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Review of 2000 World Economic Situation

In 2000 at the turn of the century, there has appeared a thriving economic situation in the world, that has been rarely seen for many years and has gone down in history with a good record of growth.

However, the existence of unstable factors, such as the steep rise of oil price, the fluctuation of the global stock market and the plummeting of the exchange rate of the Euro, has caused people to feel anxious about the future development trend of the global economy.

Nevertheless, the good momentum gained in the powerful growth and innovative development of the world economy this year forecasts that there will be a good beginning in the development of the world economy in the new century.

The worldwide strong economic growth is a salient feature of the world economic situation this year. World financial circles affirm that this year has witnessed the most forceful economic growth over the past 13 years, with the growth rate being expected to reach 4.7 percent, much higher than the 2.5 percent in 1998 and the 3.3 percent in 1999. In the next two years, the world economic growth rate is estimated to stay at around 4 percent. The growth of world trade value this year is expected to be 10 percent, the highest level since the first oil crisis occurred in the 1970s.

The average economic growth rate of developed countries may reach 4.2 percent this year. The US economy continues to lead the tide of the world economic growth, with its economic growth rate getting close to 5.2 percent; the European economic situation is also better than in previous years, the average GDP growth rate of the 11 countries in the Euro zone is to reach 3.5 percent; the Japanese economy has extricated itself from a slump, its growth rate this year may reach1.9 percent, higher than the average growth rate in the past 10 years.

The average economic growth rate of the developing countries this year can reach 5.6 percent. The economic development in the Asian developing regions has attracted people's attention, their growth rate this year may reach 7.1 percent. Of them, China and some newly emerging industrial economies have given most prominent expressions: growth in exportation, a balanced international payment and a recovery in domestic demand. In addition, the economies in Latin America and the Middle East have begun to pick up after a speed reduction, the situation in Africa has also taken a turn for the better.

The average economic growth rate of the transition countries may reach 4.9 percent, benefited from the oil price hike. The Russian economy has had an unexpected, strong recovery from the 1998 crisis, with the growth rate possibly reaching 6 percent.

Among the many factors that have boosted world economic growth, the growing information technological industry is playing an increasingly outstanding role. The information technological industry is becoming a leading industry in the national economy and a new economic growth point. This represents another feature in the world economic situation this year. According to experts' estimate, the current contribution rate of the information industry to the world economic growth is 18.2 percent, its ratio in the growth of the US economy is even higher, standing at one-third.

The information technological industry is currently the world economic sector experiencing fairly fast development and is creating ever-more wealth. An estimate shows that in 2000 income from e-business is to reach US$233.4 billion, the figure is estimated to increase to US$1,400 billion in 2003.

The integration of the traditional economy and the web economy and the merger of the old and the new economy has become the present development trend of the world economy. Six world largest airlines of the United States, France and Britain announced this past April that they would jointly set up a website dealing in various aviation materials, with an annual business volume capable of reaching US$32 billion. The net economy has also taken big strides ahead in Asia.

In the new century, information technology will become the commanding height of the high and new technologies. In order to seize this commanding point, various countries around the world have been vying with each other to accelerate the development of their information technology: The United States has formulated relevant policies, increased investment for research and development, its investments in commerce using information equipment and software will be more than doubled in five years; the European Union (EU) formally put forward the concept of "Network Europe" in March this year, and has planned to raise 40 billion European dollars in the next three years to be used in the construction of a Network Europe and has set down the grand goal of catching up with and overtaking the United States to become the world's largest economic entity in 10 years, Japan, ASEAN countries and India have also mapped out their respective plans for the development of information technology.

There are also some hidden troubles behind the good world economic situation. The fluctuation of the global stock market can be regarded as a major lurking peril in the present global economy. In the 90s, dangerous situations have frequently emerged in the international financial field. This year, the rise and fall in the global stock market, particularly high-tech stocks, have aroused people's concern. Although the Nasdaq index reached its peak value of over 5,000 points in March, on December 20 it plummeted to the low of 2,400 points, with the rate of decrease exceeding 50 percent this year. This has entailed the fluctuations in the stock markets of other countries, for example, the European stock index dropped by 21 percent, that of Japan by 25 percent and that of the ROK by 51 percent. Furthermore, judged from the present situation, it is hardly possible for the global stock market to witness a rapid, big rebound.

Depressing clouds also loam large over the sky of the international swap centers, the situation of Euro is depressed. This year, people have sold large quantities of European communications and high-tech stocks as well as European dollar bonds. Under such circumstances, seven Western countries were compelled to jointly interfere in the exchange houses in September, thereafter, the European central bank also twice singly interfere in the stock market in November, but with little result. The exchange rate reached its peak value of one Euro to 0..9140 US dollar on December 21 only after people anticipated that the US economic growth rate would continue to slow down in the fourth quarter. Apparently, the future development trend of Euro will depend mainly on whether or not the economy in the Euro dollar zone can continue a strong recovery and whether the US economic growth rate can slow down.

The dramatic rise of oil price in the international market will increase the crude oil importing countries' expenditures on imports, bring greater inflationary pressure on the developed countries and expand the crude oil importing developing countries' current account deficits, thus leading to the deterioration of the debt problem. This has brought and will continue to bring certain negative influence on world economic growth.

At the turn of the century, people can see from the experiences and lessons in the 20th century that change is eternal and that people can adapt themselves to change and bring about development only through unremitting efforts for readjustment and innovation.

In the new century, the economic globalization is developing at an accelerated rate, under the action of the new technological revolution, the internationalization of productive forces has been greatly speeded up, the international division of labor and the degree of cooperation along specialized lines has become ever higher, transnational corporations have further become the mainstays of international economic activities, global economic competition and cooperation will further strengthen.

In order to cope with the new situation, various countries around the world, particularly the majority of newly emerging market countries, have in recent years actively carried out various types of reform to support the market economy and greet the tidal wave of a new technological revolution in the hope to bring the economy onto the track of a virtuous circle through system innovation, technological innovation and management innovation, and to imbue it with the ability to resist various unforeseeable external impacts. This year, America, Europe, Japan as well as some developing countries all have worked out plans to deepen structural readjustments.

The new economy represented by information technology constitutes a big driving force and orientation for various countries to speed up structural readjustments. The US economic change is a typical example: People can remember that in 1992 when the Internet was first opened to the general public, the US economy was still in the doldrums, and the unemployment rate even further rose. However, US enterprises, particularly the financial sector, made the maximum use of the Internet, streamlined administrative structures and solved bad debts. .

As a result, US enterprises raised productivity, improved the enterprise system, and created thousands of new job opportunities, the US economy also for many years enjoyed a longest period of growth. Up till now, in order to meet the needs of sustained economic development, US structural readjustment is still going on.

While carrying out structural readjustments, the developing countries are faced with the new issue of how to make use of their own comparative advantages, seize the development opportunities resulted from the wave of the information technological revolution, particularly to use new rising science and technology to renovate traditional industries, so as to update and upgrade them, adopt the new method designed to catch up and overtake by combining industry and informationization by means of which to promote industrialization, so as to bring about a new leap in social productive forces and social progress.

The dawn of the 21st century will come out, that will be the beginning of a more innovative age. Various countries around the world are faced with a common challenge-opening up a higher-level innovative economy promoted by technological progress, this will be the common choice of all wise men.

(People’s Daily 12/25/2000)

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