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To sustain its growth into the future, China will need to create conditions for increased growth from the private sector and encourage the redirection of demand away from exports towards domestic consumers.

Recognition of the importance of private enterprise was formally acknowledged through the tortuous ideological device of former President Jiang Zemin's "Three Represents". This notion, formally enshrined in the Communist Party's charter in November 2002 (thus binding the incoming leadership of March 2003), stipulates that, in addition to its historical role in championing the Chinese people and Chinese culture, the Party should also now incorporate the "advanced forces of production" - code for private business. There has already been some notable success in this area. Between 1996 and 2002, the number of private enterprises rose from 820,000 to 2.3 million. Employment in these enterprises has grown threefold over the same period.

The promotion of higher levels of private consumption might seem an uncontroversial enough idea but deflationary price pressures in China (themselves a function of industrial over capacity) have tended to discourage spending. A revaluation of China's currency, the renminbi, would effectively help to put greater spending power into the population's pockets but would add further to deflationary pressures and could also be socially divisive in so far as it would benefit mainly the urban middle classes while exposing China's rural farmers to additional price competition from imports.



To sustain its growth into the future, China will need to create conditions for increased growth from the private sector and encourage the redirection of demand away from exports towards domestic consumers. Recognition of the importance of private enterprise was formally acknowledged through the tortuous ideological device of former President Jiang Zemin's "Three Represents". This notion, formally enshrined in the Communist Party's charter in November 2002 (thus binding the incoming leadership of March 2003), stipulates that, in addition to its historical role in championing the Chinese people and Chinese culture, the Party should also now incorporate the "advanced forces of production" - code for private business. There has already been some notable success in this area. Between 1996 and 2002, the number of private enterprises rose from 820,000 to 2.3 million. Employment in these enterprises has grown threefold over the same period. The promotion of higher levels of private consumption might seem an uncontroversial enough idea but deflationary price pressures in China (themselves a function of industrial over capacity) have tended to discourage spending. A revaluation of China's currency, the renminbi, would effectively help to put greater spending power into the population's pockets but would add further to deflationary pressures and could also be socially divisive in so far as it would benefit mainly the urban middle classes while exposing China's rural farmers to additional price competition from imports.
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