Under Mao, China’s economy was a prisoner to ideology and incompetence. Deng Xiaoping’s tenure essentially 1977 to 1997) was a period of reform, continued in perhaps less dramatic fashion by Jiang Zemin, Deng chose a pragmatic approach to achieving the so-called ‘Four Modernisations’; namely, modernization of China’s industry, agriculture, defence, and science and technology.

Rural China was the birthplace of Deng’s pioneering economic reforms. Unfortunately, rural earnings still lag far behind urban incomes; 70% of the nations’ wealth is in the cities, where only 17% of the population live.

A floating population of as many as 150 million to 200 million migrant workers flock to the cities from the countryside in the hope of finding employment-often they end up working long hours in poorly paid factory or construction jobs.

Deng’s reform program saw spectacular growth in the eastern and southern seaboard provinces, while the interior trailed behind. The government is now attempting to swing investment to China’s west, partly by sponsoring huge projects in the region.

After two decades of high growth, China’s economy is now slowing and unemployment is on the rise. In an attempt to stimulate the economy, the government has turned to pouring money into public works also a high priority especially in rural areas, but consumers, worried about lay-offs or uncertain about the future, are holding on to their money.

Corruption sends vast amounts of public money to private bank accounts abroad. Official reports suggest that over 2% of China’s GDP is diverted for unlawful purposes.

Reform of the banking sector is urgently needed. Many banks are saddled with huge, non-performing loans to state-owned enterprises. The states-owned esterprises is costing millions of jobs and is leading to social unrest among laid-off workers.

Chinese leaders are pinning their hopes on WTO membership spurring the economy. In the longer term, it’s hoped that it will increase imports and exports, force state industries into the market and revive foreign investment. Pessimists take the view that the government’s hesitancy to reform its state enterprises at a faster rate and its unwillingness to nurture the private sector will drive China to crisis point. Optimists point out that China’s policy of gradual economic reform has basically worked well so far and has allowed China to come out unscathed from the Asian economic crisis.

In a recent 2001 report, the government admitted to concern at growing demonstrations, especially in rural areas. The report noted that protest involving more than 10,000 people were becoming increasingly widespread, high taxes, levied by corrupt officials, have led to a number of officials being killed.