he foundation of a diversified banking system, the
development of stock markets, the rapid growth of the non-state
sector, and the opening to foreign trade and investment. China has
generally implemented reforms in a gradualist or piecemeal fashion,
including the sale of equity in China's largest state banks to
foreign investors and refinements in foreign exchange and bond
markets in 2005. The restructuring of the economy and resulting
efficiency gains have contributed to a more than tenfold increase in
GDP since 1978. Measured on a purchasing power parity (PPP) basis,
China in 2006 stood as the second-largest economy in the world after
the US, although in per capita terms the country is still lower
middle-income and 130 million Chinese fall below international
poverty lines. Economic development has generally been more rapid in
coastal provinces than in the interior, and there are large
disparities in per capita income between regions. The government has
struggled to: (a) sustain adequate job 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) contain environmental damage and social strife
related to the economy's rapid transformation. From 100 to 150
million surplus rural workers are adrift between the villages and
the cities, many subsisting through part-time, low-paying jobs. 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. China has
benefited from a huge expansion in computer Internet use, with more
than 100 million users at the end of 2005. Foreign investment
remains a strong element in China's remarkable expansion in world
trade and has been an important factor in the growth of urban jobs.
In July 2005, China revalued its currency by 2.1% against the US
dollar and moved to an exchange rate system that references a basket
of currencies. In 2006 China had the largest current account surplus
- nearly $180 billion - in the world. More power generating capacity
came on line in 2006 as lar