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There is no legislatively-determined minimum wage. An administratively-determined minimum wage exists, but is now largely outmoded. Instead, various minimum wages in individual industries are specified in industry "awards" approved by state or federal tribunals.

The 1991 Occupational Health and Safety Act gives employees the right to cease work if they believe there is an immediate threat. Due to federal and state regulations Australian workers enjoy hours, conditions, health, safety standards and wages that are among the best and highest in the world.

f.

Rights in Sectors with U.S. Investment

Most of Australia's industrial sectors enjoy some U.S. investment. Worker rights in all sectors are essentially identical in law and practice and do not differ between domestic and foreign ownership.

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Source:

U.S. Department of Commerce, Survey of Current Business
August 1991, Vol. 71, No. 8, Table 11.3

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GNP (bil RMB) 1/

1,568 Real GNP

N/A Real GNP Growth (pct)

3.9 GNP by Sector

N/A Gross Value Indus. Output

2,188 (GVIO) (billion RMB) 27 Real Growth GVIO (pct)

8.3 Gross Value Agric. Output

655 (GVAO) (bil RMB) 27 Real Growth GVAO (pct)

3.3 Real GNP Per Capita

N/A GNP Per Capita (RMB)

1,410 Real Per Capita GNP Growth (pct) 2.2 Size of Labor Force (mil) 3/

553 Official Unemployment (pct) 4/ 2.6

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Sources: State Statistical Bureau (SSB) Yearbook and Annual Statistical Communiques on Economic Performance, People's Bank of China Monetary Data, World Bank and International Monetary Fund reports, USG trade data, and

PEOPLE'S REPUBLIC OF CHINA

Embassy estimates.

1/ Source for GNP data for 1989 and 1990 is the IMF's International Financial Statistics. GNP per capita and real per capita GNP growth are calculated using this IMF data. Real GNP growth is based on PRC government statistics. Figures for 1991 are Embassy projections. 21 In accordance with the material product system (MPS) of national income accounting, GVIO and GVAO figures are calculated on a gross rather than a net basis. They are not directly comparable with GNP and national income figures which are calculated on a net value added basis. 3/ Embassy estimates. 41 1989 and 1990 are unofficial Chinese estimates. 5/ Ml and M2 are Embassy estimates based on data released by the Central Bank. Because of definitional problems, the estimate for M2 is probably more accurate. 61 Estimates of Gross National Savings as a percent of GNP and Gross Domestic Investment as a percent of GNP for 1989 and 1990 are as estimated by the IMF in January 1990. Actual savings in 1990 were much higher. Figures for 1991 are Embassy estimates. 71 Figures are for December over December inflation. They differ from official Chinese statistics which show average annual inflation of 17.8 percent for 1989. 8/ The parallel exchange rate estimate is based on an average of year-end prices of foreign exchange sold at domestic adjustment centers (swap markets). 97 U.S.-China bilateral trade is based on U.S. Government data. Trade totals are from Chinese Customs data.

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The guidelines for the People's Republic of China's eighth five year plan (1991-1995) and outline for the next ten years, approved by the National People's Congress in the spring of 1991, reaffirmed the primacy of state ownership while promoting continued economic reform measures and opening to the outside. In a major speech on reinvigorating large and medium size state run enterprises, in September, 1991, Premier Li Peng declared that the period of economic retrenchment begun in late 1988 had ended, paving the way for a new series of reform measures. It appears that reform will be gradual and subordinate to maintaining a stable social environment.

Economic performance indicators showed that the period of retrenchment ended with an upturn beginning in the last quarter of 1990. The Gross Value of Industrial Output (GVIO), led by the non-state owned enterprise sector, registered strong growth throughout 1991, exceeding 13 percent in the second and third quarters, and annual GNP growth appears likely to have reached or exceeded 6 percent, surpassing earlier Planning Commission estimates of less than 4 percent. However, structural problems in the industrial sector continue to plague China's economic future, giving rise to increasing calls for restructuring and reform. Agriculture, in spite of severe flooding in the south of China, will experience its second best grain crop ever, leading to difficulties in storing and distributing the near record output. Prices

PEOPLE'S REPUBLIC OF CHINA

appear to be under control with estimates for national average retail price indices below 5 percent, although certain urban indicators are near the ten percent mark. Reflation of the economy in 1992-93 could lead to some moderation of China's trade imbalance with the US. Although U.S. exports to China for 1991 returned to 1989 levels, imports from China continued to rise sharply with the result that the U.s. trade deficit with China, based on U.S. Department of Commerce figures and Embassy estimates, increased from USD 10.4 billion in 1990 to approximately USD 12.5 billion in 1991.

The industrial sector is the target for new reform policies designed to resolve the chronic debt, low efficiency and heavy losses of state run enterprises. National and provincial conferences focussing on the industrial sector in Fall 1991 called for measures to improve both the national economic environment for state run enterprises as well as management conditions within the enterprises themselves. The centerpiece of the proposed reform measures is the 1988 Enterprise Law, which gives enterprise managers the right to hire and fire workers, separates factory management from government interference, and calls for more responsibility on the part of individual factories for their own profits and losses. References to effectively implementing this law, while perhaps more credible now than when first proposed three years ago, are still overly optimistic. Measures to carry out the provisions of the law will depend on the dynamism of the implementing organizations and their leaders for their effectiveness. More immediate measures are likely to be low interest loans and fiscal restructuring aimed at reducing the tax burden on large and medium scale enterprises and leveling the playing field between these enterprises and their more tax favored non-state run counterparts.

Chinese fiscal policy remains embryonic. It is widely acknowledged that budget deficits were used to fund subsidies for grain distribution and bailouts of state run enterprises. However, fiscal deficits are still thought to be manageable in terms of percentage of GNP (4-5 percent). China's system of taxation, in which the center negotiates a share of tax revenues collected by the provinces, is ripe for reform but the growing economic power of the provinces makes arriving at an agreed formula for allocation of taxation revenue difficult if not impossible in the short run. In an effort to relieve the fiscal burden, the government has raised prices on subsidized items such as wheat and edible oil and removed export subsidies. However, assistance to flood victims is likely to increase the budget deficit by over 8 billion yuan by the end of 1991 to a potential 15-17 billion yuan.

Li Peng and others have cited the need to reform fiscal policy to reduce the deficit, but it seems an elusive goal at present.

The relaxation of monetary policy beginning in the fourth quarter of 1990 has not had a highly stimulative effect on the economy since most of the new credit went to bail out financially starved state run enterprises and settle "debt chains" among state firms. Recently called-for reform policies encourage using measures of a firm's viability to allocate bailout loans, but it remains to be seen if they will in fact be used. Large increases in money supply have not yet been accompanied by inflation, possibly due to disinflationary

PEOPLE'S REPUBLIC OF CHINA

expectations among consumers who have a savings rate in excess of 30 percent. The banking system continues to espouse strengthening the role of the central bank and using monetary levers to control the economy. There has been some success recently with using interest rate policy to promote the introduction of various forms of debt instruments, i.e., bonds, and the continued development of the stock markets in Shenzhen and Shanghai. Foreign currency swap centers have been established in nine cities and the resulting availability of foreign exchange (about $15 billion in 1991) has all but destroyed the black market in foreign currency.

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China administers a managed, floating official exchange rate. This rate is nominally linked to a trade-weighted basket of currencies. China issues Foreign Exchange Certificates (FEC); this is a hard currency-backed scrip for domestic payments by foreigners. The Chinese currency, the renminbi (RMB), is not freely convertible.

The last major devaluation was on April 12, 1991, when the RMB fell 11.6 percent from its rate a year earlier of 4.72 to 5.26 to USD 1.00. Since then, the RMB has changed its value vis-a-vis foreign currencies several times a week in small increments, with a current value, as of November 1991, of 5.39 to USD 1.00. It is still regarded as somewhat overvalued. The rates at Foreign Exchange Adjustment Centers (commonly called "swap centers") have also remained stable at about 5.88 RMB to l U.S. dollar for the past year. Swap centers were established in late 1986 to permit the trading of enterprise foreign exchange or foreign exchange retention quotas. Swap center rates are determined daily through negotiation between buyers and sellers, although trading methods differ from center to center. Black market rates also run about 5.8 RMB to i U.S. dollar. Many observers believe that the swap centers have all but eliminated the black market. The Chinese government uses the swap center rate as one of the signals denoting the "proper" value of the RMB.

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China's structural policies have traditionally tried to emphasize industry while not neglecting agriculture. Chinese agricultural policy emphasizes extensive government involvement to promote self-sufficiency for key commodities such as grain and cotton; these policies have not resulted in complete self-sufficiency but contributed to attaining record grain production in 1990. Industry, as a result of earlier reforms, has split into the state and non-state run enterprise sectors. The state run sector manufactures heavy equipment, needed primary products, energy, etc. and is plagued by low efficiency, poor quality, excessive interference in management by government, and other problems related to being managed within a planned economy. The non-state run sector is primarily in light manufacturing, services, high technology and small subcontracting firms. In 1991 government leaders called for reform to be deepened in both sectors but, predictably, with emphasis on state run enterprises.

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