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G. water diversion projects, alternative energy systems) – and that management of these nontraditional problems is difficult because China does not have a wealth of successful domestic experiences to draw upon. The economic costs of SARS have been greatly magnified not only by an inadequate public health system but also by structural weaknesses in information dissemination within China. org Wing Thye Woo 37 2-percentage points safety margin in fiscal management that we identified in Section 4 should at best be regarded as minimally adequate when we consider the sustainability of China’s fiscal policy, and its ability to keep the annual growth rate above 7 percent.

As a result, the SOE losses are translated into the NPLs of the stateowned banks and into rising unemployment since the SOEs have had to cut their jobs. Thus, there is the dilemma between drastic reform of the SOEs to reduce the debts and the NPLs, on the one hand, and continuing a political strategy that aims at maintaining social stability and equality that would require fewer lay-offs, on the other hand. While more rural-urban migration is needed to increase the income levels of the rural population, there are not enough jobs created in the urban areas.

Sources: China Statistical Yearbook, 1990 to 2001 data from 2002 edition, and earlier data from 2001 edition. Citigroup (2003) for GDP growth rates 2002 and 2003. org Wing Thye Woo 39 cereals, tobacco, fuels and minerals. 5 percent by 2004 will create considerable adjustment costs for China. For example, China is a natural food-importer and a natural factoryoriented society given its low land-man ratio, but its agricultural sector still employs over 332 million people, which is over two-third of the rural labour force.

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