Monetary¹ policy China's impressive money-supply growth rates continued in 1999. Deflation-fighting efforts included the issuance of more than *200 billion ($24.16 billion) in new currency last year; the institution in November of a tax on individual savings² deposits; and another round of interest rate cuts. The government also increased its reliance on open-market operations in 1999, after suspending operations through mid-1998. This could be the year Beijing further relaxes its control over loan interest rates.

    Financial reforms China stepped up the pace of financial reform in 1999 and this pace is likely to continue in 2000. A few of the more high-profile moves included: establishing asset-management companies to relieve the four state banks of their bad loans; slightly loosening restrictions³ on foreign participation⁴ in commercial banking⁵; granting domestic insurance firms the ability to invest in closed-end securities funds; and expanding the number of listed investment funds.

    The government's budget woes⁶ Government revenue, while rising of late, is still falling far short of the budget's requirements. Though the State Administration of Taxation⁷ reported that total revenue was up 13.4 percent in 1999, tax evasion⁸ remains⁹ a serious problem. The government has already issued billions of RMB in Treasury¹⁰ bonds both to help recapitalize the ailing¹¹ banks and to stimulate¹² the suffering economy, and more such outlays¹³ will be necessary before either recovers.

    Foreign currency and the value of the RMB China's foreign-currency reserves reached $154.68 billion at the end of 1999, up 6.7 percent. Most analysts¹⁴ expect that the RMB's value will remain relatively¹⁵ stable this year.

    Agriculture Falling agricultural prices, due to bumper¹⁶ harvests, were responsible for the small rise in rural incomes of only 4 percent in 1999. This was less than half of the average urban income, which rose more than 9 percent. Rural poverty is likely to be exacerbated¹⁸ when China joins the WTO-an additional 9.6 million farm workers are expected to lose their jobs as a result of China opening its agricultural markets.