Steel tariffs were to be reduced from 10% to 6% by 2003. These reductions would be implemented on a sliding yearly basis. Most other tariffs have been scheduled for reduction by more than 50%, to an average of 9.4% on industrial tariffs and an average of 17% on agricultural tariffs. China acceded to the World Trade Organization on 11 December 2001.

Official PRC policy is that direct trade with Taiwan is interregional, rather than international, since Taiwan is considered a province of China and, therefore, no customs duties are levied. There are free trade zones in Shanghai, Tianjin, Dalian, Haikov, the Hainan Island Special Economic Zone, and within the Shenzhen Special Economic Zone. Smuggling, reportedly well organized along the coasts of Guangdong, Fujian, and Zhejiang provinces and in the frontier regions of Tibet and Yunnan, is a major governmental concern.


China strongly emphasizes attracting foreign investment in projects that will enhance the nation's economic development. Beginning in the early 1970s, China contracted for the construction of a substantial number of complete plants, notably for iron and steel, automobile, fertilizer manufacture, and power generation, including nuclear power. Such agreements, often made with private firms from Japan, Germany, Italy, France, the United Kingdom, and Canada, as well as with agencies of the Communist states, all called for direct purchase of materials and services. Residual ownership by foreigners and remittance of profits from production were expressly disallowed. In 1979, China established the Foreign Investment Control Commission to attract and coordinate foreign investment, and the first four Special Economic Zones (SEZs) in southern China at Shenzhen, Xiamen, Shantou, and Zhuhai to attract foreign investment (the fifth SEZ was established on Hainan Island in 1988).

In the 1980s, foreign investment was restricted to export-oriented businesses, and foreign investors were required to enter into joint ventures (JVs) with Chinese counterparts in order to enter the market. Under the Joint Ventures Law, enacted in 1979 and revised in 1982, the development of joint ventures for the production of exports has been particularly stressed as a means of securing for China the foreign exchange needed to pay for purchases of advanced technology. Foreign investment in products for the domestic market, other than those needed for modernization, was discouraged. In 1984, further foreign investment opportunities were created with the designation of 14 open coastal citiesShanghai, Guangzhou, Tianjin, Fuzhou, Dailan, Qinhuangdao, Yantai, Qingdao, Lianyungan, Nantong, Ningbo, Wenzhou, Zhanjiang, and Beihaiwhere preferential incentives could also be offered. Since then, 52 state approved economic and technology zones have come into existence, and most provinces, regions, and major municipalities have their own international and trust investment corporations, of which the one in Shanghai is the largest. Special corporations for the attraction of investment by overseas Chinese have been established in Fujian and Zhejiang provinces.

In the early 1990s, the government began allowing foreign investors to manufacture and sell an increasingly wide variety of goods in the domestic market. From the mid-1990s, wholly foreign owned enterprises (WFOEs) have been allowed to operate. In 2000 and 2001, China revised its laws on JVs and WFOEs to eliminate requirements for foreign exchange balancing, to eliminate domestic sales ratio requirements, to eliminate or adjust advanced technology and export performance requirements, and to modify provisions on domestic procurement of raw materials. With China's accession to the WTO in December 2001, foreign investment opportunities were further expanded with the removal of financial and distribution services from the restricted list. Only the production of arms and the mining and processing of certain minerals are currently off limits to foreign investment.

China attracts capital in four ways: (1) by soliciting loans and credits from foreign governments and international financial institutions; (2) by floating bonds and debentures on international capital markets; (3) by promoting direct foreign investment through joint ventures and other cooperative enterprises; and (4) by accumulating trade surpluses from export sales.

From 1979 to 2000, according to Chinese government figures, FDI totaled $350 billion. This figure includes investment from the Special Administrative Regions (SARs) of Hong Kong and Macao as well as from Taiwan. On an annual basis, this not very-foreign proportion of FDI has dropped from over two-thirds to an average of 45.5% for 1999 and 2000. (Analysts have also estimated that 1030% of FDI from Hong Kong actually comes from Chinese mainland companies looking for a tax break.) From 1979 to 1990, double digit annual growth rates in the early years (55% in 1984 and 38% in 1985) declined to a low of 2.7% in 1990, the year after the Tiananmen Square violence. However, in 1991, FDI increased 25% and then soared by triple digits in 1992 (152%) and 1993 (150%). By the end of 1995, over 258,000 foreign invested enterprises had registered in China. In 1996 a World Bank study found that China attracted more than one-third of all investment in factories and other manufacturing plants in developing nations. Growth rates, of course, moderated after their early surge, but it was not until the Asian financial crisis of 199798, precipitated by China's reabsorption of Hong Kong in July 1997, that annual FDI levels stagnated, with a 0.45% growth rate in 1998, and then declined, with an 11.1% fall in 1999 from $45.46 billion to $40.4 billion annual FDI. In 1999 foreign invested firms numbered 300,000 and accounted for almost 50% of exports. In 2000, FDI only grew 0.9%, to $40.77 billion, but in 2001, a 14.6% increase sent annual FDI to a record $46.8 billion.

China continues to have no mergers and acquisitions law that would permit the involuntary takeover of a company. A company can be bought outright but the sale requires specific government approval, as do all investments in China. Indirect foreign (or portfolio) investment (FII) is limited to those willing to invest to the mainland companies listed on the Chinese stock exchange. Mainland companies raised about $22 billion in 2000. This fell to about $12 billion in 2001, reflecting the near 50% drop in foreign investment worldwide following the 11 September 2001 terrorist attacks on the United States.

Until the early 1980s, the flow of Chinese funds abroad was confined to assistance to developing countries and to investment in Hong Kong real estate. In 1983, however, China began making direct investments overseas, in the United States, Canada, the Solomon Islands, and Sri Lanka. China has been a significant supplier of development aid to other countries. Recipients of Chinese military and economic assistance have included the DPRK, Vietnam, Egypt, Pakistan, and Tanzania.


A profound restructuring of China's economy began in 1949 following the founding of the PRC. Adhering to orthodox models borrowed wholesale from the former USSR, the PRC brought all major industrial, infrastructure, and financial enterprises directly under state ownership. Agriculture was collectivized. Management of the economy was closely controlled by central authorities, whose powers extended to the allocation of basic commodities and the basic division of resources into investment, consumption, and defense channels. Centralized planning for economic development was introduced in the form of five-year economic plans.

The first five-year plan (195357), belatedly announced in 1957, pursued rapid industrialization along Soviet lines, with a special emphasis on increases in steel and other heavy industries. The plan reportedly achieved its goals of a 5% gain in gross value of agricultural output and a 4% gain in grain production, and exceeded the 19% growth target in gross value of industrial output.

The second five-year plan (195862) was voided at its start by the social and economic upheavals of the Great Leap Forward. At the heart of the Great Leap was the establishment of the self-sufficient rural commune; decentralization of industry was stressed, and the rural unemployed put to work in "backyard steel furnaces" and other industrial enterprises of dubious efficiency. Incomes were determined by need, and coercion and revolutionary enthusiasm replaced profit as the motivation for work. Publication of economic data ceased at this time, but Western observers estimated a 1% decline in agriculture for the 195860 period, an increase in GNP of only 1%, and no more than a 6% increase in industrial output. After the bad harvests of 1960 and 1961, an "agriculture first" policy was adopted under which large areas of semiarid steppe and other marginal lands in the north and west were converted to agricultural use.

A third five-year plan (196670), formulated by governmental pragmatists and calling for rapid growth of all sectors, was aborted by the outbreak of the Cultural Revolution. In 1969, the government published a report calling for a more open approach to foreign assistance and trade. Domestically, it confirmed the use of the "mass line"the system of calling upon workers and peasants to take responsibility and initiative, and to work without material incentives. It favored the simultaneous use of modern and traditional employment methods (the "walking on two legs" policy), and recommended expansion of industry through investment of profits derived from the sale of agricultural and light industrial products. At the heart of the 1969 policy was a reversion to the commune system of 1958a program to make the countryside self-sufficient, with every commune not only growing its own food but also producing its own fertilizer and tools, generating its own electricity, and managing its own small handicrafts factories, health schemes, and primary schools. In contrast to the hastily organized communes of 195860, however, the new units frequently adhered to the traditionaland more manageablestructure of Chinese rural life.

Long-range economic planning resumed in 1970 with the announcement of a fourth five-year plan, for 197175. In late 1975, Premier Zhou Enlai proclaimed the plan successful. Agricultural output was reported to have grown by 51% during the 196474 period, while gross industrial output was said to have increased by 190%. Specifically, the following growth rates (196474) for mining and industry were reported: petroleum, 660%; coal, 92%; steel, 120%; cotton yarn, 86%; tractors, 540%; chemical fertilizers, 350%; and electric power, 200%.

A fifth five-year plan (197680), announced in 1975, gave priority to modernization of the economy and, for the first time, emphasized the development of light rather than heavy industry. Implementation of this new departure was, however, delayed by the deaths of Mao and Zhou in 1976 and did not occur until 1978, by which time the economic pragmatists, led by Deng Xiaoping, had emerged victorious from the subsequent political and ideological struggles.

The sixth five-year plan (198185) reemphasized China's commitment to the pragmatic line and to the Four Modernizations. Approximately $115 billion was allocated for capital construction, and another $65 billion for renovation of existing infrastructure. GNP increased by an annual average of 10%, industrial output by 12%, and agricultural output by 8.1%.

The seventh five-year plan (198690), announced in March 1986 and called by Deng Xiaoping "The New Long March," featured the following major goals: increasing industrial output 7.5% annually (to $357 billion); increasing agricultural output 4% annually (to $95.4 billion); increasing national income 6.7% annually (to $252.7 billion); increasing foreign trade 40% (to $83 billion); spending $54 billion on 925 major development projects in energy, raw materials, transportation, and postal and telecommunications; and investing $74.6 billion in technological transformation of state enterprises. The goal for rural per capita income was $151 annually.

Concerns about the unevenness of China's economic development progress, both in geographic and sectoral terms, shaped the country's eighth five-year plan (199195). To ameliorate potentially crippling bottlenecks in the supply of raw materials, energy, transportation, and communications capacity, the government prioritized the financing of infrastructure investments. Streamlining of inefficient state industrial enterprises was targeted as well, with the setting up of an unemployment security fund planned in order to assist laid off workers make the transition to employment in nonstate industry and the services sector. Direct foreign investment in industry, services, and infrastructure (especially energy and communications development) were promoted. The plan also emphasized better distribution of the country's development momentum. Inland cities, especially along the Russian, Mongolian, and North Korean borders were targeted for development as export-oriented special economic zones in addition to coastal areas. Particular emphasis was given to developing major infrastructure projects to link Hong Kong, Macao, and the Pearl River delta area of Guangdong province into an integrated economic area and major export base for the 21st century.

The ninth five-year plan (19962000) called for a shift from a centrally planned economy to a "socialist market economy." It also stressed resource allocation to achieve higher efficiency. The goals included continuing progress toward quadrupling the 1980 GNP by the year 2000 (a goal that had already been met by 1996) and doubling the 2000 GNP by the year 2010, a goal carried over into tenth five-year plan (200105). By the end of 2002, the Chinese economy had come through two major external shocks (the Asian financial crisis of 199798 and the global economic slowdown of 200102) without seriously faltering, at least according to official government figures. Real GDP growth registered 8% in 2000 and dipped to 7.3% in 2001. Inflation has held near zero or below, with a slight deflation in consumer prices (-0.8% in 1998, -1.4% in 1999, and -0.4% in 2002). In 2000 and 2001 inflation was below 1%, at 0.4% and 0.7%, respectively.

The tenth five-year plan (200105) called for a continuance of these trends: average GDP growth rates of 7% with a goal of reaching a GDP of $1.5 trillion by 2005 in the context of stable prices. The government estimated that the labor force would increase 40 million by 2005, and that there would also be 40 million surplus rural laborers to be transferred, as the proportion of the labor force in agriculture dropped from an estimated 50% in 2001 to a planned 44% by 2005. Under the tenth five-year plan the government sought to improve its "socialist market economy." Priorities include establishing a "modern enterprise system" in the stateowned enterprises (SOEs), improving social security, and increasing the depth and breadth of participation in the international economy. Registered urban unemployment, at 3.6% in 2001 and below 4% in 2002, was to be controlled at about 5% under the tenth plan. The CIA estimated that total urban unemployment was about 10% in 2001, and that there was substantial underemployment in rural areas; Chinese sources put unemployment overall at 20% in 2003. The tenth five-year plan foresaw agriculture's share in the GDP decreasing to 13% by 2005 from 17.7% in 2001, while industry's share was expected to increase from 49.3% to 51%, and the share of services, from 33% to 36%, across the planning period. Educational goals include attaining gross enrollments of 90% at the junior high school level, 60% in high school, and 15% in higher education. Environmental targets included attaining 18.2% forest coverage, 35% urban green rate, and an overall 10% reduction over 2000 levels in pollutants discharged.

In 2005, China's history of incrementalist economic restructuring for increased efficiency gains led to a GDP ten times higher than that recorded in the late 1970s. Such advances helped make China the second-largest economy in the world (in terms of purchasing power parity) after the United States. However, despite the country's economic advances as a whole, the low per capita income and millions of citizens living below the poverty line still placed China in a lower middle-income range. Economic development continued to be disproportionate, with more advances occurring in the eastern coastal provinces than in the rest of the country. Also, as stateowned enterprises (SOEs) have decreased, the government has been challenged to find work for the millions of former SOE employees who were unemployed as a result. Also challenging the government are charges to reduce corruption and economic crimes and to reduce environmental damage (air pollution, soil erosion, and the fall of the water table in the north) and social strife in the face of economic transformation. In July 2005, China revalued the yuan (y) by 2.1%, and benefited from foreign investment and increased involvement in world trade and increasing employment in urban jobs, despite electricity shortages in the summer of 2005.

Also, in 2005, the draft of the eleventh five-year plan was approved. The plan included provisions to reduce energy consumption (per unit GDP) by 20% and increase GDP by 45% by 2010. It also included a resource conservation and environmental protection package supplementing the other policies and reforms.


China does not yet have national social security legislation. Old age provisions in rural areas is tied to family support and community and state programs. According to the Labor Law, male workers and professional women are eligible to retire at age 60, female nonsalaried workers at 55, and other women at age 50. The amount of the pension is decided by the local or city government based on the standard of living in that area. The urban medical insurance program covers employees in urban enterprises. Local governments and employers adapt the guidelines and base rates according to local conditions. There are some local programs to provide for needy families.

Workers may receive six months' sick leave at 60100% of salary. For work-related total disability, workers are entitled to lifetime compensation of 7590% of the standard wage. Maternity leave at full pay is provided for up to 90 days. In addition, numerous health, daycare, and educational benefits are provided free of charge. In urban areas, housing rentals rarely exceed 5% of the monthly wage.

Despite constitutional provisions, women may face discrimination in the workplace. Women continue to report that unfair dismissal, sexual harassment, demotions, and wage disparity are significant problems. In addition, some enterprises are reluctant to hire women because of the additional costs of maternity leave. Sexual harassment was an ongoing problem and the first court cases were heard in 2003. Most women earn less than men, and are twice as likely to be illiterate. Violence against women remains a serious problem, and spousal abuse goes largely unreported. The suicide rate among women is three times the global average. Women are subject to pressure and sometimes physical coercion to submit to abortion or sterilization. The trafficking of women for the sex trade is a pervasive problem.

A serious human rights problem is female infanticide by families wishing for sons. The imbalance of sex ratios in the country has led to a shortage of women of marriageable age and a dramatic increase in the abduction of women for this purpose.

China's human rights record continued to draw international censure. Ongoing human rights abuses include arbitrary and lengthy detention, forced confessions, torture, and the mistreatment of prisoners. Repression of political dissent continues. Prison conditions are poor and China does not allow any independent monitoring of its prisons. Widespread human rights abuses have also been reported in Chinese occupied Tibet. The government does not tolerate any political dissent or proindependence movements in Tibet.


A revamping of China's health system was underway in the late 1990s to manage serious diseases. The Ministry of Public Heath's ninth five-year plan on the control of serious diseases outlined major reforms to be reached by the year 2000. These include strengthening epidemic prevention management systems and facilities. National health practices, including the provision of both Western and traditional Chinese health services are under the supervision of the Ministry of Health. The ministry has emphasized preventive medicine and general improvement of sanitary conditions.

Since the early 1950s, mass campaigns have been mounted to deal with major public health problems. These have included nationwide cleanup campaigns and mass educational programs in the sanitary preparation of food, the treatment of drinking water, personal hygiene, and waste disposal. The entire population was mobilized to eradicate the four pestsrats, sparrows, flies, and mosquitoeswith mixed results. Epidemic prevention centers were established to carry out massive immunizations, while parasitic diseases, affecting hundreds of millions in China, were also attacked. As a result, schistosomiasis, malaria, kalaazar, and hookworm are thought to have been largely brought under control.

Approximately 90% of inhabitants had access to health care services. In 2000, 75% of the population had access to safe drinking water and 38% had adequate sanitation.

There were 62,000 hospitals and total beds numbered 2.6 million, a rate of 2.33 per 1,000. As of 2004, there were an estimated 164 physicians, 104 nurses, 29 pharmacists, and 4 midwives per 100,000 people.

During the Cultural Revolution in an effort to even out the disparity between rural and urban health services, medical personnel from hospitals (as much as 3050% of a hospital's medical staff) were sent to the countryside and the number of locally trained paramedical personnel, called barefoot doctors, expanded. These paramedical personnelyoung peasants or middle school graduateswere trained on the job by township doctors or in two-month courses at township health clinics. "Barefoot doctors" and brigade health stations were still the major deliverers of health care in the countryside.

An estimated 83% of married women (ages 1549) used contraception. The infant mortality rate was reduced from as high as 200 per 1,000 live births before 1949 to an estimated 24.18 per 1,000 in 2005. The maternal mortality rate was estimated at 55 per 100,000 live births. In the mid-1990s, China vaccinated a high percentage of its children up to one year of age: tuberculosis, 94%; diphtheria, pertussis, and tetanus, 93%; polio, 94%; and measles, 89%. Despite the high immunization rates, diseases still persist. China had the greatest number of tuberculosis cases of any UN member state. According to the World Health Organization, cholera was reported in 10,344 individuals in 1995. In China, which accounts for 20% of the world's tetanus cases, over 90,000 a year die from neonatal tetanus.

Average life expectancy in 2005 was 72.27 years, up from an average of 45 years in 1950. Major causes of death were recorded as: communicable diseases and maternal/perinatal causes, noncommunicable diseases, and injuries. The HIV/AIDS prevalence was 0.10 per 100 adults in 2003. As of 2004, there were approximately 840,000 people living with HIV/AIDS in the country. There were an estimated 44,000 deaths from AIDS in 2003.


China has an acute shortage of housing, attributable not only to the large annual increases in population (over 10 million a year), but also to the longstanding policy of directing investment funds into heavy industry rather than into housing and other social amenities. In the mid-1990s, the total number of housing units in China stood at 276,502,000. Approximately 400,000 new dwellings were completed per year and 90.6% of all homes had piped water. By the end of 2002, an additional 19.25 million sq m (207.21 million sq ft) of commercial housing had been completed, representing a 10.5% increase from the previous year. The government expects to build 486 million sq m (5,231.26 million sq ft) to 549 million sq m (5,909.39 million sq ft) of floor space each year for the first 20 years of the 21st century. In 2002, the annual investment for housing was at about us$97 billion.

During the 1990s, the government began a program of transferring ownership of stateowned housing into private hands at fairly low costs and with subsidized mortgages. As a result, an estimated 73% of families own their own residence. In 2002, the average living space was at 23.5 sq m (252.95 sq ft). In rural areas, homes tend to be smaller. Some newer rural homes are at about 50 sq m (538.2 sq ft) in size with households of about three to six people. Though many rural homes are constructed with wood and earthen walls and tile or thatched roofs, some newer homes, such as those built by Habitat for Humanity, include red brick, stone, and compressed earth blocks.


The Cultural Revolution affected education more than any other sector of society. Schools were shut down in mid-1966 to give the student Red Guards the opportunity to "make revolution" on and off campus. The Cultural Revolution touched off purges within the educational establishment. Upper- and middle level bureaucrats throughout the system were removed from office, and virtually entire university faculties and staffs dispersed. Although many lower schools had begun to reopen during 1969, several universities remained closed through the early 1970s, as an estimated 10 million urban students were removed to the countryside to take part in labor campaigns. During this period and its aftermath, revolutionary ideology, and local conditions became the principal determinants of curriculum. A nine-year program of compulsory education (compressed from 12 years) was established for youths 715 years of age.

Education was reoriented in 1978 under the Four Modernizations policy, which restored the pre-1966 emphasis on competitive examinations and the development of special schools for the most promising students. The most striking changes were effected at the junior and senior high school levels, in which students were again streamed, according to ability, into an estimated 5,000 high-quality, well-equipped schools, or into lower-quality high schools, or into the technical and vocational schools, which were perceived as the least prestigious. In addition, 96 universities, 200 technical schools, and 7,000 primary schools were designated as "key" institutions. Universities were reopened, with a renewed emphasis given to science and technology. By 1998, there were 628,840 primary schools with 5,794,000 teachers and 139,954,000 students. At the secondary level, there were 4,437,000 teachers and 718,883,000 students.

As of 2006, the nine years of compulsory education was still in effect. This consists of a six-year primary education and a three-year junior secondary program. A senior secondary program continues for another three years. The academic year runs from September to July. The primary language of instruction is Chinese.

In 2001, about 27% of children between the ages of three and six were enrolled in some type of preschool program. Primary school enrollment in 2001 was estimated at about 94.6% of age-eligible students. The same year, secondary school enrollment was about 67% of age-eligible students. It is estimated that about 98% of all students complete their primary education. The student-to-teacher ratio for primary school was at about 21:1 in 2003; the ratio for secondary school was about 19:1.

There are over 1,000 colleges and universities in China. Among the largest and most prestigious institutions were Beijing University and Qinghua University, both in Beijing; Zhongshan University, in Guangzhou; Nanjing University and Nanjing Institute of Technology; Nankai University and Tianjin University, in Tianjin; and Fudan University, in Shanghai. In 2003, about 16% of the tertiary age population were enrolled in some type of higher education program. The adult literacy rate for 2004 was estimated at about 90.9%, with 95.1% for men and 86.5% for women.

Tuition has traditionally been free in vocational secondary schools, and in training schools for elementary teachers, as well as in colleges and universities; students in need of food, clothing, and textbooks receive state grantsinaid. Primary and general secondary school students pay a nominal tuition fee. Parttime primary and secondary schools, evening universities, and correspondence schools exist for adult workers and peasants.

As of 2003, public expenditure on education was estimated at 2.1% of GDP, or 13% of total government expenditures.


The National Library in Beijing (founded in 1909) is the largest in China, with over 22 million volumes, including more than 291,000 rare ancient Chinese books and manuscripts. The Chinese Academy of Sciences Central Library, in Beijing, has a collection of 6.2 million volumes, with branches in Shanghai, Lanzhou, Wuhan, and Chengdu. The Capital Library in Beijing (2.6 million volumes) is the city's public library and operates lending, reference, and children's services. The Shoudou Library, also in Beijing, has 2.35 million volumes. Shanghai Central Library System, established in 2001 with support from the municipal government, includes about 36 branch libraries.

Small lending libraries and reading rooms can be found in factories, offices, and rural townships. The library of Beijing University, with over four million volumes, is the largest university library. Other important university collections are at Nanjing University in Nanjing (3.2 million volumes), Fudan University in Shanghai (3.6 million volumes), and Qinghua University in Beijing (2.5 million volumes). The Central Institute of Nationalities in Beijingone of dozens of private institutions with librarieshas a collection of 800,000 volumes, including 160 foreign-language journals. The Library Association of China was founded in Peiping (modern-day Beijing), China, in 1925 and reorganized in T'aipei in 1953. The Hong Kong Library Association was founded in 1958.

China has a wealth of about 1,000 museums, most of them cultural in nature. The Imperial Palace Museum in Beijing houses collections of art, sculpture, silk fabric, and furniture. The Museum of the Chinese Revolution on Tiananmen Square has exhibits of the revolutionary movement in China from the Opium War to the founding of the PRC. In Shanghai is the Museum of Art and History, with some of the country's outstanding archaeological and art collections. Many museums are memorials to Chinese artists and writers, and house collections of their work. China also has 500 historical sites with exhibitions. With the return of Hong Kong to China, the country gained the Hong Kong Museum of Art, the University Museum and Art Gallery, the Hong Kong Museum of History, and the Hong Kong Space Museum.


Postal service and telecommunications facilities fall under the authority of the Ministry of Posts and Telecommunications. In 2003, there were an estimated 209 mainline telephones for every 1,000 people.

The same year, there were approximately 215 mobile phones in use for every 1,000 people. Figures for Hong Kong alone were much higher, with 559 mainline telephones and 1,079 mobile phones for every 1,000 people.

Television broadcasting began in 1958, and color transmissions in 1973. As of 1998 China had 369 AM and 259 FM radio broadcasting stations. In 1997, China Central Television operated 209 government-owned television stations. There were also 31 provincial stations and almost 3,000 city stations. The most important station is Beijing's Central People's Broadcasting Station (CPBS); from there, programs are relayed by local stations. CPBS broadcasts daily on several channels using a variety of languages, including Mandarin (or standard Chinese), the Hokkien and Hakka dialects, Cantonese, Mongolian, Tibetan, Uigur, Kazakhi, and Korean. In 2005, there were about 2,100 television channels available through staterun Chinese Central TV, provincial, and municipal stations. Approximately 75 of every 1,000 people were cable subscribers. In 2003, there were an estimated 339 radios and 350 television sets for every 1,000 people. Many of the TV sets are installed in public meeting places and in government and economic enterprises, although increasingly a television set has become a muchprized private acquisition. Since large segments of the rural population are as yet without radios and television sets, the government operates a massive wired broadcast network linked to over 100 million loudspeakers. Again, figures for Hong Kong alone were much higher, with 686 radios and 504 television sets for every 1,000 people.

Despite controls, a rapidly growing number of Chinese have access to satellite television and the Internet. The government regulates access of the Internet through the Ministry of Information Industry and the Ministries of Public and State Security. In 2003, there were 27.6 personal computers for every 1,000 people and 63 of every 1,000 people had access to the Internet. There were 293 secure Internet servers in the country in 2004.

The press is closely controlled by the government, the CCP, or the various political and mass organizations associated with the CCP. Minority newspapers are published in Mongolian, Uygur, Tibetan, Korean, and other languages. The main news agencies are the official New China (Xinhua) News Agency; the China News Service, which supplies information to overseas Chinese newspapers and journals; and China Feature, which supplies articles to magazines and newspapers worldwide.

The Cultural Revolution caused substantial upheaval in the Chinese press establishment. Many publications closed down, and others underwent purges of editorial staffs. Publication of Hongqi (Red Flag ), the most authoritative of the CCP publications, resumed in 1968.

The major newspapers, with their locations and circulations in 2002, are: Gongren Ribao (Worker's Daily ), Beijing, 2,500,000; Renmin Ribao (People's Daily ), Beijing, 2,150,000; Xin Min Wanbao (Xin Min Evening News ), Shanghai, 1,800,000; Wenhui Bao (Wenhui Daily ), Shanghai, 1,700,000; Yangcheng Wanbao (Yangcheng Evening News ), Guangzhou, 1,300,000; Jiefang Ribao (Liberation Daily ), Shanghai, 1,000,000; and Jiefangjun Bao (Liberation Army Daily ), Beijing, 800,000.

Jiefangjun Bao, the army news, played a leading role in the Cultural Revolution. China's first English-language newspaper, the China Daily, founded in 1981, is published in Beijing and had a circulation of 150,000 in 1999. The most authoritative publication for foreigners is the multilingual weekly Beijing Review, which distributed in China and abroad with a 1995 circulation of more than 100,000.

In 2002, Hong Kong had over 75 daily newspapers in circulation, some of which are Englishlanguage papers from other countries, such as the Toronto Star, the Boston Globe, and The Australian. Major Hong Kong dailies and their 2002 circulations were Tin Tin Yat Pao, 199,260; Sing Tao Wan Pao, 125,000; Wah Ku Yat Po, 125,000; Ching Pao, 120,000; Hong Kong Commercial Daily, 110,000; South China Morning Post, 104,000; and Hong Kong Daily News, 101,815.

The largest daily newspaper in Macau is Ou Mun Iat Pou (Macau Daily News, 2002 circulation 100,000).

Government-approved publishing houses are the only legal book publishers.

Though China's constitution states that freedom of speech and of the press are fundamental rights, in practice the Communist Party and the government control all print and electronic media, which are compelled to propagate the current ideological line. All media are under explicit, public orders to guide public opinion as directed by the authorities.


Prior to 1966, the leading mass organizations, all closely tied to the regime, were the Communist Youth League, the Women's Federation, the Federation of Literary and Art Circles, the Federation of Scientific Societies, and the Federation of Industry and Commerce. These bodies were to some extent eclipsed by the Cultural Revolution, which spawned a host of new groups. After the Cultural Revolution passed its peak, many of the new organizations lost ground, while local Communist Youth League organizations, including the Young Pioneers, gained prestige. By the mid-1980s, the preCultural Revolution groups were once again ascendant.

There are professional and trade organizations representing a wide variety of professional fields. The All China Federation of Industry and Commerce promotes international trade. The All China Federation of Trade Unions serves as an advocate for worker's rights and benefits, particularly for women. The Asia Pacific Occupational Safety and Health Organization (APOSHO) is located in Hong Kong. Labor organizations in Hong Kong include the Employers' Federation of Hong Kong, the Hong Kong Confederation of Trade Unions, and the Hong Kong Federation of Trade Unions. The International Labour Organization has an office in Beijing.

Educational and cultural organizations include the China National Association of Literature and Fine Arts based in Taiwan. The Chinese Academy of Social Sciences promotes research in philosophy and the social sciences. The Hong Kong Arts Festival Society sponsors an international arts festival. The Royal Asiatic Society, dedicated to the history and culture of China, Hong Kong, and Asia, has a branch in Hong Kong. There are also several organizations dedicated to research and education in various fields of medicine and science. There are also many associations for hobbyists.

National women's organizations include the Association for the Advancement of Feminism (AAF), based in Hong Kong and the All China Women's Federation, based in Beijing. The largest youth association is the umbrella organization the AllChina Youth Federation (ACYF), which is led by the Communist Party of China. Member organizations include the Rural Young Entrepreneurs Association, the Association for Young Journalists, the Communist Youth League (CYL) of China, the AllChina Students Federation (ACSF), the YMCA and YWCA, and the Chinese Young Entrepreneurs Association (CYEA). Scouting groups exist in Hong Kong and Macau. A wide variety of sports organizations are active throughout the country, including the Chinese Table Tennis Association, which has gained international recognition.

The Asian Human Rights Commission (Hong Kong) is a multinational organization for human rights. There are national chapters of the Red Cross, Greenpeace, Habitat for Humanity, and Amnesty International.


Chinese restrictions on tourism were eased to allow access by foreigners on group tours in 1976 and further relaxed in 1983, when the ban on individual travel was lifted. By 1985, there were 244 Chinese cities and scenic spots open to foreign tourists and a number of resorts specifically designed for foreigners were in operation. China was opened to tourists from Taiwan in 1987. All visitors to China must have a valid passport and visa; personal interviews may also be required upon entry.

The most famous tourist attraction in China is the Great Wall, the construction of which began in the 3rd century bc as a barrier against northern invaders. Other leading tourist attractions include the Forbidden City, or Imperial Palace, in Beijing; the nearby tombs of the Ming emperors; historic Hangzhou, with its famous West Lake and gardens; busy Shanghai, with its well-stocked stores and superb cuisine; Xi'an, the site of monumental Qin dynasty excavations; and Guangzhou, the center of Cantonese cooking, with an extensive Cultural Park.

Sports activities in China are coordinated by the State Physical Culture and Sports Commission and the AllChina Sports Federation. Active sports, represented by national associations, include gymnastics, diving, basketball, football (soccer), tennis, cycling, swimming, volleyball, weight lifting, and mountain climbing. The 2008 Summer Olympics were scheduled to be held in Beijing, the first Olympic Games to be held in China.

Distinctively Chinese pastimes include wushu, a set of ancient exercises known abroad as gonfu (kung fu) or the "martial arts"; taijiquan, or shadow boxing, developed in the 17th century; and liangong shibafa, modern therapeutic exercises for easing neck, shoulder, back, and leg ailments. Qigong (literally "breathing exercises") is also widely practiced both as a sport and as physical therapy. A popular traditional spectator sport is Chinese wrestling. Traditional pastimes for the national minorities are horse racing, show jumping, and archery among the Mongolians; the sheep chase (in which the winner successfully locates and defends possession of a slaughtered sheep) among Uigurs and Kazaks; and yak and horse racing among Tibetans.

In 2003, about 11,403,000 tourists arrived in China. Total receipts from tourism that year were estimated at $18.7 billion, a decrease of 15% from 2002. There were 992,804 hotel rooms with 1,887,740 beds and a 56% occupancy rate.

The costs of traveling in China vary from city to city. In 2005, the US Department of state estimated the daily cost of staying in Shanghai at $320 and in Beijing at $241.


Confucius (K'ung Futzu or Kong Fuzi, 551479 bc) is generally regarded as the most important historical figure, as well as the greatest scholar, of ancient China. His philosophy and social ideas include observance of filial piety, the sanctity of the family, and social responsibility. Other early philosophers were Laotzu (Laozi; Li Erh, 604?531 bc), the traditional founder of Taoism; Mencius (Mengtzu or Mengzi, 385289 bc), who stressed the essential goodness of human nature and the right of subjects to revolt against unjust rulers; and Mo Ti (Di, 465?390? bc), who stressed the theme of universal love. Among the principal early poets was Chu (Chü) Yuan, (340278 bc), whose Li Sao, a melancholy rhapsody, is among the world's great poems. Sima Qian (Ssuma Ch'ien, 14587 bc) produced the monumental Shiji (Shihchi; Historical Records), the first general history of China. Ban Gu (Pan Ku, ad 3292) wrote Qian Hanshu (Ch'ienHan shu; History of the Former Han Dynasty), a continuation of Sima Qian's work. Zhang (Chang) Heng (78139), an astronomer, is credited with having invented the first seismograph. Zhang Zhongjing (Chang Chungching, 152219) was a celebrated physician, and Zu Zhongzhi (Tsu Chungchih, 429500) calculated the figure 3.14159265 as the exact value for pi. Three brilliant poets of the Tang dynasty were Li Bo (Po, 70162), Du (Tu) Fu (71270), and Bo Juyi (Po Chüyi, 772846). Li Shizhen (Shichen, 151893), an outstanding pharmacologist, wrote a monumental Materia Medica. Great authors of the Qing dynasty were Wu Jingzi (Chingtzu, 170154), who wrote Rulin Waishi (Julin waishih; Unofficial History of the Scholars), a superb satire on the civil service system, and Cao Xuequin (Ts'ao Hsüehch'in, 1715?63), who produced a remarkable novel, Honglou meng (Hunglou meng; The Dream of the Red Chamber). Lu Xun or Lu Hsun (Zhou Shuren or Chou Shujen, 18811936) is generally regarded as China's greatest writer of the modern period. Mao Dun (Shen Yanbing, 18961981) and Ba Jin (Li Feigan, b.1904) are leading novelists. Lin Yutang (Yut'ang, 18951976) popularized Chinese culture in the West. Ha Jin (b.1956) is a contemporary Chinese American novelist born in Liaoning, China. His novel Waiting (1999) won the US National Book Award and PEN/Faulkner Award, and War Trash (2004) was a finalist for the Pulitzer Prize. Maxine Hong Kingston (b.1940), born in California, is a ChineseAmerican writer whose The Woman Warrior (1976) won the National Book Critics Award for Nonfiction.

Political Figures

Sun Yatsen (Zhongshan or Chungshan, 18661925) planned the revolution against the Manchus and became the first president (191112) of the republic. Mao Zedong (Tsetung, 18931976), the foremost figure of post-revolutionary China, served as chairman of the Central Committee of the CCP from 1956 to 1976. Other prominent Chinese Communist leaders include Zhu De (Chu Teh, 18861976), who became commander in chief of the Red Army in 1931 and chairman of the Standing Committee of the NPC; Zhou Enlai (Chou Enlai, 18981976), first premier of China's State Council; Liu Shaoqi (Shaoch'i, 18981969), who became China's head of state in 1959 and was purged during the Cultural Revolution but posthumously rehabilitated in 1985; and Lin Biao (Piao, 190871), who became deputy premier and minister of defense in 1959 and who, prior to his death and subsequent political vilification, had been certified as Mao's successor in the constitution drawn up in 1969. Women in the political hierarchy have included Song Qingling (Soong Ch'ingling, 18921981), Sun Zhongshan's wife, and Jiang Qing (Chiang Ch'ing, 191391), Mao's fourth wife, who emerged as a radical leader during the Cultural Revolution. Jiang, with other prominent radicals, was purged in the wake of the ascension of Hua Guofeng (b.1920) as CCP chairman in 1976. Deng Xiaoping (190497), twice disgraced (196673 and 1976) by radical administrations, reemerged in 1977 to become China's most powerful political figure, albeit without major office, and a major figure in its modernization drive; he officially retired in 1987. A protégé, Hu Yaobang (191589), was party secretary until his ouster in 1987. Another protégé was Zhao Ziyang (19192005), who became general secretary of the CCP in 1987; he was purged in 1989 for his support of student demonstrators in the Tiananmen Square protests of 1989, and spent the last 15 years of his life under house arrest. Li Peng (b.1928) was chairman of the standing committee of the National People's Congress from 19982003. For his support of the violent suppression of the 1989 Tiananmen Square protests, he remains unpopular with a large part of the Chinese population. Jiang Zemin (b.1926), is part of the "third generation" of Chinese leaders (after those surrounding Mao Zedong and Deng Xiaoping); he served as general secretary of the CCP from 19892002, as president from 19932003, and as chairman of the military from 19892004. Hu Jintao (b.1942) is the fourth president of the People's Republic of China, general secretary of the CCP, and chairman of the central military commission, succeeding Jiang Zemin in those posts. He ushers in a "fourth generation" of leaders.


Hong Kong

Hong Kong consists of 237 small islands off the southeast coast of the mainland of China and a small peninsula adjoining Guangdong Province on the mainland between 22°29 and 22°37 n and 113°52 and 114°30 e. With a total area, including reclamation, of 1,068 sq km (412 sq mi), it comprises the island of Hong Kong and adjacent islands, 79 sq km (30 sq mi); the Kowloon Peninsula, 11 sq km (4 sq mi); and the New Territories (a leased section of the Chinese mainland) and the remaining islands, 978 sq km (377 sq mi). Most of Hong Kong territory is rocky, hilly, and deeply eroded. The climate is subtropical, with hot and humid summers. Rainfall is heavy and there are occasional typhoons.

Total population, which was under 600,000 in 1945, was approximately 7.3 million in 2002. Some 60% of Hong Kong's residents in 1996 were born there. The phenomenal increase since World War II (193945) resulted primarily from a large influx of mainland Chinese. During the late 1970s and early 1980s, hundreds of thousands of "boat people" arrived from Vietnam. Most have been resettled in other countries, and by mid-1987 only 8,500 remained in camps. In summer 1987, however, Hong Kong faced another influx of Vietnamese, most of them ethnic Chinese. These peoplemore than 6,000 of themhad fled to China after the Vietnam War but found it difficult to assimilate there.

The overall population density in 2002 was 5,800 per sq km (14,500 per sq mi). About 95% of the inhabitants are Chinese and about 95% of the people live in metropolitan areas. Chinese (Cantonese dialect) is the principal spoken language; both Chinese and English are official languages. Taoists, Confucianists, and Buddhists constitute a majority of the population. The Christian population (10%) is split about evenly between Roman Catholics and Protestants. There are also Muslim and Hindu communities (1%). The capital is Victoria, commonly known as Hong Kong.

Hong Kong has regular shipping, air, cable, and wireless services to every part of the world. Government-maintained roads span more than 1,830 km (1,135 mi). The milelong Cross Harbour Road Tunnel connecting Hong Kong Island to Kowloon was opened in 1972, and the Lion Rock Tunnels link Kowloon with Sha Tin; the Aberdeen Tunnel beneath Hong Kong Island entered service in 1982. The governmentowned Mass Transit Railway, a 38.6-km (24-mi) subway system, was begun in November 1975 and started operations in October 1979. The government also owns and operates a 56-km (35-mi) rail line, known as the KowloonCanton Railway. The railroad links up with the rail system of Guangdong Province and constitutes a major land-entry route to China; passenger service, suspended in 1949, was resumed in 1979. The KowloonCanton Railway operates a 34-km (21-mi) light rail system for the New Territories; as of 2001, it connected to the China railway system.

Hong Kong has one of the finest natural harbors. There are deepwater berths in Kowloon Peninsula and in Hong Kong; a container terminal at Kwaichung in Kowloon handles some 60% of Hong Kong's exports. An extensive ferry service connects Hong Kong's islands; hydrofoils provide service to Macau. The Hong Kong airport, Kai Tak, is the world's fourth-largest in terms of passenger traffic; it can handle upwards of 27 million passengers a year. A new airport, Chep Lap Kok, a us$20 billion project that included bridges, highways, tunnels, and a highspeed railway, opened in 1998. The first phase of the airport project, the West Kowloon expressway connecting the airport to Hong Kong Island, opened in February 1997. In April that year, another linkthe Tsing Ma Bridge, the longest suspension bridge for road and rail travel in the worldopened with lavish ceremonies. Three days later, a tunnel with capacity for 180,000 cars a day opened to provide another link between Hong Kong Island and the West Kowloon expressway.

A bleak fisherman's island for most of its early history, Hong Kong was occupied in 1841 by the British. Formal cession by China was made in 1842 by the Treaty of Nanking. The Kowloon Peninsula and adjacent islands were added in 1860, and in 1898, the New Territories were leased from China for 99 years. Hong Kong fell under Japanese occupation from 25 December 1941 to 30 August 1945. Negotiations between the United Kingdom and China culminated in an agreement on 26 September 1984 under which sovereignty over the entire colony would be transferred to China as of 1 July 1997. For a 50-year period, Hong Kong would be a Special Administrative Region and would retain its capitalist economy, its political rights, and its general way of life. A Basic Law, forming a constitution for this period, took effect in 1990.

In the interim, the colony was ruled by a UKappointed governor, with an advisory Executive Council headed by the local commander of UK forces, and an appointed Legislative Council presided over by the governor. Chris Patten, appointed governor in 1992, held the post until the transfer of control to China 1 July 1997. The Urban Council of 30 members (15 elected and 15 appointed by the governor) dealt primarily with municipal affairs, and the government secretariat was responsible for the work of some 40 executive departments. The public sector's share of GDP decreased steadily after 1973. Under a 1981 defense agreement, about three-fourths of the cost of the maintenance of a garrison of 8,945 troops (including four Gurkha battalions) in Hong Kong was borne by the Hong Kong government. The currency unit is the Hong Kong dollar; exchange rates as of 2005 were hk$1 = us$7.7773; us$1 = hk$0.1286).

Located at a major crossroads of world trade, Hong Kong has become a center of commerce, shipping, industry, and banking. Rapid industrialization, accelerated by the influx of new labor, skills, and capital, changed the pattern of the economy after World War II. While heavy industries, such as shipbuilding and ship repairing, iron, and steel, remain important, light industriesespecially watches, clocks, toys, and electronicshave developed more rapidly in recent years. The service sector has also experienced growth; as of 2005, approximately 90% of Hong Kong's GDP derived from services. In 2005, the gross domestic product (GDP) stood at us$172.6 billion, with annual growth that year of 7.3%.

Less than 10% of the total land area is used for farming, most of which is intensive vegetable cultivation. Agriculture does not represent a significant portion of Hong Kong's GDP and most of Hong Kong's agricultural produce is imported. Hong Kong is among the top export markets for US produce.

Electricity is supplied by two franchise companies. Water resources, for long a serious deficiency, have been increased by converting Plover Cove into a lake. About one-quarter of the water supply is purchased annually from China.

Imports in 2005 were estimated at us$291.6 billion, and exports and reexports at us$286.3 billion. As one of the world's largest banking centers, Hong Kong receives a continuous flow of outside capital. The Hong Kong Association of Banks was created in January 1981 to regulate charges and deposit interest rates and oversee banking standards. There is no central bank; currency is issued by two commercial banks. In addition to the licensed banks, many Chinese firms handle Chinese remittances from overseas.

Hong Kong is self-supportive except for external defense. Revenues in 2005 were estimated at us$31.31 billion, derived mainly from internal taxation and import duties. Government expenditures, including us$5.9 billion in capital expenditure, amounted to us$32.3 billion in 2005.

Tourism was an important industry prior to 1997, and remained so after the transfer of Hong Kong to China. About one-fourth of the total number of tourists travel to Hong Kong from the United States, Canada, and Western Europe, with another one-fourth from Japan. Travel restrictions for tourists from mainland China were eased, resulting in growth in tourism in 200305.

Main line telephones numbered about 3.8 million in 2004; mobile cellular telephones numbered about 8.2 million that year. Broadcasting services are provided by a government station, Radio Television Hong Kong, and by commercial operators. Broadcasting services are in both Chinese and English. More than 90% of all households have one or more television sets. The Hong Kong press included 734 newspapers and periodicals. Almost all the newspapers are in Chinese; five are Englishlanguage dailies.

The infant mortality rate was 2.95 deaths per 1,000 live births in 2004, down from 5.73 deaths per 1,000 live births in 2002. The average life expectancy as of 2004 was 81.59 years (females, 84.5 years and males 78.9 years), up from 79.8 years in 2002. In 1995, there were 4.7 hospital beds per 1,000 population, and the daily cost of a hospital bed in a public hospital was $60.

The Hong Kong Housing Authority plans, builds, and manages public housing developments. About 40% of the population lived in public and aided housing as of the late 1990s.

In September 1980, education until the age of 15 was made compulsory; six years of primary and three years of secondary schooling are provided by the government free of charge. Schools are of three types: Chinese, English, and AngloChinese. Prevocational training was offered in more than a dozen government run institutions. Student enrollment in primary and secondary school is about a quarter of the population. Higher education is provided primarily by the University of Hong Kong and the Chinese University of Hong Kong. Hong Kong Polytechnic and the City Polytechnic of Hong Kong also provides postsecondary education for the colony's residents. As of 2002, approximately 93.5% of the population was literate (96.9% for men and 89.6% for women).


Macau (Macao) is situated on the south coast of China, at the mouth of the Pearl (Zhu) River, almost directly opposite Hong Kong, which is about 65 km (40 mi) away. Located at 22°6 to 22°13 n and 113°33 to 113°37 e, Macau consists of a peninsula, about 5 km (3 mi) long and 1.6 km (1 mi) wide, and two small islands, Taipa and Coloane. The total area is about 16 sq km (6 sq mi), and the total coastline is 41 km (25 mi). The climate is subtropical, with high humidity from April to October, when Macau receives most of its rainfall. Daily maximum temperatures average 29°c (84°f) during the summer; normal daily temperatures are less than 20°c (68°f) during the winter months.

Macau's population was estimated at 453,125 in mid-2006, down from 496,837 in mid-1996. The population density of over 29,000 per sq km (79,000 per sq mi) was among the highest in the world. Chinese, many of them refugees from the People's Republic of China (PRC) before Macau reverted to the PRC in 1999, constitute 95% of the total; the remaining 5% are Portuguese or of mixed Chinese Portuguese ancestry. Largescale movement of Chinese in and out of Macau has inevitably affected the economic and social life of the territory. The common language is Chinese, usually spoken in the Cantonese (87.9%), Hokkien (4.4%), or Mandarin (1.6%) dialect. As of 1997, Buddhism (50%) and Roman Catholicism (15%) were the dominant religions.

In 2003 there were about 345 km (215 mi) of highways. A causeway links Taipa and Coloane islands, and a 2.7-km (1.7-mi) bridge connects Macau and Taipa. Macau's main asset is its harbor; ferries, hydrofoils, and jetfoils offer shuttle service between Macau and Hong Kong. In 1994, a 240-km (149-mi) road connecting Macau and Hong Kong opened, running through Guangdong Province in the PRC.

Macau is the oldest European settlement in the Far East. The first Portuguese attempts to establish relations with China were made in the early 16th century. In 1557, the Chinese authorities agreed to Portuguese settlement of Macau, with leaseholder rights. The Portuguese, however, treated Macau as their possession and established a municipal government in the form of a senate of the local inhabitants. Disputes concerning jurisdiction and administration developed. In 1833, Macau, together with Timor, became an overseas province of Portugal under the control of the governor-general of Goa, and in 1849, Portugal succeeded in having Macau declared a free port. On 26 March 1887, China confirmed perpetual occupation and governance of Macau and its dependencies by Portugal, but the question of the delimitation of the boundaries was left unsettled.

As the only neutral port on the South China Sea during World War II (193945), Macau enjoyed a modicum of prosperity. In 1949, the government of the PRC renounced the "unequal treaty" granting Portuguese suzerainty over Macau. Civil disturbances in late 1966 between Macau police and Chinese leftist groups resulted in concessions to the territory's proChina elements. The 1974 military coup in Portugal led to a constitutional change in Macau's status from a Portuguese province to a "special territory." In January 1976, Portugal's remaining few hundred troops were withdrawn from Macau. China and Portugal established diplomatic ties in 1980. In March 1987, the PRC and Portugal reached an agreement for the return of Macau to the PRC on 20 December 1999. The PRC has guaranteed not to interfere in Macau's capitalist economy and way of life for a period of 50 years.

Until December 1999, Macau was ruled by a governor appointed by Portugal, although it was empowered to make its own laws, appoint and control its own civil service, and contract directly for foreign loans.

Prior to and immediately following Macau's transfer to PRC control, the unit of currency was the Macau pataca (p) of 100 avos; Hong Kong dollars also circulated freely. There are coins of 10, 20, and 50 avos and 1 and 5 patacas, and notes of 5, 10, 50, 100, and 500 patacas. The pataca is linked to the Hong Kong dollar at the rate of hk$1= p1.03; as of 2005, the rate of exchange with US dollars was us$1= p8.011 or p1 = us$0.1248. Corporate taxes and import duties are important sources of revenue; major expenditures are for finance, security, education, and health and welfare.

Macau's economy is consumer-oriented. There is little agriculture and the territory is heavily dependent on imports from China for food, fresh water, and electricity. Important economic sectors are commerce, tourism, gambling, fishing, and light industry. There are small- and mediumscale enterprises concerned especially with the finishing of imported semi-manufactured goods, in particular the manufacture of clothing, ceramics, electronic equipment, toys, and fireworks, and the printing and dyeing of cloth and yarn.

Macau's historic role has been that of a gateway for southern China. It has close trade relations with neighboring Hong Kong, another free port. Gold trading, formerly a major facet in Macau's economy, virtually came to a halt in 197475 following Hong Kong's decision to lift its own restrictions on gold trading. The principal exports were clothing, textiles, footwear, toys, electronics, and machinery and parts. Principal export partners in 2004 were the United States, 48.7%; China, 13.9%; Germany, 8.3%, Hong Kong, 7.6%, and the United Kingdom, 4.4%. The principal imports were raw materials and semimanufactured goods, consumer goods (foodstuffs, beverages, and tobacco), capital goods, and mineral fuels and oil. Total imports in 2004 were valued at $3.478 billion, of which China provided 44.4%; Hong Kong, 10.6%; Japan, 9.6%; Taiwan, 4.9%; Singapore, 4.1%, and the United States, 4.1%.

Government schools are operated mainly for the children of civil servants and wealthier families, while poor Chinese students are educated in schools supported by China. Macau's University of East Asia opened in 1981. The Medical and Health Department, although critically understaffed, operates a 400-bed hospital. The 800-bed Kiang Vu Hospital has a largely Chinatrained staff.

There were 173,900 main telephone lines and 432,400 mobile cellular phone lines in use in 2004. Macau has two FM radio stations and has access to satellite communications. There are newspapers published in Chinese and Portuguese. Macau receives television broadcasts from Hong Kong.

With its varied gambling facilities, gambling provides about 70% of government revenue. Travelers must have a valid passport and a visa, which is generally purchased at the point of disembarkation. After the transfer of Macau to Chinese control in 1999, there was an increase in tourist arrivals from China.


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