Economy Grew 12% in 1992, China Says

China achieved extremely rapid development in 1992, with the economy expanding by about 12%, the government announced Wednesday.

Zhang Zhongji, spokesman for the State Statistical Bureau, predicted at a news conference that strong growth will continue next year, with only moderate inflation.

Acceleration of China’s market-oriented reforms, including increased autonomy for large state-owned enterprises, played a key role in triggering this year’s boom, Zhang said. Growth also was fueled by a 30% increase in money supply, he said.

During China’s last round of double-digit economic growth in 1987 and 1988, rapid price reform contributed to rapid inflation in an overheated economy. That touched off panic buying, especially of consumer durables, in the summer of 1988. Beijing responded with a three-year “retrenchment” that slashed both growth and inflation.

Zhang expressed confidence Wednesday that this cycle is not about to be repeated.

Average prices for all of 1992 were up 6.2% over the 1991 average, with a rise of 11% in major cities, but inflation is not expected to get out of control, he said.

Zhang said the government hopes that the pace of growth will be slightly slower in 1993. This year’s expansion was double the original target. In 1991, the economy grew at 7%, at 5% in 1990 and 3.6% in 1989.

The percentage of state enterprises that lose money was reduced to 29.9% in 1992, compared with 34.5% in 1991, Zhang said. About 90% of the unprofitable firms, subsidized out of the state budget, lose money primarily because they have to sell their products at controlled low prices, he said.

Taken as a whole, state enterprises turned in a good 1992 performance, he said. After subtracting $4.7 billion for state subsidies to money-losing firms, state-owned enterprises pulled in net after-tax profits of $5.6 billion and turned over $20.8 billion of taxes to the government, he said.

Price reform also moved forward, with free-market forces now determining the prices of 90% of all retail goods and about 70% of production materials, Zhang said.

Foreign investment and trade also pushed the economy forward, he said. Total foreign trade jumped about 19% to $163 billion, with China enjoying a $7-billion surplus. Foreign investment totaled about $16 billion in 1992, a jump of more than 50% over 1991.

China’s 1992 gross domestic product, which accounts for virtually all of the country’s gross national product, is projected at 2.34 trillion yuan, or $408 billion, Zhang said, about $355 per capita. Average annual per-capita income in 1992 was $314 for urban residents, up 7% after inflation, and $134 for peasants, up 5%, he said.

While these figures clearly reflect strong economic performance, analyzing their meaning in comparative terms is no easy task.

During 1992, for example, China devalued its currency at a faster pace than inflation. The 1992 GNP figure was up 17.9% in nominal terms in Chinese yuan, 12% after adjustment for domestic inflation and 11% in U.S. dollars without adjustment for inflation.

Also, the same goods or services contribute much more to GNP figures in rich countries than they do in developing nations. A Chinese haircut, for example, may add only 20 cents to this country’s GNP, while a haircut in Japan could easily count for $20. This sort of difference explains how peasants can live on per-capita incomes calculated at $134 a year.