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INDIA & CHINA
China and India are the largest,
agrarian economies in the world,accounting for a substantial share of
the world poorest people.
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INTRODUCTION
The rate at which China and India have beengrowing since the early 1990s has been a majortopic of discussion around the world. Both countriesare home to nearly a billion people and they
experience tremendous GDP growth each year.
One of the main factors that make India and Chinaan interesting comparison is the fact that although
they are similar in many ways, their differenceshave led each of the take different paths towardseconomic development.
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INDIA AND CHINA
COMPARISON OF KEY INDICATORS
Indicators India China
Size of Population 1.1 Billion 1.3 Billion
Type of Government Democracy Communist State
GDP Growth (2007) 9.3%
11.4%Manufacturing as a % of GDP 16% 53.3%1
Services as a % of GDP 51.5% 41.2%
FDI Inflows (2006 2007) $67.72 Billion
(predicted)
$699.5 Billion
Indias growth has been spurred by the service sector as opposed to itsmanufacturing sector. Indias service sector comprises approximately 52% ofits GDP while Chinas is significantly lower, at 41%.
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INDIA OPENS ITS ECONOMY
India is viewed as a rising economic superpower today, but as recentlyas 1991, it was in dire financial straits. Economic liberalization openedIndias doors to foreign investors.
Before India began welcoming foreign trade and investors, its economicgrowth rate hovered around 3%. Three years after the 1991 reforms, the
rate of growth jumped to 7% and since then, the country hasexperienced an overall 6 - 7% growth rate.
India had only $1 billion in foreign currency at the time of the reforms;today, it has an astounding $239.4 billion. (31 December 2007 est.).
India is playing an increasingly important role in information technologyinnovation. Motorola, Hewlett-Packard, Cisco Systems,Microsoft andother technology giants rely on their Indian employees to design softwareplatforms and futuristic multimedia features for next-generation devices.
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CHINA OPENS ITS ECONOMY To get rich is glorious, declared Chinas leader in 1977,
signifying the opening of the worlds most populous country tointernational trade. In China today, there is no question thatcommunist ideology takes a backseat to capitalism for economicgrowth.
For the past two decades, Chinas average annual economic growthhas been an incredible rate of 9.5%. If this rate continues, Chinaseconomy could be 75% bigger than the U.S. economy by 2050.
China is the worlds largest manufacturer of consumer electronics.China impacts our lives in some fashion every day, as consumers,sellers, employees, employers, manufacturers, etc. China leads theworld in the number of clothes made and toys assembled. Chinamakes more than 40% of all the furniture sold in the United States.
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SERVICE INDUSTRY
INDIA
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OVERVIEW OF SERVICES The Indian information technology (IT) industry has
been the source of much discussion on the successfulgrowth of a knowledge industry in a largely poor,developing country.
IT in India is spread across four key sectors- IT services;IT enabled services (ITES), software, and e-business.These sectors combine for a 2008 annual revenueforecast of $87B, (NASSCOM) with numerous analystssuggesting higher revenue.
The rapid growth of IT in India, software was a small$150MM industry in 1991, but grew to $5.7B in 2000.Anannual growth rate of 50% . (NASSCOM).
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FACTORS LEADINGTO GROWTHIN
SERVICES
Passive Role of Government
Indias IT industry has flourished with minimal intervention or support from thecentral government.
The Indian IT industry did not face a rigorous process for starting newcompanies. IT also faced limited labour restrictions on hours and overtime,
while having the opportunity early in its development to receive foreign directinvestment
English
At least 70MM individuals (Torreblanca) speak English at a professional level
in India.
Indias IT industry has matured from software to business process off shoring(BPO), English has again been a comparative advantage as the sheernumber of employable English speakers has made India a key FDIdestination.
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Education
India has only 4% engineers, while Germany and China have 20% and 33%respectively.
IT required large numbers of technical graduates, especially relatively inexpensive,English speaking ones, which has been a major advantage for India, despiteoverall shortcomings in the education system.
Entrepreneurship
While the heavily regulated post-Independence economy in India was notconducive to entrepreneurship, IT beginning in 1980s was an exception.
Starting a software company was comparatively easy to manufacturing or othercapital intensive industries. As multinationals began using India for IT services
Clusters of high tech areas formed in cities like Bangalore and Hyderabad,essentially creating natural high tech zones that pulled in greater amounts ofinvestment.
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OVERVIEW OF SERVICES
One of Chinas fastest growing service industries is thesoftware industry. The Chinese software industry is inherentlydifferent than Indias and will likely take different paths. Themajority of Chinese software services producers are domesticcompanies with domestic consumers.
Chinese firms comprise about a third of the domestic softwaremarket, with the government pushing for a 60% domination by2010. China is also experiencing growth in other knowledge
based service sectors.
China is racing India in the IT enabled services/ Back OfficeOperations industry.
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FACTORS LEADINGTO GROWTHIN
SERVICES
English
The recent emergence of English education in China is likelyattributed to the growth of the service sector. Because the governmentunderstands the importance of English-language knowledge tosuccess in the Knowledge based service sector.
Education
To take advantage of the large technically educated labour pool, manyAmerican educated and trained Chinese entrepreneurs are movingback to China to develop ITES/BPO companies.
Salaries amongst IT professionals in China are less than a sixth ofthose in the United States. China, spent 2.3% of GDP on education,compared to 5.1 % by the United States in the same year.
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OBSTACLESTO GROWTHIN
SERVICESIN CHINA
IPR violations
Despite the efforts in education andinfrastructure that China has started, one ofthe largest drawbacks is the constant threat ofintellectual property rights violations in China.
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RECOMMENDATIONSFOR CHINASSOFTWARE
INDUSTRY/ITES GIVEN INDIAS SUCCESSES
Recommendation 1: Become More Export Oriented
The first recommendation that China should adopt to improve its softwaresector is to develop a more export oriented growth strategy. Beingdomestically focused could leave the industry susceptible to internalshocks.
The high tech development zones should provide technical assistance onexporting guidelines and globalization to help companies export abroad.
Recommendation 2: Create A Better IPR Regulatory Environment
China needs to focus on improving its protection of IPR and target pirating.A first step towards this goal is through the creation of an IT/Off shoringTrade Association similar to Indias NASSCOM.
The creation of this type of organization would allow companies to sharebest practices to increase efficiency and, apply more pressure to increasecompliance with international IPR standards
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INFRASTRUCTURE
WITHFOCUSON
THE POWER SECTOR
INDIA
& CHINA
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INTRODUCTION
The East Asian region including China and India isprojected to experience stronger growth inelectricity consumption than any other region of theworld. Total electricity consumption is projected to
grow by more than 3 trillion-kilowatt hours between1995 and 2015, a growth rate above 5 percent peryear, with China alone accounting for more thanhalf the growth.
China and India are more heavily dependent oncoal for electricity generation than are the otherdeveloping Asian nations. The relative shares for oiland nuclear power are expected to decline
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INTRODUCTION
At the time of Indias independence, India andChina were at par with respect to overallinfrastructure development. Now Chinas per capitaconsumption of steel is five times that of India and
that of energy if three times.
The success of reforms in the power sector inChina paves the way for India in understanding the
formulation and implementation issues relating tothe same. China is a very relevant case study forIndia because of various similarities viz. population,size, demographics.
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THE CHINESE
POWER SECTOR
China has the world's fastest growing electric power. Percapita consumption in China is currently only 6% that of theUnited States.
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THE DEMAND SUPPLY SITUATION
Strong projected growth in electricity demand in Chinaresults from two factors.
Increased need for rural electrification. Although nearly 90percent of the rural households in China had access toelectric power at the end of 1993, some 120 million peoplewere still without electric power. The Chinese governmentplans to increase electrification to 95 percent by 2000.
The Chinese government is working to keep electric power
growth in line with economic growth. China's annual averageratio accounted for only 1.24 percent of GDP from 1980 to1999. Hence, China is heavily investing in power projects.Growth in electricity generation averaged 8% per annumduring the last 15 years.
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ENERGY SUPPLYPTIONS
Chinas installed power generating capacitywas 250 GW in 1997 of which 77% wasthermal and 23% was hydro. Nuclear
capacity occupied only a fractional share ofthe total power generated.
1.) Thermal Power,
2.) Hydroelectric Power,
3.) Nuclear Power.
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THERMAL POWER
Coal-fired power plants provide more than 90% ofthermal generation, with oil based generationaccounting for most of the balance. The share ofnatural gas-based power generation is negligible andis expected to remain so even if the countrysucceeds in implementing its challenging gas importprojects.
The power sectors use of coal amounted to 370million tons, which is more than one-third of the totalcoal consumption in the country.
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THERMAL POWER
Although government policy emphasizes the addition oflarger, more efficient units of 300 MW and 600 MW, overhalf of the existing capacity is still in units below 200 MW.Only 15% of installed capacity are in units of larger than
300 MW, compared to 60-80% in industrialized countries.
New plants being built by the local governments are inunit sizes of 50 MW or less. The main reason is that these
small units are easier to finance. At the same time, theseunits consume 60% more coal per unit of electricityproduced compared to units of 300 to 600 MW.
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HYDROELECTRIC POWER Hydropower is the least-cost generation source in China. It
serves, and will serve, a major role in meeting the base-loadpower generation needs of the country. The generation cost isabout $0.03 / kWh.
The country has a hydroelectric potential of 670 GW, of which380 GW is considered suitable for exploitation. This capacitymay generate up to 1900TWh per year. By the end of 1996,56 GW of installed hydro capacity were in operation, reflectingapproximately 14.7 percent of the exploitable resource. Theinstalled capacity is expected to increase to 100 GW by 2010.
The Three Gorges project on the Yangtze River involvesconstruction of the world's largest dam, with its 26 hydropowergenerating units (700 megawatts each) slated to provide atotal of 18 gig watts generating capacity by 2009.
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NUCLEAR POWER
Nuclear power represents a relatively minor, but growing, share ofChinas electric generating capacity, with two plants currently inoperation: Qinshan at Hangzhou Bay in Zhejiang province (288megawatts) and a plant at Daya Bay in Guangdong province(1812 megawatts).
China has plans for 9 additional units, totalling 8 gig watts. By2015, output from nuclear plants is projected to increase 9-foldover 1996 levels, accounting for about 4.5 percent of China'selectric power generation. Under construction are two 600-
megawatt units at the Qinshan plant and two 1,000-megawattunits at a new plant, Lingao, near Hong Kong.
G CO S O
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ENERGY CONSUMPTION
PROJECTIONS FOR CHINA
If electricity demand grows, as expected, at 8 to 9% per annum,China would need to add about 18-20 GW of capacity per year.
Even with a growth rate of 7% (low-case scenario), the growth inChinas power generating capacity will be about 16 GW per year.This still accounts for more than 20% of the worlds new
capacity.
The projected huge increase in overall energy usage by 2020(162 percent), a massive investment in energy infrastructure fornatural gas, nuclear, hydroelectric (e.g., Three Gorges Damproject), and other renewable is a must.
The large annual increases in energy demand in Asia will mostlikely be met by rapid increases in coal and oil imports. In 1992,China was a net oil exporter, but it is expected that by 2010,China will become the second largest importer of oil in Asia.
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THE INDIAN
POWER SECTOR
Indias power sector has grown many fold in size andcapacity. India consumes two-thirds more energy per dollar ofgross domestic product (GDP) as the world average. Indiaconsumes only about 18 percent of the energy per person asthe world average.
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THE DEMAND SUPPLY SITUATION
The power sector has been characterized byshortage in supply vis--vis demand. From 1998,there has been peaking shortage of 18% and
energy shortage of 12%.
The transmission and distribution losses in Indiaare among the highest in the world. Against the
normal world average of 8-10%, the figures havebeen about 23%, which is alarmingly high.
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ENERGY SUPPLY OPTIONS
Coal currently accounts for 78% of fuel use at Indias electricpower stations. As in China, Indias high coal use is a reflection ofits ample coal reserves. Renewable energy (almost entirelyhydropower) is the next largest source of electricity supply in India.
Renewable energy (almost entirely hydropower) is the next largestsource of electricity supply in India. In1995, renewable accountedfor 14% of Indias electricity generation. Natural gas (at about 5%),oil (at 2%), and nuclear energy (at just under 2%) provided theremaining fuels to Indias electricity industry.
A wind-energy rush began in 1994 as the government opened up
the power grid to independent developers and offered taxincentives for renewable energy development. Indeed, India is nowsecond only to Germany in the number of annual wind-powerinstallations.
ENERGY CONSUMPTION
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ENERGY CONSUMPTION
PROJECTIONS FOR INDIA
Electricity demand in India is projected to growdramatically over the next 20 years. With about 6percent of total world coal reserves, India, like China,relies on coal for much of its energy supply. Although
coal's share of India's electricity generation is projectedto drop slightly, from 77 percent in 1995 to 64 percent in2015.
The contribution of natural gas in electricity generationis projected to rise from only 4 percent in 1995 to 12percent by 2015.
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WORLD ENERGY CONS. FOR ELECTRICITY GENERATION
BY REGIONAND FUEL
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LEADING ELECTRIC POWER COMPANIESIN ASIA
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PETROLEUM
INDIA& CHINA
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PETROLEUM CONSUMPTION
IN CHINA From 1993 China began to become a net importer of energy
resources, with yearly petroleum import increasing around10m tons and the amount tending to grow on an annual basis.
China will still be short of 8 percent energy by 2010 and about24 percent by 2040, of which petroleum shortage may reachseveral hundred million tons. Dependence on imports had
jumped from 6.6 percent in 1995 to 25 percent in 2000. Thefigure is expected to rise to 30 percent by 2010 and further totop 50 percent by 2020.
The country plans to increase its proven oil reserve by fourbillion tons and crude oil production by 10 million tons in thenext five years, mainly by stepping up exploration andexploitation efforts in the western regions and its offshoreareas
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PETROLEUM CONSUMPTION
INDIA India's oil import bill has swelled 52 per cent to $44.64
billion in 2005-06 on the back of high global oil prices.
India imported 99.4 million tones of crude oil for $38.77
billion and 11.67 million tones of petroleum products for$5.86 billion in 2005-06.
In 2006- 2007 the import bill of PETROLEUM, CRUDE &PRODUCTS was $52.11 billion according to latest
Petroleum Ministry data.
LPG demand was up 0.6 per cent to 10.3 million tonesand petrol consumption rose 4.8 per cent to 8.64 milliontones
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INDIA & CHINA
Quick Facts In Figures
E
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ECONOMY
INDIA CHINA
GDP (purchasing power
parity):$2.965 trillion (2007 est.) $7.043 trillion (2007 est.)
GDP (official exchange
rate):
$894.1 billion (2007 est.) $2.879 trillion (2007 est.)
GDP - real growth rate: 8.5% (2007 est.) 11.4% (official data) (2007 est.)
GDP - per capita (PPP): $2,700 (2007 est.) $5,300 (2007 est.)
GDP - composition by
sector:
agriculture: 16.6%
industry: 28.4%
services: 55% (2007 est.)
agriculture: 11%
industry: 49.5%
services: 39.5%
note: industry includes
construction (2007 est.)
Labour force: 516.4 million (2007 est.) 803.3 million (2007 est.)Labour force - by
occupation:
agriculture: 60%
industry: 12%
services: 28% (2003)
agriculture: 43%
industry: 25%
services: 32% (2006 est.)
Unemployment rate: 7.2% (2007 est.) 6.1% unemployment in urban areas;substantial unemployment and
underemployment in rural areas (2006 est.)
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ECONOMY
INDIA CHINA
Population below poverty
line:
25% (2002 est.) 8% note: 21.5 million rural
population live below the
official "absolute poverty"
line (approximately $90 per
year); and an additional 35.5
million rural population
above that but below the
official "low income" line(approximately $125 per
year) (2006 est.)
Household income or
consumption by
percentage share:
lowest 10%: 3.6%
highest 10%: 31.1% (2004)
lowest 10%: 1.6%
highest 10%: 34.9%
(2004)Distribution of family
income - Gini index:
36.8 (2004) 46.9 (2004)
Inflation rate (consumer
prices):
5.9% (2007 est.) 4.7% (2007 est.)
Investment (gross fixed): 31.8% of GDP (2007 est.) 42.2% of GDP (2007 est.)
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ECONOMYINDIA CHINA
Public debt:
58.8% of GDP (federal and
state debt combined) (2007
est.)
18.9% of GDP (2007 est.)
Agriculture -
products:
rice, wheat, oilseed, cotton,
jute, tea, sugarcane,
potatoes; cattle, water
buffalo, sheep, goats,
poultry; fish
rice, wheat, potatoes, corn, peanuts, tea, millet,
barley, apples, cotton, oilseed; pork; fish
Industries:
textiles, chemicals, food
processing, steel,
transportation equipment,
cement, mining, petroleum,machinery, software
mining and ore processing, iron, steel,
aluminium, and other metals, coal; machine
building; armaments; textiles and apparel;
petroleum; cement; chemicals; fertilizers;
consumer products, including footwear, toys, andelectronics; food processing; transportation
equipment, including automobiles, rail cars and
locomotives, ships, and aircraft;
telecommunications equipment, commercial
space launch vehicles, satellites
ECONOMY
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ECONOMYINDIA CHINA
Industrial production growth
rate:
10% (2007 est.) 12.9% (2007 est.)
Electricity - production: 661.6 billion kWh (2005) 2.866 trillion kWh (2006)
Electricity - production by
source:
fossil fuel: 81.7%
hydro: 14.5%
nuclear: 3.4%
other: 0.3% (2001)
fossil fuel: 80.2%
hydro: 18.5%
nuclear: 1.2%
other: 0.1% (2001)
Electricity - consumption: 488.5 billion kWh (2005) 2.859 trillion kWh (2006)Electricity - exports: 67 million kWh (2005) 11.27 billion kWh (2006)
Electricity - imports: 1.764 billion kWh (2005) 5.39 billion kWh (2006)
Oil - production: 834,600 bbl/day (2005 est.) 3.71 million bbl/day
(2006)
Oil - consumption:
2.438 million bbl/day (2005 est.) 7 million bbl/day (2006)
Oil - exports: 350,000 bbl/day (2005 est.) 375,800 bbl/day (2006)
Oil - imports: 2.098 million bbl/day (2004 est.) 3.646 million bbl/day
(2006)
Oil - proved reserves: 5.848 billion bbl (1 January 2006
est.)
16.3 billion bbl (1 January
2006 est.)
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ECONOMYINDIA CHINA
Natural gas - production: 28.68 billion cu m (2005 est.) 58.6 billion cu m (2006est.)
Natural gas - consumption: 34.47 billion cu m (2005 est.) 55.6 billion cu m (2006
est.)
Natural gas - exports: 0 cu m (2005 est.) 2.874 billion cu m (2006)
Natural gas - imports: 5.793 billion cu m (2005) 976 million cu m (2006)Natural gas - proved
reserves:
1.056 trillion cu m (1 January
2006 est.)
2.45 trillion cu m (2006
est.)
Current account balance: -$18.53 billion (2007 est.) $363.3 billion (2007 est.)
Exports: $140.8 billion f.o.b. (2007 est.) $1.221 trillion f.o.b. (2007
est.)Exports - commodities: petroleum products, textile
goods, gems and jewellery,
engineering goods, chemicals,
leather manufactures
machinery, electrical
products, data processing
equipment, apparel,
textile, steel, mobile
phones
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ECONOMY
INDIA CHINA
Exports - partners: US 17%, UAE 8.3%, 7.8%,
4.3% (2006)
US 21%, Hong Kong 16%, Japan
9.5%, South Korea 4.6%,
Germany 4.2% (2006)
Imports: $224.1 billion f.o.b. (2007
est.)
$917.4 billion f.o.b. (2007 est.)
Imports -
commodities:
crude oil, machinery,
gems, fertilizer, chemicals
machinery and equipment, oil
and mineral fuels, plastics, LED
screens, data processing
equipment, optical and
medical equipment, organicchemicals, steel, copper
Imports - partners: China 8.7%, US 6%,
Germany 4.6%,
Singapore 4.6%,
Australia 4% (2006)
Japan 14.6%, South Korea
11.3%, Taiwan 10.9%, US 7.5%,
Germany 4.8% (2006)
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ECONOMYINDIA CHINA
Economic aid - recipient: $1.724 billion (2005) $1.757 billion (2005)
Reserves of foreign exchange
and gold:
$239.4 billion (31 December
2007 est.)
$1.493 trillion (31 December 2007
est.)
Debt - external: $165.4 billion (30 June 2007) $363 billion (31 December 2007
est.)
Stock of direct foreign
investment - at home:
$67.72 billion (2006 est.) $699.5 billion (2006 est.)
Stock of direct foreign
investment - abroad:
$21.11 billion (2006 est.) $75 billion (2006 est.)
Market value of publicly
traded shares:
$818.9 billion (2006) $2.426 trillion (2006)
Currency (code): Indian rupee (INR) Renminbi (RMB); note - also
referred to by the unit yuan (CNY)
Currency code: INR CNY
Exchange rates: Indian rupees per US dollar -
41.487 (2007), 45.3 (2006),
44.101 (2005), 45.317
(2004), 46.583 (2003)
yuan per US dollar - 7.61 (2007),
7.97 (2006), 8.1943 (2005), 8.2768
(2004), 8.277 (2003)
Fiscal year:1 April - 31 March calendar year
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