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Economic Overview

China is the second-largest global economy, the largest exporter and has the largest exchange reserves in the world. However, even though China has one of the fastest-growing GDPs worldwide, its economic growth was abruptly slowed by the impact of the COVID-19 pandemic. After growing only 3% in 2022, the sudden abandonment of the zero-tolerance COVID-19 policy in late 2022 prompted a rapid recovery in the first quarter of 2023 when GDP surpassed expectations, expanding by 2.3% quarter-on-quarter, fueled by the resurgence of private consumption and state-owned enterprise investment. However, the rebound proved short-lived due to the deeper-than-expected impact of the pandemic, resulting in households maintaining high precautionary savings. Moreover, ongoing uncertainty from the real estate crisis continued to dampen consumer and investor confidence. Growth softened in the second quarter (0.5% q-o-q) as households, private enterprises, and local governments actively deleveraged, before regaining momentum in the third quarter (1.3% q-o-q). For the year as a whole, China's economy expanded by 5.2%, slightly surpassing the official target. However, the recovery proved much more fragile than anticipated by many analysts and investors. A deepening property crisis, increasing deflationary risks, and subdued demand have overshadowed the outlook for the current year. Projected to decline to 4.2% in 2024 and 4.1% in 2025 (IMF forecast), growth is anticipated to linger well below its pre-pandemic trend for both years. China's current growth model, reliant on substantial investment in real estate and infrastructure fueled by debt, is faltering, while new growth drivers remain underdeveloped. The expected continuation of household consumption recovery is forecasted for both 2024 and 2025.

Concerning public finances, China's fiscal revenue rose 6.4% in 2023, picking up significantly from a 0.6% increase in COVID-hit 2022, while fiscal expenditures rose 5.4% (official government data). The overall budget deficit was estimated at 6.6% of GDP and should remain stable in 2024 (IMF). Meanwhile, the debt-to-GDP ratio rose to 80%, up from 77% in 2022. The IMF expects the debt ratio to rise to 91.8% by 2025. Higher debt poses the most significant risk to China's economy in the next two years, exacerbated by the real estate crisis, which could potentially spill over into the financial sector. At the end of Q1 2023, total non-financial sector debt reached 306% of GDP, nearly 17 percentage points higher than the previous year and 40 points higher than in 2019. Servicing such massive debt, particularly corporate debt, is becoming increasingly challenging amidst the projected growth slowdown. Additional risks stem from weak investor and consumer confidence, geopolitical uncertainties, and adverse demographics. In 2023, China's economy avoided inflation caused by surging global energy and food prices due to its high food self-sufficiency rate and the substitution of some crude oil imports with discounted oil from Russia, resulting in an overall rate of only 0.7% albeit with a slight uptick expected this year (1.7% as per the IMF).

According to the Minister of Human Resources and Social Security, the low unemployment rate of these past years is largely due to the new digital economy and entrepreneurship. Many analysts say, however, that the government figure is an unreliable indicator of national employment levels, as it takes into account only employment in urban areas and does not measure the millions of migrant workers that arrive in the country every year. Despite the global context, the unemployment rate stood at 5.3% last year and should remain stable over the forecast horizon (IMF). A large gap remains between the living standard of the cities and the countryside, between urban zones on the Chinese coast and the interior and western parts of the country, as well as between the urban middle classes and those who have not been able to profit from the growth of recent decades. The COVID-19 pandemic also highlighted weaknesses in the health and social security systems and pushed many households and firms to the brink of bankruptcy. It further widened inequalities between central provinces that have been hardest hit and the coast; between poorer households that had already been indebted and wealthier households and between the private sector, which has limited access to infrastructure contracts and is hard hit by slackened demand and the state-owned sector. Such divides will need to be addressed by the central government to make growth inclusive and sustainable (OECD).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 17,848.5417,662.0418,532.6319,790.0721,027.66
GDP (Constant Prices, Annual % Change) 3.05.24.64.13.8
GDP per Capita (USD) 12,64312,51413,13614,03714,929
General Government Balance (in % of GDP) -6.6-6.6-7.2-7.5-7.8
General Government Gross Debt (in % of GDP) 77.183.688.693.097.5
Inflation Rate (%) 2.00.21.02.02.0
Unemployment Rate (% of the Labour Force) 5.55.25.15.15.1
Current Account (billions USD) 401.86264.20235.71275.51284.87
Current Account (in % of GDP) 2.31.51.31.41.4

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

China has a highly diversified economy, dominated by the manufacturing and agricultural sectors. It is the most populated country in the world and one of the largest producers and consumers of agricultural products. The agricultural sector is estimated to employ 24% of the active population (World Bank, latest data available) and to account for 7.3% of GDP, although only 15% of the Chinese soil (about 1.2 M km²) is arable. China is the leading global producer of cereals, rice, cotton, potatoes and tea. In terms of livestock, it also dominates sheep and pork livestock farming as well as the world’s fish production. A series of plans have been aimed at transforming, modernising and diversifying agriculture to increase productivity. Data from the National Bureau of Statistics (NBS) show that China's grain output rose 1.3% year on year to a record high of 695.41 million tonnes in 2023, marking the ninth consecutive year with a grain harvest of over 650 million tonnes. Additionally, the country is rich in natural resources and has significant coal reserves (the country's primary energy source), which account for two-thirds of the total primary energy consumption. China is the world leader in the production of certain ores (tin, iron, gold, phosphates, zinc and titanium) and has significant petrol and natural gas reserves, making the country the 6th-biggest oil producer in the world, with 4.01 million barrels produced per day in 2023.

The industry sector contributed to approximately 39.9% of China's GDP and employed 28% of the population in 2022 (World Bank). China has become one of the most preferred destinations for the outsourcing of global manufacturing units thanks to its cheap labour market, despite an increase in labour costs in recent years. The country is a global leader in various manufacturing sectors like machinery manufacturing; electronics; textiles and garments; and steel and automobiles (the Chinese manufacturer BYD overtook Tesla to become the world's biggest electric car company in the final quarter of 2023). China’s economic growth has coincided primarily with the development of a competitive and outward-oriented manufacturing sector. More than half of the Chinese exports are made by companies with foreign capital. Their share in the sector's added value varies according to the industry: more than 60% for electronics and less than 20% for the majority of producer goods. The value-added industrial output went up 4.6% year on year in 2023 (data NBS). The output of the equipment manufacturing sector expanded 6.8% y-o-y in 2023, faster than the average industrial production growth. The production of solar batteries, new energy vehicles and power generation equipment surged 54%, 30.3%, and 28.5%, respectively.

The services sector in China has witnessed rapid expansion in the last decade, becoming the largest contributor to GDP (52.8%), surpassing manufacturing, and employing around 47% of the workforce (World Bank). Even though the sector's GDP share has been growing in recent years, the service sector as a whole, encumbered by public monopolies and restrictive regulations, has not progressed. The development of the sector has been constrained by the country’s focus on manufactured exports and the substantial barriers to investment in the sector. However, the Chinese government has been focusing more on the services sectors lately, particularly in sub-sectors such as finance, logistics, education, and healthcare, as it is also aiming to rank among the top exporters for transport, tourism and construction. The trade sector is particularly strong and includes online giants like Alibaba and JD.com.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 24.4 28.2 47.4
Value Added (in % of GDP) 7.3 39.9 52.8
Value Added (Annual % Change) 4.1 3.8 2.3

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Chinese Yuan (Renminbi) (CNY) - Average Annual Exchange Rate For 1 USD 6.646.766.626.906.90

Source: World Bank - Latest available data.

 

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Foreign Trade

Thanks to its enormous trade surplus over the past few years, China has become the world's largest exporter and ranks second among the world’s largest importers. Despite its strict policies, the country is fairly open to foreign trade, which represented 37% of its GDP in 2022 (World Bank). In the same year, China remained the largest trader of goods throughout the world for the sixth consecutive year. China's main exports include telephones (7.7%), automatic data-processing machines (5.2%), electronic integrated circuits (4.3%), semiconductors (1.8%), and electronic accumulators (1.6%). On the other hand, the country mainly imports electronic integrated circuits (15.3%), petroleum oils (13.5%), iron ores (4.7%), petroleum gas (3.3%), and gold (2.8% - data Comtrade).

In 2022, exports were directed mostly towards the United States (16.2%), Hong Kong SAR, China (8.3%), Japan (4.8%), South Korea (4.5%), and Vietnam (4.1%); whereas imports came chiefly from South Korea (7.4%), Japan (6.8%), the United States (6.6%), Australia (5.2%), and Russia (4.2% - data Comtrade). In the same year, China's trade in goods with the ASEAN, the EU, and the U.S. respectively surged 15%, 5.6%, and 3.7% to CNY 6.52 trillion, CNY 5.65 trillion, and CNY 5.05 trillion. China's trade with countries along the Belt and Road rose 19.4% year-on-year and accounted for 32.9% of the nation's total foreign trade, up 3.2 percentage points. The country's trade with the other 14 members of the Regional Comprehensive Economic Partnership increased by 7.5% (data General Administration of Customs). On the 15th of November 2020, China signed the Regional Comprehensive Economic Partnership (RCEP) with 14 other Indo-Pacific countries. This free trade agreement is the largest trade deal in history, covering 30 per cent of the global economy. It includes the Association of Southeast Asian Nations (ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and ASEAN’s free trade agreement partners (Australia, China, India, Japan, New Zealand and the Republic of Korea). The RCEP covers goods, services, investment, economic and technical cooperation. It also creates new rules for electronic commerce, intellectual property, government procurement, competition, and small and medium-sized enterprises.

Trade has become an increasingly important part of China’s overall economy, and it has been a significant tool used for economic modernisation. As reported by WTO, in 2022, exports of goods and services reached USD 3.59 trillion and USD 424 billion, respectively (+7% and +8.1% year-on-year). Imports of goods totalled USD 2.71 trillion, and those of services USD 465 billion (+1% and +8.9% year-on-year). According to the World Bank, the overall balance of trade was positive by 3.2% of GDP (from +2.6% one year earlier). In 2023, the country's foreign trade stood at CNY 41.76 trillion (about USD 5.87 trillion ), according to preliminary figures from the General Administration of Customs (GAC). Exports grew 0.6% y-o-y to CNY 23.77 trillion, while imports edged down 0.3% from one year earlier to CNY 17.99 trillion.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 2,078,3862,065,9622,679,4122,706,5072,556,802
Exports of Goods (million USD) 2,499,4572,589,9523,316,0223,544,4343,380,024
Imports of Services (million USD) 500,680381,088426,998465,053551,995
Exports of Services (million USD) 283,192280,629394,273424,056381,121

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 37.635.934.837.338.1
Trade Balance (million USD) 380,074392,993511,103562,706668,633
Trade Balance (Including Service) (million USD) 87,905131,844358,573461,494576,330
Imports of Goods and Services (in % of GDP) 18.517.516.217.417.5
Exports of Goods and Services (in % of GDP) 19.118.418.619.920.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) -0.32.52.03.03.0
Volume of imports of goods and services (Annual % change) 3.04.41.63.93.7

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
China is a member of the following international economic organisations: Asia-Pacific Economic Cooperation (APEC), Association of Southeast Asian Nations (dialogue partner of ASEAN Plus Three), G-20, G-24 (observer), G-5, G-77, IMF, Pacific Alliance (observer), WTO, among others. For the full list of economic and other international organisations in which participates China click here. International organisation membership of China is also outlined here.
Free Trade Agreements
China is a member of Regional Comprehensive Economic Partnership (RCEP) signed on 15 November 2020. The complete and up-to-date list of Free Trade Agreements signed by China can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2022
United States 16.2%
Hong Kong SAR, China 8.3%
Japan 4.8%
South Korea 4.5%
Vietnam 4.1%
See More Countries 62.1%
Main Suppliers
(% of Imports)
2022
South Korea 7.4%
Japan 6.8%
United States 6.6%
Australia 5.2%
China
4.5%
See More Countries 69.5%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
General Secretary of the Communist Party: Xi Jinping
President: Xi Jinping (since 14 March 2013)
Vice President: Han Zheng (since 10 March 2023)
Head of government and leader of the State Council: Li Qiang (since 11 March 2023)
Next Election Dates
Presidential: March 2028
National People's Congress: March 2028
Current Political Context
Overall, the political situation in China has been stable, with the Chinese Communist Party (CCP) firmly in power. China's current leader, Xi Jinping, holds a triple title as CCP general secretary, Central Military Commission chairman and state president. After assuming these functions in 2012-13, he was reappointed to them in 2017-18 and then again in 2022.
In the political sphere, 2023 was characterized by the National People’s Congress in March, during which the long-anticipated retirement of Li Keqiang as premier occurred, succeeded by Li Qiang. Li Qiang, former party secretary of Shanghai and a longstanding associate of President Xi Jinping, assumed the premier role, helping Xi  consolidate his power and influence.
Throughout 2023, China's international relations were shaped by several key events, including Russia's ongoing conflict with Ukraine, heightened tensions with the United States, the Hamas terrorist attacks on Israel, and Israel's subsequent response. While China maintained rhetorical support for Russia, it refrained from direct involvement, opting instead to issue a relatively mild peace proposal in February.
Main Political Parties
The only political party in the country is the CCP (Chinese Communist Party). There are eight other registered small parties, but they remain under control of the CCP.
Executive Power
The Chinese executive is supervised by the State Council (a collegial body equipped with important powers and appointed by the National People's Congress) under which are Government commissions, ministries and other organisations with the rank of a ministry. According to the Constitution, the Council is 'the Supreme Administrative Body' of the Chinese Government, even if the majority of important measures are decided by the Political Bureau of the Chinese Communist Party (CCP). The Council thus plays an important role in the economic domain.
The president is the head of state and is elected by the National People's Assembly. In general, he is also the general secretary of the Communist Party. He represents China in international institutions. The prime minister directs and controls government action, assisted by four deputy prime ministers. The State Council also includes 5 state councillors, who, like deputy prime ministers, have jurisdiction over several ministerial departments or commissions. The Secretary General of the Government is also a member of the State Council.
Legislative Power
The legislature is monocameral, composed of the National People's Congress (NPC). It is known as a 'Body of Supreme Power of the Government' and meets once per year in a plenary session. There are approximately 3,000 designated deputies elected to the NPC every five years by indirect vote of local bodies. Since the 1980s, it has been dominated by local or sectional interests. Deputies are the representatives of 23 provinces, five areas and four autonomous municipalities. The NPC comprises a delegation of the People's Liberation Army. The Standing Committee of the National People's Congress is appointed by the Political Bureau of the Central Committee of the Party. It sits instead of the NPC during its recess and exercises all its powers. It is composed of a president, 15 vice-presidents and 176 permanent members. The Standing Committee sits regularly, but it is the Bureau of the NPC which exerts its functions on a daily basis. Eligibility is controlled by the CCP, which also has a right to supervise the appointment of the executives and the senior officials of different administrative units.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of China, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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