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Chinese economic growth is less problematic now than at any time since the beginnings of reform more than a quarter of a century ago. Economic growth last year and this is proceeding at an annual rate around nine and a half percent, which is the average rate of the reform period. The deflation of the early twenty-first century has ended, without being replaced by worrying degrees of inflationary pressure. Last year’s concerns about excessive investment in the stateowned heavy industry have been eased by restrictions on bank credit and a modest increase in interest rates. Current external payments have moved into surplus to an extent that is generating international anxieties, and which requires correction, but on a scale that can be corrected without dislocation. Direct foreign investment is high and increasing, contributing much to productivity growth. The private sector continues to grow rapidly, as a share of total activity as well as absolutely, with artificial restrictions on its expansion being removed progressively. The state-owned enterprises are shrinking steadily as a share of the economy, their number is falling absolutely with restructuring including sale into the private sector, and the financial performance of those which remain is improving with reform.

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