Household incomes have doubled in China in the last decade, Peyman said, and housing reform in the past five years has created household balance sheets. The reforms have given urban residents a major asset – their homes – at a significant discount, and transformed individuals wealth.

Consumer credit has begun, including mortgages for homes, auto loans and credit cards. A consumer society has started to emerge, Peyman said, and Maoist austerity is ending. Now, 50 years of pent-up demand in the consumer sector is driving growth.

Private property was legalized for the first time in 2000, said Peyman, and competition has helped Chinas overall economy, driving down prices. Chinas membership in the World Trade Organization has helped bring down barriers within China, reducing provincial protectionism. Increasingly, coastal companies can sell to and source from the countrys interior.

Information is increasingly available, and is driving economic activity and choice. For example, apartment-rental agencies have proliferated in Chinas major cities over the past year, creating an information-based industry that didnt exist just months before.

Turning to economic and political changes, Peyman noted that Chinas leadership is getting younger and better educated at all levels, and decision-making is increasingly decentralized. Accountability is appearing: Last year, two ministers, for health and land, were actually fired.

In state-owned enterprises, Peyman said, much of the hard part has been done in the transition to a market economy, with 35 million workers laid off. He estimates that the state-owned enterprises, in general, are about halfway through their transition. Regarding taxes, Peyman said the governments take has almost doubled since 1996; its up 21 percent in the last year.

Peyman sees a growth shift in China. It is becoming a continental economy and a major importer, he said. The countrys infrastructure is now being developed, linking producers, markets and consumers. Like the United States in the 1950s, highways are being built. Outbound tourism is growing. Twenty million Chinese toured other countries in 2003; that number is expected to jump to 50 million in 2010.

Finally, Peyman said, fears have faded over the past five years. The fear of deflation – the falling price of manufactured goods – has faded, and price stability has returned.

Chinas rural areas were a great cause of concern in the 1990s, he continued, but market forces are helping the rural areas, and agricultural prices have improved. Fear of a frayed social safety net has faded, as pension reform is beginning in the most troubled areas. Fear of social instability has hit bottom, despite poverty in rural areas. And fear of Chinas relations with the United States has faded; Chinas current leadership sees good relations as important.

Looking ahead at the next five years, Peyman predicted that momentum toward a market-driven economy will accelerate. Urbanization will add 140 million people to Chinas cities by 2010, and 350 million by 2020. This huge population shift will solve some problems in the rural sectors, Peyman contended, and will drive demand for housing, cars and other consumer goods. Demand for more space, another 25 percent per person, in housing will continue.

The demand for credit will continue to rise, Peyman said, noting that the number of credit cards in use in China jumped from 2 million to 24 million last year alone.

City center redevelopment, sometimes called slum clearance [elsewhere], is a pillar of the economy, Peyman said. People who are moved out of substandard housing are compensated enough to move into better apartments in new areas of cities.

The official sanctioning of private property may spur bank lending, said Peyman, and privatization will certainly transform formerly state-owned enterprises as new investors buy into businesses. Rural China will be transformed by new land laws, and farmers will have the right to use of their land, giving them an asset they can sell, which will likely lead to consolidation of small plots.

Global industries, like consumer electronics, textiles and ship building, will soon be centered in China, Peyman continued.

Currency is 30 to 40 percent undervalued, and will be revalued, said Peyman, likely 10 to 12 percent in 2004 and another 10 to 12 percent in 2006 or 2007. It is now in Chinas interest as a major importer to revalue its currency.

And productivity will increase, Peyman concluded. There will be no more cheap labor, he said. Rather, youll find better quality in China, and better prices.