In 1981 the Chinese leadership set the goal of quadrupling China's 1980 per capita GNP by the year 2000 in order to raise the people's standard of living to a “relatively comfortable level.” But apart from sustained growth, the Chinese planners are also very much concerned with economic efficiency and price stability. The new development strategy to attain these goals is economic reform and opening to the outside world Over a decade has now elapsed since these goals were set. This article addresses the issues of how far the Chinese economy has advanced toward those objectives, the major challenges that lie ahead and China's economic prospects in the 1990s.

The varied experience of China's agricultural economy during the 1980s highlights the challenges and opportunities facing the farm sector during the present decade. Until 1985 agriculture's performance was widely regarded as an unqualified success. Decollectivization and institutional initiatives provided a framework which allowed, for the majority of farmers, an unprecedented degree of independence in decision-making. Farming was once more practised on a household basis, peasants' activities were increasingly geared towards market signals and their economic relationship with the state defined by legal contracts. Large increases in the purchase prices of major farm products provided the material incentive for the expansion of all branches of the agricultural economy. These same increases were the source of substantial gains in income, which contained the wherewithal for large-scale investment in agricultural production.

In the late 1970s, Chinese industry was on the verge of collapse. Its high but erratic rate of growth since 1949 had been achieved by using ever-increasing amounts of labour and capital. Not only was industry operating inefficiently, but the output mix was inappropriate and inventories had accumulated to very high levels. However, the true state of affairs had been obscured by the political turmoil of the Cultural Revolution (1966–76) and the virtual disbanding of the State Statistical Bureau (SSB).

With a total population of over a billion people, China requires vast supplies of energy for industrial and economic development. Indeed, in absolute terms, the country ranks third to the United States and the former Soviet Union as a producer and consumer of energy resources. Nevertheless, its per capita energy consumption remains extremely low even for a developing country.

Foreign direct investment (FDI) in China is the most dramatic manifestation of China's open-door policy. Together with continuous import and export expansion, FDI has increasingly exposed the Chinese economy to the western world during the past decade. There are, however, several differences between FDI and foreign trade in terms of their implications for the domestic economy. The most obvious is that FDI directly helps to relieve domestic capital supply bottlenecks and to promote employment and economic growth. By contrast, increased capital formation through imports of machinery and equipment must be financed by extra export earnings.

China's opening to the outside world was perhaps the most visible of its reforms of the 1980s. China's international trade volume grew dramatically, it attracted tens of billions of dollars of foreign direct investment and it became an active borrower in international financial markets. In contrast to the pre-reform era, foreign trade grew more rapidly than the domestic economy and in some regions of the country it appeared that it had become a powerful engine of growth, accelerating not only the speed of domestic development but the pace of structural and technical transformation as well.

The future of the reforms in China ultimately depends on whether, and if so to what extent, reforms introduced in the recent past have improved the consumption and the standard of living of the Chinese people. It also depends on whether any such gains in the standard of living have been widely spread among the whole population. Since 1978 real per capita consumption in China has risen at an average annual rate of 7 per cent which is more than three and a half times that of the preceding 21 years. As a result, the standard of living of the average Chinese citizen in 1990 was more than double that of 1978. However, the growth of consumption and the living standard was rather uneven during the reform period. During the first phase of the reforms (1978–85) the consumption standard increased rapidly without widening existing income disparity. During the second phase (1985–90), however, improvements in consumption standards slowed significantly amidst rising inflation and growing income inequality. The question is whether the recent trend of a relatively slow rise in the standard of living and greater income disparity will continue in the 1990s. The purpose of this article is to examine the recent trends and changes in the level, structure and differentials of Chinese consumption and living standards, and to assess their prospects for the 1990s

Although not commonly recognized as such, China is a sizeable oil exporter in the world. In 1985, for example, it exported 36.24 million tonnes of crude oil and oil products, accounting for 2.41 per cent of total oil exports in the world. Oil also satisfied 17 per cent of total domestic energy needs and generated 25.9 per cent of all export earnings of the country in 1985.

In February 1985, Hui Tong Urban Co-operative Bank, China's first new private bank since 1949, opened for business in Chengdu City in Sichuan Province. The bank was set up by a group of young economists from the Sichuan Academy of Social Sciences and university teachers in Chengdu City.