ed a wide variety of small-scale
enterprises in services and light manufacturing, and opened the
economy to increased foreign trade and investment. The result has
been a quadrupling of GDP since 1978. Measured on a purchasing power
parity (PPP) basis, China in 2004 stood as the second-largest
economy in the world after the US, although in per capita terms the
country is still poor. Agriculture and industry have posted major
gains especially in coastal areas near Hong Kong and opposite Taiwan
and in Shanghai, where foreign investment has helped spur output of
both domestic and export goods. The leadership, however, often has
experienced - as a result of its hybrid system - the worst results
of socialism (bureaucracy and lassitude) and of capitalism (growing
income disparities and rising unemployment). China thus has
periodically backtracked, retightening central controls at
intervals. The government has struggled to (a) sustain adequate jobs
growth for tens of millions of workers laid off from state-owned
enterprises, migrants, and new entrants to the work force; (b)
reduce corruption and other economic crimes; and (c) keep afloat the
large state-owned enterprises, many of which had been shielded from
competition by subsidies and had been losing the ability to pay full
wages and pensions. From 100 to 150 million surplus rural workers
are adrift between the villages and the cities, many subsisting
through part-time, low-paying jobs. Popular resistance, changes in
central policy, and loss of authority by rural cadres have weakened
China's population control program, which is essential to
maintaining long-term growth in living standards. At the same time,
one demographic consequence of the "one child" policy is that China
is now one of the most rapidly aging countries in the world. Another
long-term threat to growth is the deterioration in the environment -
notably air pollution, soil erosion, and the steady fall of the
water table especially in the north. China continues to lose arable
land because of erosion and economic development. As part of its
effort to gradually slow the rapid economic growth seen in 2004,
Beijing says it will reduce somewhat its spending on infrastructure
in 2005, while continuing to focus on poverty relief and through
rural tax reform. Accession to the World Trade Organization helps
strengthen its ability to maintain strong gro