China disconnects from the dollar.

On July 21, 2005 China announced that it would no longer peg the yuan to the dollar. The expected announcement was carried by all the major news wires, and the move was covered by most major news outlets.

In the days immediately preceding the announcement, other world governments increased the already intense pressure on China to release the peg. Most of the information released by these other governments was political rhetoric.

For example, the chairman of the United States (US) Federal Reserve expressed concern about China's economy if the peg were not released suggesting that inflation would spiral out of control.

This is not supported by China's financial record. Clearly, China has had its problems with inflation. From 1986 through 1995, the annual rate of growth in inflation averaged an alarming 11.9 percent. But from 1996 and through the International Monetary Fund's (IMF) projections for 2005, the annual growth in the rate of inflation dropped to 1.7 percent.

The average rate of growth of China's GDP for the past 20 years, which includes both of these decades is 9.1 percent.

In 1996, inflation grew 8.3 percent, but in 1997 the rate of growth fell to 2.8 percent as though trimmed by an axe.

In a sense, that's what happened as the Chinese government exercised the enormous control it still maintains over the economy.

What's the significance, then, for China's growing consumer economy?

In the short term, the effect will be hardly noticeable. The yuan is now pegged against a basket of foreign currencies and will be permitted to trade only in a very narrow range.

The significance of China's move is a concession to producers in other countries. It is a signal that China intends to play fair, or more accurately, a little fairer in the competitive global market.

Consumers will benefit because imports of consumer products will be slightly less expensive, and Chinese imports to other countries will be more expensive meaning that workers abroad will be somewhat protected.

Also, China's bid to join the World Trade Organization (WTO) will be advanced, an indirect benefit to consumers.

CHINA NEEDS TO URBANIZE AND MUST COPE WITH AN AGING POPULATION

The population growth rate for China sets the regional average for East Asia at 12 per thousand inhabitants. Of course, China's enormous population guarantees that the regional average will be its own growth rate. Job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve further in 2005. Unemployment is running 9.8 percent as estimated by the CIA's World Factbook, which additionally cites an official Chinese journal estimate of 20 percent overall unemployment including the country's large rural population.

China's population reached 1.3-billion people mid-2004, 86 percent of East Asia's 1.5-billion inhabitants. According to data released by the Population Reference Bureau (PRB), China's population will reach 1.4-billion by 2025, remain at that level through 2050.

The PRB revealed that only 41 percent of China's population lived in urban areas during 2004, and that the country's population density is 352 people per square mile. China is about the same size as the United States (US), but with 4.5 times the population. By comparison, the US population density is 79 people per square mile. Another source of demographic data, the CIA's World Factbook, indicates that 21 percent of China's population is birth to 14 years old in 2005, while 71 percent is 15 to 64 years old, and 8 percent of the populace is 65 years of age and over.

CIA statistics estimated that the country's population growth rate was 0.58 percent in 2005 and the net migration rate was negative 0.4 per thousand.

According to the United Nations Population Division, in the year 2050, 16 percent of China's population will be birth to 14 years old, while 54 percent will be aged 15 to 59, and 30 percent of the populace will be 60 years of age and over.