China's macroeconomic development in 2001

The Chinese economy has entered a critical stage in the beginning of 21st century.High growth continues despite the global economic slowdown and the country's difficult structural transformation. However, it will become ever more challenging to secure robust growth in the near future.The US recession and the worldwide slowdown in the demand for information technology products caused serious problems for many East Asian economies in 2001.China's export growth decelerated significantly.China's domestic demand, particularly public investment, replaced exports as a driving force in economic growth, and fiscal policy continued to be the main policy instrument for stimulating economic growth in 2001.The Chinese government continued its relatively loose stance regarding monetary policy since inflationary pressure was very mild.To meet the imminent challenges of WTO accession, China needs to tackle its non-performing loans in the banking sector and an increasingly large income disparity between urban and rural areas.Despite short-term difficulties, the prospects for China's medium- to long-term growth remain favourable.China will continue to benefit from the efficiency gains achieved in the transitions from a rural to an industrialised economy, from a centrally planned to a market one, and from a closed to an open one.Foreign direct investment will be instrumental in transforming China into a global manufacturing base.Key words: China, macroeconomic development, policy challenges, global manufacturing base