A Report on the Development of China’s Market Economy 2003
(Condensed Version)
China’s accession to the WTO in the year 2001 is an event of great significance in the history of world trade. The
World Trade Organization, with the overwhelming majority of its members being market economy countries,
follows the rules of market economy in its operation. It is unfair, however, that in its worldwide trade activities
China is regarded as a “Non-Market Economy Country”(NMC) in overseas anti-dumping cases against China. As
a matter of fact, China has already established a market economy system after over 20 years of reforms and
opening-up. In order that our foreign friends have a better understanding of China’s market economy, we devoted
the whole of year 2002 to studying the situation of China’s market economy as of the end of 2001. The
development of China’s market economy is evaluated and assessed in comparison with that in some developed
countries, countries in economic transition and developing countries. A Report on the Development of China’s
Market Economy 2003 is compiled on such basis. This is a condensed version in English to facilitate our readers
abroad as the full text is being translated into English at the moment.
Ⅰ. Antidumping and Non-Market Economy Countries
It is known to all that whether a country is a market economy is an important concept frequently used for
determining the dumping margin in anti-dumping investigations. Once the exporting country is categorized as a
NMC, the investigation authority of the country launching anti-dumping actions will refer to the cost related data
of a market economy country with a similar level of economic development in calculation of the so-called “normal
value”, which is used to measure the dumping margin and to determine the corresponding duties to be imposed.
Antidumping is permitted by the WTO and is accepted by all countries as a lawful measure for maintaining
fairness in trade and for protecting the safety of domestic industries. China agrees with and supports such actions
and has always opposed using dumping as a means to distort the order of fair competition in international trade or
to harm the interests of relevant businesses of trading partners. On the other hand, China is strongly against
abusive use of antidumping or turning it into a tool for implementing trade protectionism or discriminative policies.
Currently there do exist cases in which some countries, taking advantage of certain cases of trade disputes, have
turned antidumping into a means for trade protectionism by purposefully exaggerating the magnitude of the
so-called dumping from the other country. Moreover, some developing countries and countries in transition are
categorized as “non-market economy countries”, and market prices of a third country (the surrogate country)
whose economy has nothing whatsoever to do with these countries are used in determining the normal values of
their products regardless of the actual costs and prices of the products. Thus the real economic situations of these
exporting countries cannot be correctly reflected, leading to wrong conclusions. Faced with such discriminative
measures and unfair treatment, exports from some countries are judged as “dumping” when they are actually not,
or “serious dumping” when they are slightly so, creating artificial barriers to exports from these countries and
causing excessive frictions and disturbances in the fair order of the international trade.
China is one of the badly afflicted countries. The lack of sufficient communication is the main reason why some
countries judge China as an NMC and resort to antidumping policies against China frequently. They definitely
have no idea as to how far China has gone on the development of a market economy, as to China’s rapid progress
in the market-oriented reforms, nor do they understand exactly what sort of market economy would be referred to
as the “socialist market economy”. While on the part of the Chinese enterprises, lack of knowledge about
international antidumping laws and procedures, not well informed of various changes that have taken place in
China’s market economy, they will not be able to provide extensive background information for investigation use
to the countries launching antidumping actions for a considerable length of time to come. Although the Chinese
scholars have made numerous attempts at assessing China’s market-oriented reforms with a view to further
promote the reforms, they have almost never discussed the issue of China’s NMC status with their foreign
counterparts from an antidumping point of view. The result is that some countries’ misjudgment of China’s
economy not only has never been corrected, but it has even been aggravated due to some trivial disputes. Of course,
possibilities do exist in some antidumping cases where factors other than short of understanding are playing a role.
For instance, when the economic interests of the relevant enterprises of an importing country are involved, the
government of the importing country sometimes may yield to undue demands of the domestic enterprises. At times
it is even possible that certain government institutions have sneaked certain political factors into antidumping
measures when they are only supposed to deal with trading issues.
As a matter of fact, the status of a market economy is not the only condition for winning an antidumping case.
Unfairly traded products exist in a market economy. Fair and mutually satisfying trade is also possible in a
non-market economy. Among enterprises that have obtained market economy status there are losers in an
antidumping case. Therefore China demands that the antidumping countries take a realistic position in relation to
China’s NMC issue. China is not pursuing a favorable position in antidumping actions, but is demanding a fair
treatment as a trading partner. China only hopes that antidumping measures for reinforcing fairness in trade will
not turn into a means for expanding unfairness in trade.
In order to obtain a non-discriminative and impartial judgment, patience and objectiveness are required on our part
in informing our foreign friends on the rapid economic transition process in China so that they know China is a
market economy and China’s enterprises are operating under the conditions of a market economy. This Report
provides our foreign friends with the results from a comprehensive research on China’s market economy. Readers
domestic and overseas alike, especially those from overseas, are welcome to give their verdict with regard to the
development of China’s market economy. Comments and suggestions put forward through reasoning
matter-of-factly by all parties including those from Chinese and foreign experts will be considered to the full
extent, as they will not only further promote China’s market-oriented economic reforms, but will also contribute in
forming a fair and impartial world trade order and economic development environment.
Ⅱ. The Criteria of Market Economy Viewed from Antidumping Perspective
The questions “What is a market economy?” “ What is a standard market economy?” or rather “What are the
standards for a market economy?” would naturally prop up when people are talking about some countries being
market economy countries and some enterprises being market economy enterprises. For if not so, how come the
conclusion as to whether a country is or is not a market economy country?
ⅰ. Criteria of Market Economy as Defined by Relevant Antidumping Laws of the USA, the EC and Canada
“Non-Market Economy Countries” as referred to by the US Department of Commerce are countries whose
operation does not follow market costs or price rules. There are six statutory requirements [19U.S.C—1677(18)] or
concrete standards set by it with regard to the market economy: 1, the extent to which the currency of the foreign
country is convertible into the currency of other countries; 2, the extent to which wage rates in the foreign country
are determined by free bargaining between labor and management; 3, the extent to which joint ventures or other
investments by firms of other foreign countries are permitted in the foreign country; 4, the extent of government
ownership or control of the means of production; 5, the extent of government control over the allocation of
resources and over the price and output decisions of enterprises, --requesting that decisions concerning the output
and prices of an industry are free of government intervention and that all important product inputs are paid at
market prices-- and 6, such other factors as the administrating authority considers appropriate. In addition, the
Department of Commerce is particularly concerned with the export control by the exporting countries: on the one
hand, if there is any control by the government with regard to the enterprises’ export activities by law. This
includes: a, any restrictive regulations concerning business operation and export permits of the enterprises; b. any
legislation for reduction of control on enterprises; c. any other governmental measures for reduction of control on
enterprises. On the other hand, with regard to the facts of governmental control on the enterprises’ export activities,
the Department of Commerce usually considers the following elements: a. whether export prices are determined by
the government or subject to government approval; b. whether the exporter has the right to negotiate contract terms
and sign the contracts or other agreements; c. whether the exporter is free of government restriction in choosing its
managing body and enjoys full autonomy; d. whether the exporter enjoys independent power of decision in
distribution of profits and remedying losses.
The EC issued a regulation No 905.98 in 1998, which allows the Chinese respondent enterprises to apply for the
status of market economy in antidumping investigations and stipulates five criteria for determining the status of
market economy, namely, 1, prices, costs and inputs etc are determined by market demand and supply; 2, firms
have one clear set of basic accounting records which are independently audited in line with international
accounting standards and are applied for all purpose. 3, the production costs and financial situation of firms are not
subject to significant distortions carried over from the former non-market economy system, in particular in relation
to depreciation of assets, other write-offs, barter trade and payment via compensation of debts. 4, the firms
concerned are subject to bankruptcy and property laws that guarantee legal certainty and stability for the operation
of firms, and, 5, exchange rate conversions are carried out at the market rate.
In its investigation on the issue of “non-market economy”, Canada specified five aspects: 1, is the government’s
role in formulating economic policies and controlling economic activities interfering the normal performance of
the market economy? This includes the weight and structure of governmental influence in pricing, distribution of
products and procedures for making offers; the pricing mechanism of domestic products and services; planning
and controlling of production of commodities and provision of services and market restrictions; the control of
domestic and international trade; further reforms in the structure and functions of government organizations. 2,
how does the government control or govern the enterprises in respect of production, sales and procurement? And
how is control or governing applied in connection with the enterprise financing? 3, in respect of international trade,
the conditions and procedures the foreign trade enterprises must comply with for the government to allow it to
carry out foreign trade business; government guidance and control in respect of quotas and prices of import and
export products. 4, market-oriented reforms of state-owned enterprises, including the existing types of ownership,
when and how the ownership system was transformed; in the state-owned enterprises under government control,
the mechanism for determining prices of elementary factors such as raw materials, energy, labour cost as well as
quantity and prices of its products, the managing of the enterprise’s funds and performance, the distribution of
profits, the relationship between employer and employees and the availability of loans etc. 5, whether there are
different interest rates for different enterprises, industries and domestic and international trade departments,
whether the exchange rates are determined by the market as far as the exporters are concerned and whether the
enterprises enjoy autonomy in obtaining foreign exchange and keeping foreign exchange etc.
Obviously the standards of market economy defined by the European and American countries, although not
without intentions to safeguard the interests of the developed countries, are after all based on the factors that may
affect fairness of trade in antidumping actions, and are precisely relevant to the issues in question. Naturally there
are differences between the criteria of market economy put forward by the USA and those by the EC and Canada,
for the USA has directly raised the issue of criteria for a country to be a market economy, while the EC and
Canada mainly talked about the criteria of market economy of an enterprise and an industry. It is obvious, however,
that such differences are only superficial. As far as the contents are concerned, they are the same or similar, and in
essence they are exactly the same. These criteria form an integrated system and are not to be applied independently.
The European countries and the USA will not make their judgment just according to one criterion, but will sum up
the results of investigations in all aspects covered by these criteria in determining whether or not the enterprise or
the industry has reached the critical point of a market economy so as to reach a conclusion whether the country, the
industry or the enterprise in question has achieved the status of a market economy. Of course, in actual treatment
of an antidumping case, the defending party will have to be prepared in line with the standards of the country that
is initiating the antidumping action.
ⅱ. The Five Major Factors of Market Economy
In view of the actual development of market economy in China and abroad, and taking into consideration of the
criteria of market economy formulated by the USA, the EC and Canada for antidumping purposes, we are of the
opinion that there are five major aspects that are particularly important in defining a market economy country,
from which five universally applicable standards can be obtained.
1. The Role of the Government. The European countries and the USA are concerned with the following issues:
the governmental possession, allocation and control of natural resources, capital and human resources; the
governmental control of and authority over the performance of the national economy; the government’s control on
production, where the control is manifested in property ownership of enterprises, the distribution of profits and the
mechanism for bankruptcy, while the production mainly refers to questions such as who produces, what are
produced, how much to be produced and for whom to produce; the government’s control on international and
domestic trade and the government’s control on intermediary organizations such as chambers of commerce and
industrial associations etc. All of these issues, to sum up, are the roles of the government, or, to put it more
precisely, are the roles to be played by the government in a market economy and refer to the relations between the
government and the enterprises. In the final analysis, it is a matter concerning who shall allocate the resources, the
government or the market? Who shall make the decisions concerning the use and pricing of the resources, the
market or the government? Does the government respect and protect the autonomy of the economic entities in their
business operations? Are all enterprises treated equally? We shall call this the “standardization of governmental
behavior”.
2. The Enterprises’ Rights and Behaviors. The US Department of Commerce is concerned with whether there is
government intervention in the enterprise’s decision on output quantity and pricing, whether the enterprise enjoys
autonomy in its operation and exports, whether it enjoys independent power in choosing its managing body, in
distribution of profits and in remedying losses, whether it has the autonomy in negotiation of contract terms and
signing contracts, particularly if these enterprises are in the export business. The EC is likewise concerned whether
the enterprises have the right to take decisions on the prices and quantities of their exports, whether they have
basic book-keeping systems in compliance with the international accounting standards, whether they are entitled to
obtain financing and to transfer their profits abroad, whether they enjoy full freedom in carrying out business
activities. In the case of Canada, the investigation authorities apart from being concerned about the
above-mentioned aspects, they are curious about the type of ownership of the enterprises and the ownership
transformations in state-owned enterprises etc. In a word, this issue concerns the enterprises’ rights and behaviors.
In the final analysis, the apprehension is whether the enterprises are market-oriented or administration-oriented in
their production and operation. Here we may call it the “freedom of the economic entity”.
3. Costs and Prices of the Input Factors. The US Department of Commerce is concerned with the extent of
control on the allocation of resources by the government, and with whether the inputs in products are paid at
market prices; The EC is concerned with whether the market can determine the prices of the input factors and the
trustworthiness of the enterprises’ costs; The relevant authorities of the Canadian government are concerned with
how the decisions are made in respect of the prices of the input factors such as raw materials, energy, labor costs as
well as output quantity and prices of products in the state-owned enterprises. All in all, the EC and the North
American countries are concerned with whether the production factors such as raw materials and labor input by the
enterprises are paid at market prices. This is totally understandable as the prices of inputs will affect the costs of
the outputs and will directly influence the prices of the products and is therefore in direct connection with the
antidumping cases. For this reason, any importing country would be particularly concerned with the
trustworthiness of the costs and the rules governing the formation of prices of the products from an exporting
country. We may call this the “marketization of productive factors”.
4. Trade Environment. The EC and the American countries are concerned that in trade activities, international
and domestic alike, are the transactions carried out freely or subject to restrictions? Are well-developed market
infrastructure, market legislation and judicial system available? Are the market intermediaries independent and
what roles are they playing? Do the enterprises have autonomy in determining their prices according to the trade
policy? How does the government exercise control over exports and exporting enterprises? Can the enterprises
carry out business activities independently? All these issues are related to trade environment and conditions, we
may call them the issues for the “fairness of trade environment”.
5. Financial Parameters. The EC and the American countries are especially keen about whether the interest rates
and exchange rates of the country under antidumping investigation are determined by the market. Is the local
currency convertible and to what extent is it convertible? Are there different interest rates for different enterprises,
departments of domestic and foreign trade and different industries? Is the enterprise’s financial status not distorted
by the former non-market economy system? Are the enterprises free to transfer the profits or capital? Do the
enterprises enjoy autonomy in swap and deposit of foreign exchanges? In a word, the apprehension is about the
way in which the two financial parameters, namely the interest rate and the exchange rate, are formed and the
fairness in the application of them, thereby touching upon the principles underlying the formation of these
parameters, i.e. the rationalization of the financial structure. We hereby will call it the “rationalization of
financial parameters”.
Obviously, the above five key factors in the criteria of market economy are put forward on the basis of our
knowledge and understanding of the theory and reality of the modern market economy, having taken into full
consideration of the criteria of market economy put forward by the EC, the USA and Canada for antidumping
purposes, and are closely focused on the matter of fairness in trade. We are of the opinion that as a pragmatic
approach, comparisons and discussions on the basis of these five factors as our criteria for market economy will
facilitate our direct dialogue with the EC, the USA and the other countries.
Ⅲ. 1978-2001: Speedy Progress of China’s Market Economy
China started to make reforms in its system of planned economy in 1978. In 1979, the household contracted
responsibility system with remuneration linked to output was promoted in the rural areas, and the farming
households were entitled to full autonomy in arranging their production. In 1984, China made a decision to reform
its economic system. In October 1992, China made it explicit that the objective of its reforms was to establish a
system of socialist market economy. In 2002, the 16th National Congress of the Communist Party of China
proclaimed to the world that China has established a preliminary system of socialist market economy. China will
persevere in its reforms and opening-up, and will continuously improve its system of socialist market economy.
After over 20 years of efforts, China’s achievements in market-oriented economic reforms have attracted
worldwide attention.
The first priority was shifting the function of the government from serving the planned economy to serving the
market economy so that it was the market that would play a fundamental role in the allocation of resources. The
product and the quantity to be produced are decided by the producer at his own will according to the demand in the
market, meaning that the players in the market have obtained autonomy in their business activities. The
government faded out step by step from direct involvement in the management of numerous enterprises to become
a macro regulator and a social administrator. After the reforms in taxation, financing, foreign exchange and
investment systems in 1994, China has established a macro administrative system that matches the requirements of
a market economy.
Secondly, a pattern in which economic sectors of a diversity of ownerships are developing concurrently is taking
shape. Estimations made by the State Bureau of Statistics show that the contribution to GDP in the form of the
added value created by China’s non-state-owned sectors rose to 63.37% in 2001 as compared to 53.57% in 1992.
Further, according to the assessment by the International Financing Company under the World Bank, by the year
1998 the contributions to China’s GDP by enterprises from different sectors are: 37% by state-owned sector, 12%
by collectively owned sectors, 24% by private sector, 6% by foreign funded businesses, 3% by joint-equity
companies and 18% by farming households respectively. In other words, the private sectors took up 51% of the
total GDP. This estimation is accepted internationally. The non-state-owned sectors have become an important
force in supporting the national economy. The state-owned enterprises have become much more market-oriented,
under the ever more intensified pressure for transformation of system in line with accepted norms. “Clearly
established ownership, well defined power and responsibility, separation of enterprises from administration and
scientific management” are the important principles guiding the transformation of state-owned enterprises. The
reforms in personnel, employment and distribution systems initiated the spontaneous migration of the labor forces
and the negotiated rate of salaries. The current phase of reform and re-structuring of the monopolized industries
have been successful. The state-owned enterprises are basically following the market rules in their operations and
have become participants of the market. Measures taken by the Chinese government in encouraging direct
investment by the foreign businesses have resulted in a large number of foreign invested enterprises making
significant contributions. Of the increased portion of the total volume of imports and exports for the year 2001,
63% was contributed by foreign invested enterprises. Many world-known transnational companies from Europe
and America such as Motorola, Siemens, Alcatel, Nokia and Phillips have achieved fabulous successes in the
Chinese Market, as the market-oriented reform of China is a powerful statutory support to their efforts in
developing the Chinese market. These companies are the witnesses of the development of China’s market
economy.
Thirdly, the market system has been better improved. A financial market has been established from non-existence
and is growing ever more sophisticated. The labor market is developing rapidly in recent years. The real-estate
market is growing steadily. The markets for technology and information are being formed step by step. The prices
of the most majority of commodities, productive factors and services are determined by the market. The interest
rates are becoming more market-directed. A flexible exchange rate system that is market-oriented and
well-directed is playing an effective role. The development of intermediary organizations is accelerated and a
preliminary system of intermediary organizations has come into being with a variety of types, organizations and
method of services. Meanwhile the management and supervision of market have witnessed constant improvement.
A fact particularly worth mentioning is that a basic legal system for the market economy has been established in
China. In the past several years, the Constitution underwent three amendments and modifications, so that it
explicitly states that “China practices a socialist market economy”, establishing that all sectors in the market
economy are on an equal standing. In order to meet the requirements for the development of a market economy, a
series of new laws were made, market rules established, behaviors of market principals standardized and the
State’s function in controlling the economy clarified.
All of the above has made it clear that a preliminary market economy system has been established in China and
that China has become a developing market economy country.
IV. Year 2001: The Development of China’s Market Economy
How was the situation of China’s market economy in the year 2001? An analysis focusing on the five aspects of
government, enterprises, productive factors, trade environment and financial parameters is given as below:
ⅰ. The Government Serving the Development of Market Economy
—— Government Shrinking in Size. In 2001, government revenue accounted for 25.78% of the GDP from the
former 42.02% in 1992. The number of government personnel accounted for 4.56% of the total employed, while in
1992 the percentage was 5.16%. Government subsidies declined to 1.08% of the GDP from 1992’s 2.88%.
—— Drastic Reduction of Direct Government Intervention in Economic Activities. When the 1992 price-setting
catalogue was issued there were 141 types of commodities and services under government control, while in 2001
the figure reduced to 13. Government fixed prices accounted for 5.6%, 10.3% and 19.8% of the total social retail
sales, the total farm and sideline product purchase volume and the total sales of producer goods respectively in
1992, while in 2001 the same percentages dropped to 2.7%, 2.7% and 9.5% respectively.
—— Production Being Regulated by the Market. In industrial production, only five products, namely timber, gold,
cigarettes, salt and natural gas, are under mandatory planning. In the case of timber, natural gas and gold,
mandatory planning is limited to certain stages of the production process and certain types of products. Thousands
of industrial products are turned out according to demand in the market. In agriculture, mandatory planning is
completely cancelled, and the production is mainly subject to guidance planning and market regulation.
ⅱ. Breakthrough in Market-Oriented Development of Enterprises
—— Contribution to the Growth of National Economy by Non-State-Owned Sectors Surpassing that by
State-Owned Sector. In 2001, the added value created by the non-state-owned sectors accounted for 63.36% of the
GDP. The investment in fixed assets by the non-state-owned sectors accounted for 52.69% of that by the whole
society. Employees in the non-state-owned sectors accounted for 68.9% of the total urban employed population.
The tax revenue created by the non-state-owned sectors accounted for 64.42% of the country’s total tax revenue.
The total import and export volume by the non-state-owned sectors accounted for 55.04% of the country’s total
import and export volume.
—— Market Access Restrictions against Non-State-Owned Sectors Abolished. At present, there are no longer
government regulations restricting access to market by the non-state-owned sectors, except for a few industries
such as manufacture of weapons and production of gold, which must be monopolized, and some other industries,
which are subject to approval in advance. In the so-called monopolized industries such as petroleum and natural
gas exploring, the number of non-state-owned enterprises has surpassed that of the state-owned enterprises,
accounting for over 65% of the industrial value added and nearly 50% of the total assets.
—— Better Administering Mechanism of Enterprises and Diversified Investing Bodies. In 2001, over 70% of the
enterprises underwent system transformation, out of which 1060 turned into listed companies in 2001. Among the
transformed companies, administering mechanism is being modified according to accepted standards. For instance,
86.3% of the state-owned enterprises and 95.1% of the non-state-owned enterprises are selecting their management
bodies from the market; 89.4% of the state-owned enterprises and 96.2% of the non-state-owned enterprises are
enjoying autonomy in decision-making. A healthy administering mechanism in which interests of a diversity of
investing bodies are well balanced has been formed.
—— Enterprises Shifting to Market-Oriented Production and Operation. In terms of fund raising, the most
majority part of the funds for investment in enterprises came from funds raised by the enterprises themselves,
loans from banks or financing through stock exchanges. In 2001 funds from the three sources accounted for over
80% of the total. In respect to marketing and pricing of products 98% of the enterprises take their decisions
according to market supply and demand and to costs of production. State-owned enterprises are fading out, as in
2001, 67.5% of the state-owned enterprises in losses were sold, re-organized or declared bankrupt. With regard to
state-owned enterprises in common competitive fields, the government encourages non-state-owned enterprises,
individuals and overseas investors to participate in the re-organization or system transformation and the
participants are allowed to be the controlling shareholders. In the case of the small state-owned enterprises, they
were to be gradually transformed into non-state-owned enterprises by means of shareholding, auctioning or
transfer of property rights.
ⅲ. Productive Factors Obtained Mainly From Market
—— Allocation of Funds by Market Mechanism Considerably More Widespread. The weight of self-raised funds
(including funds accumulated by the enterprise over the years and financing through becoming a listed company)
in the whole society’s investment in fixed assets kept rising, standing at 69.6% in 2001, scoring the highest level
since 1978 when reform and opening up were initiated. In 2001, the total net market value of the listed companies
reached RMB4350 billion, the market value in circulation being RMB1450 billion, the market value of shares
accounted for 45% of the GDP. Loans from commercial banks accounted for 72% of the volume of loans from all
the financing institutions. Foreign funds are taking an ever more important position in the whole society’s
investment in fixed assets, accounting for 4.6% in 2001, representing the largest absolute size of foreign funds
among the developing countries.
—— Labor and Salaries Remarkably More Market-Determined. The allocation of labor resources is realized
through all types of labor markets according to supply and demand situations. The responsibilities, obligations and
duties of both parties and settlement of labor disputes are all to be stipulated in agreement in strict compliance with
the relevant laws. With the development of economy, more job opportunities have become available, resulting in
remarkable increase in the migration of the working population. According to the Chinese Statistical Almanac, the
national rate of variation in the number of employees shifting between trades and industries was 4.96% in 2001,
which was 2.32 times that of 1992, indicating a remarkable increase in the frequency of job-shifting. According to
the sampling by the Policy Research Office of the State Economic and Trade Commission, the level of freely
determined employment and salaries rose sharply, reaching 97% in 2001. In the questionnaires handed out to 36
enterprises involved in antidumping cases, 34 enterprises responded to the question about the determination of
salaries. The results showed that 13 of them had their salary levels determined through free negotiation between
the employer and the employees, and 20 of them let the management make the decision provided that the decision
was acceptable to the employees. These two approaches, regarded as market-determined approaches, account for
97.06% of the responding enterprises.
—— Allocation of Land through Market Mechanism Accelerated. According to the Government Bulletin on
China’s Land Resources of 2001, among a total of 2053 townships and counties of China, 1142 of them
established information briefing system in 2001, 1515 of them established land registration and information
inquiry system, 1216 of them formulated the minimum requirements for contractual transfer of land, 1087 of them
established physical land markets, 1604 of them established collective decision making system concerning
important issues on management of land properties; and 1002 of them established land acquisition and reservation
system. In 2001 there were 23847 cases of tendered auction of state-owned land in China, the total area of the land
auctioned and transferred exceeding 100,000 hectares. Out of the 36 enterprises that received our questionnaires 30
enterprises responded to our questions regarding to the acquisition of land, showing that 5 of them acquired their
land by means of leasing, 6 of them by purchasing, 4 of them by transfer of tenure, and 9 of them by government
transference against payment. The four approaches, considered as market approaches, accounted for 80% of the
responding enterprises. The other six enterprises obtained their land by governmental allocation free of charge,
accounting for 20% of the total cases. However these six are either enterprises remaining their state-owned status,
or enterprises that have transformed their ownership systems but the land was allocated to them at the time when
they were established by the government before the reforms and opening-up.
ⅳ. Cultivating a Fair Trade Environment
——Considerable Progress in Market-Oriented Foreign Trade. There is now a diversity of entities taking part in
foreign trade. In 2001, the export volume by state-owned, foreign funded, and collectively owned sectors and other
enterprises were USD113.234 billion, USD133.3236 billion, USD14.223 billion and USD5.462 billion
respectively. The non-state-owned sectors contributed 55.04% of the total volume of imports and exports in 2001.
In the same year, commodities subject to export control by means of quota permits were reduced to 66, a reduction
by 71% as compared to 1992. The export volume of these commodities accounted for 7.7% of the year’s national
export volume, a situation of a huge difference from 1992’s 48%. By 2001, China’s overall average tariff level was
reduced to 15.3%.
——Domestic Trade Remarkably More Market-Oriented. For the wholesale, retailing and catering businesses
according to the registered types of business and provided that they are above the required level of turnover, the
basic situation in 2001 is that the number of state-owned enterprises accounted for 57.5%, 37.3% and 18.7%
respectively of the total wholesale, retailing and catering businesses. It is worth mentioning that the state-owned
enterprises referred to here have all undergone transformation into joint-equity companies in compliance with the
Company Law of the People’s Republic of China. There has been a considerable increase in the individuals
purchasing commodity houses. In 1992, personal purchasing of commodity houses accounted for 38.2% of the
total sales of commodity houses, while in 2001 the percentage became 91.5%, reflecting one aspect of the fact that
domestic trade has become more market-oriented.
——Much More Improved Legal Environment. China has established a legal system that matches the
requirements of a market economy. There are laws governing the market participants, including the Company Law
(amended in 1999), the Law on Partnership Enterprises and the Law on Individual Proprietorship Enterprises.
There is a collection of laws for regulating the performances of the market participants consisting of the Contract
Law, the Negotiable Instrument Law, the Insurance Law, the Securities Law and the Guaranty Law. There is a
collection of laws for keeping good market management order, consisting of the Law of Standardization, the Law
against Unfair Competition, the Law on Protection of Consumer Rights and Interests, the Law on Product Quality,
the Advertisement Law, the Trademark Law, the Copyright Law, the Patent Law, the Commercial Banking Law
and the Environmental Protection Law. For macro-administration purposes there are the Budget Law, the Audit
Law, the Accounting Law, the Foreign Trade Law, the Law on Administration of Tax Collection, the Individual
Income Tax Law and the Price Law. Laws relating to labor and social security matters are also available, such as
the Labor Law and the Trade Union Law. Based on the laws mentioned above, implementation rules and
regulations of relevant departments were formulated, thus establishing a complete legal framework for the market
economy.
——A System of Intermediary Organizations Formed. Being one of the principal component parts of the
operational mechanism in the market economy, diversified professional intermediary organizations came into
being in response to the new situation, forming an all purpose service framework. Currently there are over 4300
accounting (auditing) firms, nearly 4000 asset evaluation organizations, a network of more than 230,000 insurance
agencies of different types, over 500 government approved land evaluation agencies, 80,000 information
consultant firms and over 3,000 Commercial Chambers above the country level. There are nearly 50,000 legal
service institutions, among which there are nearly 10,000 law firms, over 3,000 public notarial institutions and
over 6,000 arbitration institutions.
ⅴ. Financing Becoming Steadily More Market-Responsive
—— Considerably High Level of Monetization of Economy. Between the years from 1978 to 2001, China
witnessed continuous growth in the M2/GDP ratio, which hit 165% in 2001 from the 37% in 1978. Compared with
other countries in the world, this ratio attained in China is extremely high, as, in 1998, the same value for the USA
stood at 62%, while for the UK and Japan it was 107% and 121% respectively.
—— Ever More Severe Competition Among Financial Institutions. The years from 1995 to the end of 2001 saw a
weakening monopolization and stronger tendency for competition among the financial institutions. In respect of
the share in assets, that of the joint-equity commercial banks, the urban commercial banks and the foreign funded
banks rose to 19.44% from the former 11.03%, in contrast to the share of the completely state-owned commercial
banks dropping to 60.5% from the former 69.08%. At present, the degree of banking concentration calculated on
the basis of the assets of the four largest Banks in China is about 60%, which is about the medium level among the
European countries.
—— Market-Sensitive Interest Rates. Currently China Inter-Bank Offered Rate (CHIBOR), rates for treasury
bond repurchasing and cash bond trading on the national inter bank market are set free. Also set free are discount
and rediscount rates, issuing rates of the treasury bonds and the bank debentures issued by policy banks. In respect
of interest rates on loans, financial institutions are granted more freedom in regulating the interest rates on loans,
the types of interests on loans are cut down and interest rates on loans in foreign currencies are set free. In addition,
interest rates on deposits are partially set free as well. For instance, wholesale fixed deposits by insurance
companies are entitled to negotiated rates, and interest rates of wholesale deposits in foreign currencies can be
determined through consultations between the financial institution and its clients. At present, business operation in
the open market has become the Central Bank’s principal policy instrument in regulating and controlling the basic
currency, and the interest rates in the open market have become the baseline interest rates of the currency market.
—— Control on Capital Further Relaxed. In respect of transaction items, China permits foreign investors to buy:
B shares within the legislative boundaries of China, H shares and B shares denominated in foreign currencies listed
abroad by China and bonds denominated in foreign currencies that China issued overseas. Foreign funded
enterprises are not subject to examination and approval when they are raising funds in the form of long or
short-term foreign loans. Enterprises with direct investment from foreigners are mainly provided with guidance in
industrial policies, and are not subject to many foreign exchange-related restrictions. In respect of capital items,
China has realized partial convertibility as well. Of the 43 capital item transactions identified by the International
Monetary Fund Organization, China has made 12 of them fully convertible or basically convertible, accounting for
27.9% of the total. There are 16 items under strict control, accounting for 37.2% of the total. Only 15 of them are
completed prohibited, accounting for 34.9% of the total, mainly prohibiting foreign funded businesses to buy
securities assets denominated in the Renminbi. On the whole, the openness of China’s capital items has reached a
relatively high level.
—— More Intensified Reform of Exchange Rate Regime. A unitary and well- administered flexible exchange rate
regime based on the market supply and demand has been put in practice. Items under current accounts are now
fully and freely convertible; Convertibility under capital accounts is also realized. The bank system of exchange
settlement and sales is operating smoothly according to accepted international practices. The transaction on the
inter-bank foreign exchange market is growing constantly in volume. Currently US dollars, Japanese yen, Hong
Kong dollars and euros are being traded against the Renminbi on the inter-bank foreign exchange market. By the
end of 2001, various currencies traded accumulated to an amount equal to USD 439.8 billion, of which the
equivalent of USD 75 billion of foreign currencies were traded in 2001.
On the basis of the aforementioned five aspects, the conclusion is that China’s national economy is already
running in accordance with the rules of market economy and that China has already turned into a market economy
country. This is a result achieved by the Chinese people who spared no effort in the course of reforms and opening
up, and a result that cannot be achieved without the participation, encouragement and contribution by all economic
forces worldwide. China is willing to share its achievements in reform and development with the rest of the world.
Ⅴ. 2001: Assessment Results on the Development of China’s Market-Oriented Economy
Based on our description and analysis of the current situation of China’s economy in its market-oriented
transformation, we shall use a quantitative approach to continue our analysis to determine the level of China’s
market-oriented development.
In measuring the level of China’s market-oriented development, quite a number of measurable indicators are
required. On the basis of our foregoing objective analysis of the criteria of a market economy, we selected 33
variables to be used as indicators in measuring the level of China’s market-oriented development. References were
made to the evaluation method used by the Heritage Foundation of the USA (the values of the indicators are in five
grades, the lower the grade, the higher the level of market-oriented development. Thus, grade 1 is the highest, and
grade 5 is the lowest) in working out our variable indicators of and factors in the development of China’s
market-oriented economy in 2001, and in obtaining the assessment results of the overall economy.
Now we’ll turn to the 33 variable indicators and the values assigned to them as shown in the Table below:
Measurement Indicators and the Points for China’s Market-Oriented Development
Points
for
Indicators
2001
1
Ratio between Government expenses and GDP
2
2
Average rate of company income tax (including other charges)
3
3
Ratio between Government investment and GDP
3
4
Ratio between Government transfer payment/subsidies and GDP
3
5
Weight of Government-employed population in total urban employed population
3
6
Weight of investment in fixed assets by non-state-owned sectors in that by the whole society
3
7
Weight of population employed by urban non-state-owned sectors in total urban employed
2
population
8
Weight of added value created by non-state-owned sector in GDP
2
9
Weight of tax revenue from non-state-owned sectors in that from the whole society
2
10
Weight of total import & export volume by non-state-owned sectors in national volume of
3
import & export
11
Weight of fiscal subsidies to state-owned sector’s losses in GDP
2
12
Percentage of enterprises selecting management bodies from market
2
13
Percentage of enterprises having autonomy in decision making
2
14
Percentage of difference between permanent population and registered population in total
3
registered population in particular districts
15
Rate of variation in the number of employed population shifting between trades and
3
industries
16
Percentage of enterprises where salaries are negotiated freely between employers and
2
employees
17
Percentage of foreign funds, self-raised funds and other funds in the total formation of
capital
1
18
Weight of registered foreign fund in total registered capital of foreign funded enterprises
1
19
Weight of area of urban land the right of use of which is auctioned in total area of land the
3
right of use of which is transferred
20
Weight of consumer goods whose retail prices are determined by market in the society’s
1
total volume of retail
21
Weight of farm and side-line products whose prices are determined by market in the total
1
purchased volume
22
Weight of means of production whose prices are determined by market in total sales
2
thereof
23
Average rate of tariffs
4
24
Percentage of tax revenue from foreign trade in the total volume of import and export
3
25
Rate of successful treatment of cases in violation of rules against unfair competition
3
26
Rate of successful treatment of intellectual property cases
2
27
Weight of assets owned by non-state-owned banks in the total assets of the banking
4
sector
28
Weight of deposits by non-state-owned financial institutions in the total deposits of
3
financial institutions
29
Weight of short-term loans to foreign-funded, township-run or individual-run private
4
enterprises in the total volume of short-term loans
30
The average value of inflation over the past five years
31
Full range of Coefficients of interest rates on one-year loans by various financing
1
institutions
32
Percentage of un-restricted items in the total number of capital items
4
33
The deviation of monthly average difference between the exchange rate of RMB
2
against U.S. dollars and the Singapore NDF rate
Please refer to Chapter Eleven of A Report on the Development of China’s Market Economy 2003 for the actual
calculation and evaluation of the indicator values.
It is clear from the above Table that the 33 indicators cover all fields of the economy. We may group the 33
indicators into 11 aspects, or 11 sub-factors: The first and the second indicators can be referred to as the sub-factor
of “government’s financial burden”; From indicator No. 3 to No. 5 are the sub-factor of “government’s
intervention in economy”. Indicators No. 6 to No. 10 are the sub-factor of “contribution by non-state-owned
sector”. Indicators from No. 11 to No. 13 are the sub-indicator of “operation of enterprises”. Indicators No. 14 to
No. 16 are the sub-factor of “labor and salaries”. Indicators from No. 17 to No. 19 are referred to as the sub-factor
of “capital and land”. Indicators from No. 20 to No. 22 are grouped in the sub-factor of “freedom in pricing of
products traded”. Indicators from No. 23 to No. 24 are grouped in the sub-factor of “freedom in foreign trade”.
Indicators from No. 25 to No. 26 are referred to as the sub-factor of “protection of fair trade by laws”. Indicators
from No. 27 to No. 20 are grouped in the sub-factor of “Banks and currencies”. The indicators from No. 31 to No.
33 are referred to as the sub-factor of “interest rates and exchange rates”.
Now, on the basis of the 33 variable indicator values, we establish the evaluation values for the 11 sub-factors, to
be arranged in the order from low to high, e.g. the order of high degree of freedom and market-oriented
development coming first and the lower the degree the further away of its position. Thus we have: “Freedom in
pricing of foreign trade products” 1.33 points; “Capital and land” 2.00 points; “Contribution by non-state-owned
sector” 2.40 points; “Government’s financial burden” 2.50 points; “Protection of fair trade by laws” 2.50 pints;
“Labor and salaries” 2.67 points; “Government’s intervention in economy” 3.00 points; “Interest rates and
exchange rates” 3.00 points; and finally “freedom in foreign trade” 3.50 points.
Based on the point values of the 11 sub-factors, we may further identify five major factors, so that the sub-factors
of “government’s financial burden” and “government’s intervention in economy” are merged into the
“standardized behavior of government”. The two sub-factors of “contribution by the non-state-owned sectors” and
“operation of enterprises” are merged into the “freedom of economic entities”. “Labor and salaries” and “capital
and land” become the “market-oriented productive factors”. The three sub-factors of “freedom in pricing of
foreign trade products”, “freedom in foreign trade” and “protection of fairness in trade by laws” are merged into
“impartial trade environment”. The two sub-factors of “banks and currencies” and “interest rates and exchange
rates” are merged into “rationalization of financial parameters”.
Arranged in a low-to-high order representing the high-to-low degree of freedom and market-oriented development
in the five major factors, we get: 2.17 points to market-oriented productive factors; 2.20 points to freedom of
economic entities; 2.44 points to impartial trade environment; 2.75 points to standardized government behavior
and finally, 3.0 points to rationalization of financial parameters.
To get a clear idea of the relationship between the 33 indicators and the 11 sub-factors, and the relationship
between the 33 indicators and the five major factors we shall take look at the following Table of Relations:
Table of Categorized Indicators for Measuring the Development
of China’s Market Economy
Sr.No.
Indicators
Sr.No.
I. Standardization of
gov. behavior
12
1. Government’s
financial burden
13
Weight of
government expenses
in GDP
Indicators
Percentage of
enterprises choosing
management bodies
from market
Percentage of
enterprises enjoying
autonomy in decision
making
III. Market-oriented
productive factors
1
2
Sr.No.
8. Freedom of
foreign trade
Average rate of
tariffs
23
24
Average rate of
company income tax
(incl. other charges)
5. Labor and salaries
Indicators
Weight of tax
revenue from
foreign trade in
total volume of
imports&exporst
9. Protection of
fair trade by Laws
2. Government
intervention in
economy
14
Weight of
government
investment in GDP
3
15
Weight of gov.
transfer payment and
gov. subsidies in
GDP
4
5
Weight of the
difference between
permanent population
and registered
population in total
population registered
in an area
Rate of variation in
number of employed
population between
trades and industries
16
Weight of number of
gov. workers in total
urban employed
population
II. Freedom of
economic entities
17
3. Contribution by
the non-state-owned
sectors
26
Percentage of
enterprises where
salaries are
determined by
negotiations between
employer and
employees freely
10. Banks and
currencies
Weight of foreign
funds, self-raised
funds and other funds
in the total formation
of capital
Weight of assets
owned by
non-state-owned
banks in the total
assets of the
banking sector
Weight of deposits
by
non-state-owned
financial
institutions in the
total deposits of
financial
institutions
18
7
8
27
28
Percentage of area of
urban land the right of
use of which is
auctioned in total area
of land the right of use
of which is transferred
19
29
Weight of population
employed by urban
non-state-owned
sectors in total urban
employed population
Weight of added
value created by
non-state-owned
sector in GDP
Rate of cases
violating
intellectual
property rights
investigated and
checked
V. Rationalization
of financial
parameters
6. Capital and land
Weight of registered
foreign fund in total
registered capital of
foreign funded
enterprises
Weight of investment
in fixed assets by
non-state-owned
sectors in that by the
whole society
6
25
Rate of cases
violating rules
against unfair
competition
investigated and
checked
Weight of
short-term loans to
foreign-funded,
township-run or
individual-run
private enterprises
in the total volume
of short-term loans
The average value
of inflation over
the past five years
30
IV. Impartial trade
environment
11.Interest rates
and exchange rates
9
10
Weight of tax
revenue from
non-state-owned
sector in that from
the whole society
7. Freedom in pricing
foreign trade products
Weight of total
import & export
volume by
non-state-owned
sectors in national
volume of import &
export
Weight of consumer
goods whose retail
prices are determined
by market in the
society’s total volume
of retail
31
20
4. Operation of
enterprises
21
Weight of fiscal
subsidies to
state-owned sector’s
losses in GDP
11
22
Full range of
Coefficients of
interest rates on
one-year loans by
various financing
institutions
Percentage of
un-restricted items
in the total number
of capital items
32
Weight of farm and
side-line products
whose prices are
determined by market
in the total purchased
volume
Weight of means of
production whose
prices are determined
by market in total
amount of sales
The deviation
of monthly
average difference
between the
exchange rate of
RMB against U.S.
dollars and the
Singapore NDF
rate
33
Based on the point values of the five major factors, the calculation of arithmetic mean brings us the comprehensive
score of 2.51 points, or approximately 69% if converted to percentage terms, which is the assessment value of the
development of China’s market economy. This value shows that the development of China’s market economy has
crossed the critical point of a market economy (60%), but it is still far behind the level attained by the developed
market economies in Europe and North America.
In the foregoing assessment, we made sure that a full range of variable indicators are selected, that the grouping of
the sub-factors are typically representative, that our understanding of the five major factors of the criteria for a
market economy are taken into consideration and that all these considerations are perfectly balanced in our
assessment.
VI. Comparison of the Assessments Made by the Chinese and the Foreigners Regarding the Development of
China’s Market Economy
In order to make a comparison between the conclusions drawn from assessments on China’s market-oriented
development, the assessments made by the Chinese scholars on this subject are summed up in the following Table.
ⅰ. Our Conclusion on China’s Market Economy as Compared with Similar Results by Other Research
Institutes in China
Indexes for Measuring the Development of a Market Economy in China
Unit: %
Researchers
1980
1990
Lu Zhongyuan, Hu
1992
1994
1995
1996
1997
1999
62
Angang
Jiang Xiaowei, Song
38
Hongxu
Research Group of the
65
State Planning
Commission
Gu Haibing
5
35
Chen Zongsheng and
40
50
60
his group.
Xu Minghua (1999)
A total of 31 indicators in 8 categories, market-oriented development in 9 provinces
arranged in sequential order
Pan Gang, Wang
A total of 15 indicators covering 5 aspects, market-oriented development in all provinces
Xiaolu (2000)
arranged in sequential order
Source: Based on A Research on China’s Development of a Market-Oriented Economy by Wang Quanbin, China
Economics Times, 20 July, 2002, and other source materials
The above Table shows, that in the years after 1992 there have been two types of measurements used by the
researchers on the development of China’s market economy. One is the measurement by absolute point values, the
other is the arrangement of relative positions in a sequential order. Conclusions arrived at by absolute point value
measurement gave the lowest score of 38% with the highest being 65%. Of which, conclusions by three groups of
researchers were 60% or above and one of them gave a score of 62% for the year of 1992. An annual simple mean
value of 52.5% was obtained based on all these research results. These conclusions show that the measurement
conclusions made by these experts regarding the attainments in China’s development of a market economy is
slightly lower but close to our results. Considering the fact that several years have past since the pioneering
researchers did their work, during which the market-oriented development in China has been rather speedy, then,
our index of 69% for the year 2001 should be rather reliable. But we have to bear in mind that such comparison
was made in reference to the previous years, as the research results for the year 2001 are not yet available in China.
Therefore this shall be simply a reference conclusion for analyzing and comparing the evaluation results with
respect to the attainments in the development of a market economy.
ⅱ. Comparison of International Evaluations on the Development of China’s Market Economy
In order that our research results are comparable with similar evaluations made in other countries, we chose 22
countries and regions to be grouped in three categories, namely the developed countries, countries in transition and
developing countries. Key aspects reflecting the attainments of China’s development of a market economy
including government control, freedom of enterprises and market-oriented productive factors are compared with
them. The 22 countries and regions are: Argentina, Australia, Brazil, Bulgaria, China, Czech, China’s Hong Kong,
Hungary, India, Italy, Japan, Kazakhstan, The Republic of Korea, Mexico, Mongolia, Poland, Rumania, Russia,
Singapore, the U.K., the U.S.A. and Vietnam. Meanwhile, quite some information and inspirations were drawn
from almanacs or reports published in China or in other countries on international comparison of economic
systems and competitiveness. The international comparison told us that China’s attainments in developing a
market economy, while still a distance away from the levels of the developed countries, are by no means too bad in
some of the aspects compared. When compared with the countries in transition and undergoing reforms, China is
even taking lead in many of the indicators.
Information and data from 22 countries (and regions) relating to the criteria of market economy are collected and
sorted. After painstaking work we have collected 20 variable indicators covering 22 countries (and regions). These
20 variable indicators are grouped into two categories after selection, namely the category for measuring the
development in market-oriented financing and the category for measuring the scale of the government and its
revenues and expenditures. The following is a Table comparing the development of the market-oriented financial
system of 22 countries (and regions) for our readers’ reference.
A Sequential List of Development of Market-Oriented Financial System
in 22 Countries (Regions)
Country
Compreh.
(Region)
Ranking
Ranking in Each Aspect
Ratio
Ratio
Ratio
Percentage
Standard
between
between
between the
of
Deviation
Financial
Loans to
sum of
Exchange
in Inflation
Assets and
Private
direct
Restrictions
over the
GDP
Sector and
investment
GDP
and in- and
past 5 years
out- flow of
investment
on
securities
and GDP
Argentina
16
14
16
16
7
18
Australia
6
8
8
8
5
10
Brazil
10
11
11
10
10
5
Bulgaria
14
18
17
7
8
17
China
12
7
5
15
9
15
Czech
7
10
10
5
2
12
China’s
2
1
2
1
1
11
Hungary
11
13
13
13
1
7
India
17
12
14
22
10
13
Italy
4
6
9
4
1
1
Japan
8
5
1
18
2
16
Kazakhstan
18
22
20
12
9
8
Republic of
9
9
7
14
6
8
Mexico
20
16
18
21
7
14
Mongolia
15
20
21
19
6
4
Poland
13
15
15
9
10
9
Rumania
22
21
22
20
9
19
Russia
21
19
19
11
12
20
Singapore
5
4
6
3
4
6
U.K.
1
3
4
2
1
3
Hong Kong
Korea
U.S.A.
3
2
3
6
3
2
Vietnam
19
17
12
17
11
15
Note: the Calculation of financial assets: Financial Assets = M2 + Negotiable Securities (the sum of the bond
balance figure and the total market value of stock exchanges)
Sources: M2 and GDP from World Development Indicators 2002 by the World Bank; Weight of loans to the
private sector in GDP is calculated according to figures given in World Development Indicators 2002 by the World
Bank. Data concerning direct investment, investment on securities and rate of inflation over the past five years are
from The International Financial Statistics Year Book (2002) by the IMF.
This Table shows that we have chosen the following five indicators for measuring the freedom of financial and
currency system: the ratio between the financial assets and the GDP, the ratio between loans to the private sector
and GDP, the ratio between the sum total of direct investment and in-and-out flow of investment on securities and
the GDP, the percentage of exchange restriction and the standard deviation of rate of inflation over the past five
years. These indicators are selected by referring to the indicators by two major research institutions on freedom
indexes. The ratio between the financial assets and the GDP tells the status of development in a country’s financial
market. The higher is the value of the indicator, the more freedom is there in the country’s financial system. A high
percentage of loans to the private sector in the GDP means that credit and loans can be available to the private
sector relatively easily, which is a higher evaluation of its freedom. A higher ratio between the sum total of direct
investment and in-and-outward flow of investment on securities and the GDP indicates a higher liquidity of capital
and therefore a freer environment for capital transactions. A higher percentage of exchange restrictions represents
a less free exchange system and hence a lower degree of freedom in economy. As it is possible for the inflation
rate to be a negative value, in evaluating the inflation rate of a country the standard deviation value is used. The
higher is the standard deviation, the less stable is the country’s currency policy, which represents a higher degree
of government intervention in the currency policy and hence a lower degree of freedom in its economy.
Since assigning point values to the indicators is a complex procedure, we therefore did not use the point value
approach in evaluation of the indicators, but resorted to relative sequential sorting. According to their value and
nature, the indicators are arranged in a relative sequence. Simple averages of the indicators are calculated to obtain
the mean values for listing in a sequential order. The mean value will determine the corresponding factor’s place in
a relative sequence.
Thus, China ranked the twelfth place, about the middle in the comprehensive sequence of market-oriented
financial system, before 10 other countries including India and Russia.
Our assessment of the level of the market-oriented development in China’s economy of 69% basically matches
China’s ranking in the sequential order calculated according to relevant international indicators, indirectly proving
that the results of our research are fairly reliable.
Ⅶ. More Freedom in China’s Economy than in Russia’s
Both China and Russia are large countries and are both in transition from planned economy towards market
economy. Their national conditions are strikingly similar and can therefore provide a ground for comparisons. The
research results by three authoritative international institutions are hereby used to make a comparison between the
two countries’ level of economic freedom.
1. Comparison of China and Russia as per the Report on Freedom of Economy by the Heritage Foundation
of the USA
Level of economic freedom is represented in the form of indices in the Heritage Foundation’s system. The values
of the indices are ranged from 1 to 5, the smaller the figure, the higher the degree of economic freedom. The
following table is from the Foundation’s report in 2003. It is a conclusion with regard to the degree of economic
freedom of China and Russia for the year 2000.
Country:
China
Russia
Rank
127
135
Points
3.55
3.7
Trade policies
5.0
4.0
Government’s financial burden
3.0
3.5
Government intervention in economic affairs
4.0
2.5
Currency policies
1.0
5.0
Capital flow and foreign investment
4.0
3.0
Banks and financing
4.0
4.0
Salaries and prices
3.0
3.0
Property rights
4.0
4.0
Administrative rules
4.0
4.0
Black market
3.5
4.0
Source: The Heritage Foundation, U.S.A.
In this Table, where the indices of economic freedom are concerned China is 8 places ahead of Russia. To be
specific, China is ahead of Russia on these indicators: “government’s financial burden”, 3.0 points to China while
3.5 points to Russia; in “currency policies”, 1.0 points to China and 5.0 points to Russia; in “black market”, 3.5
points to China while 4.0 points to Russia.
Where China is behind Russia with respect to the level of market-oriented development are: “trade policies”, 5.0
points to China and 4.0 points to Russia; “government intervention in economic affairs”, 4.0 points to China while
2.5 points to Russia; “Capital flow and foreign investment”, 4.0 points to China and 3.0 points to Russia.
The following indicators are where the two countries are standing on equal footing: “banks and financing”, 4.0
points to both; “salaries and prices”, 3.0 points to both; “property rights” and “administrative rules”, 4.0 to both.
This comparison of economic freedom between China and Russia shows that China is stronger in some aspects and
weaker in some other, but China is on the whole ahead of Russia in terms of the overall points, since China scored
3.55 points while Russia scored 3.70 points.
2. Comparison of China and Russia in the Economic Freedom of the World: 2002 Annual Report by the
Fraser Institute, Canada
The values of the indicators in the Economic Freedom of the World: 2002 Annual Report by the Fraser Institute
have a positive relation with the degree of economic freedom. The values of the indicators ranged from 0 – 10 and
the higher value represents a higher degree in economic freedom. Its comments on the economic freedom in China
and Russia for the year 2000 are as follows:
Table of International Comparison of Economic Freedom
-----The Fraser Institute, 2000
Country:
China
Russia
Total
5.28
4.73
Ranking
101
116
Scale of government
3.84
6.39
Legal structure and property rights protection
4.15
4.45
Justified currency policies
6.52
1.46
Freedom in using different currencies
6.69
6.95
Credit, labor force and commercial rules and procedures
5.23
4.39
Source: the Fraser Institute
According to the above Table, China is ahead of Russia in respect of economic freedom by 15 places. China fared
better in two indicators: “justified currency policies”, 6.52 points to China and 1.46 points to Russia. Both
institutes considered highly of China’s currency policies. In “credit, labor force and commercial rules and
procedures”, 5.23 points to China and 4.39 points to Russia. China is slightly behind Russia in three other aspects.
3. Comparison of China and Russia in World Competitiveness Yearbook by the IMD, Switzerland
The competitiveness of a country to some extent reflects the economic freedom of that country. The comments
concerning China and Russia made by IMD, Switzerland are shown in the Table below:
Comparison of International Competitiveness
( for 2000 and 2001, IMD, Switzerland)
Ranking
Economic
Government
Company
performance
efficiency
efficiency
Infrastructure
2000
2001
2000
2001
2000
2001
2000
2001
2000
2001
China
30
33
5
7
32
35
37
40
34
39
Russia
47
45
44
30
47
47
47
47
44
47
Source: World Competitiveness Yearbook, IMD, Switzerland
The competitiveness of China was 12 places ahead of Russia in 2001 in all four of the indicators. Indicators
determining the competitiveness in economic growth include the technical level, statutory environment and
macro-economic environment, of which the statutory environment plays a fundamental role. One of the important
reasons for China’s remarkably higher competitiveness than Russia lies in the fact that China applies more market
principles and that market-oriented reforms raised the efficiency of allocation of resources and the economic
competitiveness as a whole.
The above comparisons show that economic freedom in China is higher than that in Russia. However one question
props-up here: are economic freedom indicators equal to indicators of market-oriented development? We believe
that, from a pragmatic point of view and from the conclusions that can be obtained, economic freedom and
market-oriented economy are highly inter-related and are therefore inter-changeable to some extent, although there
are some differences between them. The indicators on the whole reflect the fact that with a higher level of
market-oriented economy, economic freedom will be correspondingly higher, and vise-versa. The requirements
such as economic freedom emphasized by the freedom indices are mostly necessary conditions in the criteria of a
market economy. Therefore, the freedom indices are to a great extent applicable in measuring a market economy.
Russia was granted the status of a “market economy country” by the EC and the U.S.A. in June 2002. It follows
that China is fully justified in requesting the U.S.A. and the EC to confer to it the status of a “market economy
country” in line with the principle for the most-favored nation treatment contained in the international trade rules.
Ⅷ. China is a Developing Market Economy Country
The years from 1978 to 2001 witnessed China experiencing a course of reforms and opening-up, a process of rapid
market-oriented development and a historical period of transition from a traditional planned economy towards a
market-oriented economy. By borrowing the rationale and method of the freedom indices worked out by the
Heritage Foundation of the U.S.A. we estimate that the development of China’s market economy by the end of
2001 has reached 2.51, or 69% in the percentage system. Assuming the criteria for a 100% market economy are
available, with the 69% of market-oriented development we should arrive at the conclusion that the market
economy system would have already been established. In fact our argument is that 60% should be a critical level in
determining whether an economy is market-oriented. Once the 60% point is crossed, the minimum requirement for
a market economy is satisfied and the country becomes a market economy. If all the countries between 80% and
100% are regarded as mature market economies, then, a country with 69% market economy should all the more be
accepted as a market economy country. In parliament voting, with a favorable majority the law is made. Similarly,
in determining whether a country is a market economy, when most aspects are market-oriented or one of the
aspects is mostly market-oriented, it may be safe for us to say that the country is on the whole a market economy
country.
Some would argue: what you are talking is about a bucket more than half full while I am actually worried about
the part without water. It is true that China is not yet completely market-oriented. But what is a 100% market
economy? Is there any 100% market-oriented country? Suppose you want to invest in China, is the 69% level of
market economy totally insignificant to you? As to the fact that there are still some aspects remaining below the
critical level for market economy, it is not to be taken that these aspects are insulated from market-oriented
development. In fact market-oriented development is being propelled rapidly forward.
To say China is a developing market economy country has two implications: on the one hand, China as a
preliminary market economy is advancing towards a mature market economy. It implies an emphasis on statutory
reform and renovation, and an emphasis on the reform and opening up of China’s economic system for a full
extent transition. This is the principal connotation of “a developing market economy country”. It took us only over
20 years to realize the transition from a planned economy to a market economy. Facts have it that the crucial issue
of a market economy is the establishment of market rules, and that the speed in building a market economy
depends directly on the selection of the statutory objectives. The reason that China was not able to develop into a
market economy more 20 years ago lies in the fact that market economy was not our initial choice. On the
peripheries of China, some rising industrial countries and regions accomplished the development from natural or
agricultural economy into industrial economy within a mere couple of decades, at the same time realizing the
transition from controlled economy to market economy, all because they preferred market economy. Market
economy as the most flexible economy among all types of economic systems, once chosen its speedy development
is ensured, especially against the background of the current economic globalization. The fact that China as a large
developing country has launched on the road of market economy is a manifestation that China has realized that
market economy is the most vigorous economic system in today’s world.
On the other hand, it also implies that China as a developing country has now adopted a system of market
economy. Here the word “developing” is used in the same sense as it is in the term “developing economics”. It is
emphasized that the term “a developing market economy country” is to be understood in terms of development of
economy. The stages of development undoubtedly are heavily dependent on the economic system. The system of
market economy is formed only when the development of economy has reached a certain stage. Therefore, the
level of economic development is to some extent related to the economic system, although they are not identical. It
is true that it is relatively easier for a country with a higher level of development to practice market economy; or,
to put it in a reverse way, the practice of a market economy system will benefit the development of economy.
While the expressions “developing” and “developed” mainly denote the level of development, they imply a
difference in the systems as well. Based on this understanding, we are able to realize the distance between our
level of economic development and that of the developed countries. Further efforts are required of us in order to
maintain a rapid, stable and healthy development of economy for a sooner realization of modernized economy,
preparing a material foundation for the realization of a full-fledged market economy system.
Obviously, a developing market economy country would judge a country’s economic system from a point of view
that combines development with reforms. Meanwhile what we call “development” and “reforms” are mutually
supplementary in this sense: a market economy system can only be established and developed when the economy
has developed to a certain level; and the establishment of an all-round market economy system is an important
foundation in propelling the rapid development of economy.
On 7 April, 1998, the EC passed a resolution to delete China from a list of “non-market-economy countries”, the
list itself being a component part of its antidumping policy, and China was granted the treatment of “special
market economy country”, which is an intermediary status between the “non-market economy countries” and the
“market economy countries”. This showed that the EC had been watching the development of China’s market
economy and was prepared to timely modify its judgment of the market-oriented development in China. The word
“special”, as we take it, was meant to express our foreign friends’ surprise at China’s speedy development of
market economy. However the “special” country, as it seems fit, should not be a country of a third category,
beyond the categories of “non-market-economy countries” and “market economy countries”. The “special”
country is a market economy country that is a bit special. One expert made a witty remark: a child, although
immature, is still a human being in the full sense. It follows that a developing market economy country is still a
market economy country. Being “special” is not being “alien”, so to speak. There should be no discriminative
policies when what we need is fairness in trade.
Ⅸ. Further Development of China’s Market Economy in 2002
Since the data collected for A Report on the Development of China’s Market Economy 2003 ended by the end of
2001, this report was not able to make an assessment on the development of China’s market economy in 2002. We
will leave the work for the next year. However, what is for sure is that due to the innate requirement for the reform
of China’s economic system and the external pressure on fulfilling our commitments made for joining the World
Trade Organization, there had been a tremendous improvement in China’s market economy. The Heritage
Foundation put it correctly in its Report 2003 on Indexes of Economic Freedom concerning the freedom in China’s
economy, that China’s successful accession to the World Trade Organization and the convention of the 16 th
National Congress of the Chinese Communist Party will provide strong impetus in the elevation of freedom in
China’s economy. The Asia Chairmen of the World Economy Forum, Mr. Frank-Jurgen Richter pointed out at the
East Asia Economic Summit in Oct 2002 that, “in the past, China’s economic competitiveness always ranked 28th
or 30th place. In this year’s report, China moved many places forward and has become a most competitive country.
This reflected the dynamics in the growth of China’s economy, which of course, is that China adopted the market
principles.” We are certain that China had made further achievements in its market-oriented economy in 2002 than
in 2001 mainly for the following reasons:
ⅰ. Further Reduction of Governmental Intervention in Economy
With a large number of state-owned enterprises phasing out, direct intervention in economy by the government
will decline. The government expenditures will mainly be consisted of transfer payments. And this explains the
reason why China is exerting a lot of efforts in building a labor security system. The government intervention in
economy shall be more and more standardized. This is especially demonstrated by the fact that, the government
has further relaxed its control on prices. In 2002, the Chinese government issued and enforced the Circulation on
Changing Part of Administrative Charges to Service Charges (Prices) by the Ministry of Finance and the State
Planning Commission, The Rules Governing Government Valorization Activities (trial) by the State Planning
Commission, Circulation on Price Control on Affordable Housing by the State Planning Commission and the
Ministry of Construction, Procedures for Holding Government Price Policy Hearings by the State Planning
Commission, Provisional Measures on Monitoring and Examining Prices and Costs of Key Commodities and
Services by the State Planning Commission. All these are for the purpose of standardizing the pricing and trading
behaviors.
ⅱ. Further Freedom for Economic Entities
Further freedom for economic entities are manifested in the following two aspects:
1. Accelerating and Standardizing the Phasing out from the Market of the State-Owned Enterprises
In 2002, a total of 382 mergers and bankruptcy cases took place under the instructions by the government,
terminating 248 cases and writing off RMB26.9 billions in bad debts. In the few years to come, over 3000 large
and medium sized state-owned enterprises that are in inferior positions in the competitive markets will phase out
from the market.
More rules and regulations governing the phasing out of state-owned enterprises will be available. In November
2002, the Provisional Regulations on Re-Organizing State-Owned Enterprises by Using Foreign Funds were
issued jointly by the Ministry of Finance, the State Industrial and Commercial Administration and the State
Foreign Exchange Control Bureau, headed by the State Economic and Trade Commission. A Law on Management
of State-Owned Assets and a new Bankruptcy Law are scheduled to be available shortly. In the new bankruptcy
law the state-owned enterprises and non-state-owned enterprises will be treated in the same way.
2. Speedier Development for the Non-State-Owned Sectors
It was put forward by the 16th National Congress of the CPC in 2002 that “it is necessary to encourage, support and
guide the non-public sectors of the economy”; that “We should expand the areas for the market access of domestic
nongovernmental capital and adopt measures with regard to investment, financing, taxation, taxation, land use,
foreign trade and other aspects to carry out fair competition”; that “We should improve the legal system for
protecting private property”; that “We should improve the environment for investment, grant national treatment to
foreign investors and make relevant policies and regulations more transparent”; and that “We should establish the
principle that labor, capital, technology, managerial expertise and other production factors participate in the
distribution of income in accordance with their respective contributions”. These policies offered further support to
the non-state-owned, especially the non-public-owned, sectors.
The year 2002 is the second year since China joined the World Trade Organization. According to the Protocol for
Joining the WTO, China will open more fields for foreign businesses. For instance, the minimum registered capital
required for a wholly Chinese-funded enterprise to be allowed to carry out foreign trade was lowered to
RMB3,000,000; Joint-ventures with foreign fund accounting for a minor portion of the capital have obtained full
right in foreign trade. Meanwhile restrictions on trade access by foreign capital were abolished or cancelled step by
step. The new Guidance Catalogue for Industries Open to Foreign Investment published in 2002 showed that
among the 382 finely defined trades and industries, 91.6% of them non-prohibited. While formerly all trades and
industries were divided into 86 categories, of which non-prohibited trades and industries accounted for 86.05% of
the total. So there was an increase of more than 5 percentage points.
ⅲ. Remarkable Improvement in Trade Environment
According to China’s commitments to joining the World Trade Organization, remarkable improvements in China’s
foreign trade environment will be made.
1. Freedom in Foreign Trade Greatly Enhanced
—— Continuous lowering of Tariff Rates. In the field of trade in goods, China drastically lowered tariff rates on
imports on 1 January, 2002. The arithmetic mean of the rates were reduced to 12% in 2002 from the former level
of 15.3% in 2001, accounting for a 21.56% reduction. In 2002, commodities whose tariff rates were subject to
on-the-spot determination were reduced to 209 from the former total of 523. Meanwhile China implements tariff
diminution under the Bangkok Agreement.
—— Considerable Reduction in Quantitative Restrictions on Imports and Exports. While lowering the tariff rates,
the Chinese government cancelled the quota administration on grains, woolen, cotton, acrylic, polyester, polyester
chips, fertilizers and some types of tires on 1 January, 2002. By 2002, the number of commodities subject to export
quota was reduced to 53 items. Starting from 1 January 2002, China cancelled quantitative restrictions on import
of crude oil, steel, insecticides, asbestos, ply-wood, tobacco, cellulose diacetate tow, natrium cyanide, polyester
chips, acrylic, polyester and some types of machinery and electrical products, such products are subject to
self-declared import permit system.
—— Diversified Foreign Trade Entities. By the end of 2002, there were 68000 Chinese-funded import and export
enterprises and over 100 thousand foreign-funded enterprises in China. Thus a development pattern in which
business entities of different ownerships, either Chinese or foreign funded, are developing concurrently in fair
competition is taking shape. During the months from January to October 2002, exports by collective, private and
other types of enterprises increased by 64.1%, becoming a powerful point of growth in expanding China’s exports.
With the alleviation of restrictions on market access, more and more foreign funded enterprises and private
enterprises are participating in foreign trade, representing a tendency for concurrent development of diversified
foreign trade business entities.
—— Legal Framework Regulating Governing Foreign Trade Activities Being Enhanced. The Regulations on
Administration of the goods for Import and Export of the People’s Republic of China put into enforcement on 1
January 2002 is a core auxiliary by-law of the Law of Foreign Trade. According to this regulation, the goods for
import and export are separately administrated as prohibited imports and exports, restricted imports and exports,
free imports and exports, imports and exports that are tariff quota controlled, imports and exports exclusive to state
trading enterprises or designated agents, import and export monitoring, provisional measures and promotion of
foreign trade. Principles for release of import and export quotas and permits and the procedures for their
applications are clearly defined. It is stipulated in the Regulations that the import and export trade in goods are
subject to the authorities of the State Council and the relevant ministries in charge of foreign trade and economic
cooperation, while the relevant ministries of the State Council will be responsible for matters related to the
administration of goods for import and export according to the responsibilities authorized by the State Council.
2. Intermediary Organizations Constantly Expanded in Scale
With the development of China’s market economy, more and more data concerning all types of intermediary
organizations are available. By November 2002, 11 international accounting firms established 26 member offices
in China. The five world famous accounting firms, e.g., KPMG, Ernst & Young Human Resources,
Pricewaterhouse, Deloitte and Andersen have all initiated their business in China. By the first half of 2002, there
were over 48,000 law firms or legal service institutions in China, with more than 250,000 employees. Of which,
there are over 9000 law firms, having over 120,000 lawyers; Over 3200 public notarial offices with nearly 20,000
notaries; By the first half of 2002, 81 foreign law firms and 26 Hong Kong law firms established their offices in
China’s mainland. By the first half of 2002, a total of over 230,000 non-official organizations at different levels
and of different natures were registered in China, among them there are 134,000 social communities and over
100,000 private non-profit-making organizations. These organizations, and some institutions that can basically be
regarded as intermediary organizations, cover almost all aspects of the society including economy, culture, science
and technology, education and law.
3. Legal System for China’s Market Economy Strengthened
The Regulations on Several Issues Concerning Hearing of Administrative Cases in International Trade, issued in
August 2002 and put into enforcement on 1 October the same year by the Supreme People’s Court, further
expanded the scope of cases subject to judiciary investigation. According to the Regulations, natural persons, legal
persons or any other organizations, when feeling that their lawful rights were violated by institutions or
organizations with state administrative power of the People’s Republic of China or the staff members thereof in
administering issues relating to international trade, may go to the people’s court and take legal actions according to
the administrative procedural law and other relevant laws and by-laws.
Further, the Provisional Regulations on Re-Organizing State-Owned Enterprises by Utilizing Foreign Funds had
already been published in November 2002. The issuance of a series of relevant laws tells us that the government
has intensified its efforts in protecting property rights.
After the Sixteenth Congress of CPC, the much talked about first Civil Code (draft) of New China has been
submitted to China’s supreme legislation for examination and approval and will be available very soon. In order
that there is a better legal system for protecting private properties, the Civil Code (draft ) devoted a whole chapter
on private properties, stating that the provision concerning the basic principles of the real right law and the
protection of property rights are all applicable to the properties of citizens and non-public sectors.
Ⅹ. The Structure and Basic Contents of the “Report on the Development of China’s Market Economy 2003
A Report on the Development of China’s Market Economy 2003 is divided in four major parts. The first part, the
General Introduction, is mainly an analysis of the theme, the argument purposes, methods used in research and
important conclusions. It is a reading guide for the book and a comprehensive summery of the results in all aspects
of research mentioned in the Report.
The second part is an analysis on the development of China’s market economy. There are 11 chapters, covering all
important aspects in measuring the market-oriented development, they are: the Reform of the Government’s
Control System, Market-Oriented Reform of Enterprises, Flow of Labor Force and Market-Oriented Salary
Determination, Market-Directed Capital Transactions, Market-Oriented Transaction in Land, Market-Oriented
Domestic Trade, Market-Oriented Foreign Trade, Market-Oriented Currency and Financing, Market-Oriented
Structure and Behavior of Intermediary Organizations, Building an Integrated Law System for China’s Market
Economy and Measuring the Development of China’s Market Economy. Each of the first ten chapters provided a
short description of the reforms taken place during the years from 1978 to 2001 in the area covered by the chapter,
analyzing and comparing the situations of the market-oriented development in 2001 and the years since 1992,
explaining the attainments of market-oriented development in the area covered in that chapter by 2001 and making
a preliminary prediction on the future market-oriented developments in the covered area. In each chapter, there are
measurement indicators to reflect the indices of the market-oriented development and several indicators specially
designed for analyzing the market-oriented development covered by that chapter. The measurement indicators
provide a connection between the subject of the chapter and the overall level of market-oriented development of
China as a whole, while the analysis indicators in their turn provide an in-depth understanding of the research
conclusions on that area and can make up for some of the shortcomings of the measuring indicators. On the whole,
the ten chapters in fact provide a full-round discussion on the criteria for the five major factors in market economy
(i.e. government, enterprises, productive factors, trade environment and financial parameters). Some of the factor
criteria are analyzed and expounded in two even three chapters. On the basis of analysis by these ten chapters, the
eleventh chapter is devoted to measuring the development of China’s market economy by classifying it into grades
and assigning values to them. It may be said that the second part is a combination of qualitative and quantitative
analyses and is the most crucial part of the Report.
The third part gives a comparison of market-oriented development on the international level, including
comparisons and analyses of the criteria used by European and American countries for determining the status of a
market economy, comparisons between and reference to the method for assessment of economic freedom
developed by several world-class research institutes, and comparing China with the developed market economy
countries, the countries in transition and the developing market economy countries in terms of economic freedom
and development of market-oriented economy. Chapter 12, “European and American Criteria for Defining a
Market Economy”, is a concentration of some most valuable materials relating to antidumping in the past several
years. First hand documents by key countries on criteria for determining a market economy are disclosed and
analyzed for the first time in China. In Chapter 13, “Comparing and Borrowing the Methods for Measuring
Economic Freedom”, one of the significant achievements is that we chose 22 countries (regions) for a sequential
ranking in terms of market-oriented development. Such sequential ranking, although limited to only a few aspects
(such as market-oriented financing), is the first attempt in China. The comparisons in this part are made between
China and the developed countries, China and the developing countries and China and the countries in transition,
within the selected 22 countries (regions). Efforts have been made so that the comparisons made are relevant and
the conclusions carry realistic significance.
Included in the fourth part are Appendices. There are two types of appendices: research reports and statistics.
Research Report Appendix 1 covers 36 key enterprises involved in antidumping cases. The 36 enterprises are
found by means of questionnaires. Inspections were made to three of the enterprises. Valuable data and responds
from the questionnaires are used in analyzing the typical characteristics in the market-oriented development of
enterprises in China’s key industries. Appendix 2 focuses on the process of the market-oriented development in
China’s rural areas and the present situation of such development. This is an important issue that cannot be
neglected when discussing the market-oriented development of China. When measuring and assessing the overall
market-oriented development of China, no categorization was made in terms of urban and rural areas. However, in
Chapter 11, important indicators about market-oriented development in rural areas are among the indicators for
overall measurement. At the same time, different types of analysis indicators are applied in depicting and
analyzing the market-oriented development in rural areas. In Appendix 3, sequential listings according to freedom
indices prepared by the Heritage Foundation of U.S.A and the Fraser Institution of Canada respectively are given.
They are valuable materials for studying the criteria of market economy and for antidumping.
Finally we would like to mention that we have attempted at a style of the report that is similar to that of the Annual
Development Reports by some international organizations like the World Bank. According to the common practice,
data from two years back are used for our report. This means, for a report in 2003, the data used would be from
2001. And this practice will be followed for the years to come, so that the data are consistent from year to year and
the report will have an up-dated looking. Throughout the Report, the expressions such as “now”, “at present”, or
“currently” are mainly referring to situations in 2001.