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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 in the world, its economic growth was abruptly slowed to 2.3% in 2020, against 6% in 2019, due to the impact of the COVID-19 pandemic. The 2019 context was already the result of a structural slowdown, as the economy moves away from an investment-led growth model and the government implements policies to reduce financial vulnerabilities. At the time, resilient external demand and robust domestic household consumption bolstered this growth, despite rising concerns about financial risks amid an economic restructuring led by the government. In 2021, growth came back strongly at 8%. New sectors like e-commerce and online financial services are gaining momentum in an economy dominated by export-oriented sectors. According to the IMF's October 2021 forecast, the GDP trend is expected to stabilise at 5.6% in 2022 and 5.3% in 2023.

By the end of 2021, inflation reached 1.1% and it should stabilise at 1.8% and 1.9% in 2022 and 2023 (IMF, October 2021). Public debt is a reason for concern in China. Although the official figure for 2021 was 68.9%, the real number is thought to be much higher and is expected to rise in coming years. According to a report published by the Institute of International Finance, the total stock of corporate, household and government debt in the nation now exceeds 303% of gross domestic product and accounts for about 15% of all global debt. Lately, the government has been targeting spending cuts in its budget and President Xi Jinping has said that curbing loans to bloated state-owned enterprises is “the priority of priorities". Nonetheless, the IMF anticipates an increase in the government debt in the future, reaching 72.1% in 2022 and 74.5% in 2023. Due to the COVID-19 pandemic, government budget balance reached a record low of -9.5% of GDP in 2020 compared to -5.9% the previous year, but then came back to 6.9% in 202, a trend that is expected to remain in 2022 and 2023, when it's estimated to remain at -6.5% and -6%, respectively. On the other hand, China still has large reserves of foreign currencies, estimated by the Chinese Official reserve assets at USD 3.2 trillion in January 2022, which could serve as a buffer to external sovereign volatility, together with a current account surplus of an estimated USD 275.7 billion in 2022 (IMF, October 2021). Consumption is still to recover from the hit caused by the COVID-19 outbreak. Even though sales of luxury goods are booming and box office revenues have reached new highs, the lack of a recovery in employment and falling household incomes mean that prospects for a full consumption recovery are not bright (OECD, 2021).

In 2022, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic. Furthermore, China has to face many challenges: an ageing population and shrinking workforce, the lack of openness of its political system and issues of competitiveness in an economy dependent on high capital spending and the expansion of credit. 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. These inequalities are becoming increasingly worrisome for both Chinese authorities and investors, hence Xi Jinping's vow to complete the eradication of rural poverty by 2020 followed by his speech the following year, stating that the "arduous task of eradicating extreme poverty has been fulfilled" (BBC News, February 2021), even though the national benchmark used by the Chinese government is slightly higher than the USD 1.90 a day poverty line used by the World Bank to look at poverty globally.

According to the Minister of Human Resources and Social Security Yin Weimin, 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 slightly decreased from 4.2% in 2020 to 3.8% in 2021. The IMF expects the rate to return to pre-pandemic levels of 3.7% in 2022 and 3.6% in 2023.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 14,340.6014,866.7416,862.9818,463.1319,993.50
GDP (Constant Prices, Annual % Change) 6.02.38.14.85.2
GDP per Capita (USD) 10,17010,511e11,89112,99014,040
General Government Balance (in % of GDP) -5.9-9.5e-6.9-6.5-6.0
General Government Gross Debt (in % of GDP) 57.166.368.972.174.5
Inflation Rate (%) 2.92.41.11.81.9
Unemployment Rate (% of the Labour Force) 3.6e4.23.83.73.6
Current Account (billions USD) 102.91273.98277.15275.68284.39
Current Account (in % of GDP) 0.71.81.61.51.4

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

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. China 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 have employed 24.7% of the active population in 2021 (World Bank, 2022) and accounted for 7.7% 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. 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 seventh biggest oil producer in the world, with 3.38 million barrels produced per day in 2021.

The industry sector contributed to approximately 37.8% of China's GDP and employed 27% of the population in 2021 (World Bank, 2022). 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. China’s economic development 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 state sector still contributes approximately 39% to the GDP.

The services sector's share in the GDP is approximately 54.5% and it employed around 47% of the workforce in 2021 (World Bank, 2022). 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, healthcare and it is also aiming to rank among the top exporters for transport, tourism and construction.

The COVID-19 pandemic has had a powerful impact on the global economy since 2020. Nevertheless, the global recovery continues, even if the momentum has weakened towards the end of 2021 and uncertainty has increased as the pandemic resurged, leaving lasting imprints on medium-term performance. The surge in global inflation has investors fretting about future growth, but many economists say price surges will subside, making way for 4.7% global GDP growth in 2022 (International Monetary Fund - IMF, 2022 & Morgan Stanley, 2021). The impact of the pandemic appears to have affected both sides of most sectors and markets in China for the second year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 25.3 27.4 47.3
Value Added (in % of GDP) 7.7 37.8 54.5
Value Added (Annual % Change) 3.0 2.6 2.1

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 35% of its GDP in 2020 (World Bank, 2022). China's main exports include Electrical and electronic equipment (27%), machinery, nuclear reactors, boilers (17%), furniture, lighting signs, prefabricated buildings (4,2%), plastics (3,7%), optical, photo, technical, medical apparatus (3,1%), vehicles other than railway, tramway (2.9%), other made textile articles, sets, worn clothing (2,9%). On the other hand, the country mainly imports Electrical and electronic equipment (27%), Mineral fuels, oils, distillation products (13%), machinery, nuclear reactors, boilers (9,3%), iron ores slag and ash (8.8%), optical, photo, technical, medical apparatus (4,8%), vehicles other than railway, tramway (3.6%). The International Monetary Fund (IMF) is forecasting a rebound of 5.7% in the volume of exports of goods and services of this country in 2022, after an increase of 4% in 2020; and an increase of only 3.2% of its imports in 2022 after a jump of 10.9% in 2021 and 0% in 2020 (IMF Country Report, 2021).

The country's main partners include the United States, Japan, South Korea, Vietnam, Australia and Germany. Tensions in the U.S. - China economic relationship have heightened business uncertainties in 2020 and 2021, given that the US is the country's main trade partner (China's 2020 trade surplus with the U.S. was USD 255.5 billion after an all-time record of 323.3 billion in 2018). Similar tensions were at play with Australia although with less consequences for China. However, the Chinese government has been adopting looser economic policies to mitigate mounting risks to future growth. On the 15th of November 2020 China has 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 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 2021, exports of goods in 2020 were USD 2,590.2 billion and imports USD 2,057.2 billion, while exports and imports of services in 2020 reached USD 278 billion and USD 377.5 billion respectively. China reported an overall 5% increase in exports and 8% decrease in imports for 2020. According to the World Bank data of 2021, China's trade surplus for goods stood at USD 535,37 billion in 2020, an increase from USD 425.2 billion in 2019. The overall trade balance (including services) was USD 369.67 billion in 2020, from 131.84 billion the previous year.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 1,587,4311,843,7932,135,7482,078,3862,057,217
Exports of Goods (million USD) 2,098,1612,263,3452,486,6952,499,4572,590,221
Imports of Services (million USD) 453,014464,133520,683496,967377,528
Exports of Services (million USD) 208,488226,389269,697281,651278,084

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

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 36.937.637.535.834.5
Trade Balance (million USD) 488,883475,941380,074392,993515,000
Trade Balance (Including Service) (million USD) 255,737217,01087,905131,844369,673
Imports of Goods and Services (in % of GDP) 17.317.918.317.316.0
Exports of Goods and Services (in % of GDP) 19.619.719.118.518.5

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 19.74.64.83.83.8
Volume of imports of goods and services (Annual % change) 19.18.55.84.54.1

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)
2020
United States 17.5%
Hong Kong SAR, China 10.5%
Japan 5.5%
Vietnam 4.4%
South Korea 4.3%
See More Countries 57.8%
Main Suppliers
(% of Imports)
2020
Japan 8.5%
South Korea 8.4%
United States 6.6%
Australia 5.6%
Germany 5.1%
See More Countries 65.8%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: XI Jinping (since 14 March 2013); president and vice president indirectly elected by National People's Congress for a 5-year term. Nevertheless, a constitutional change was passed by the 2018 annual sitting of parliament, the National People's Congress, approving the removal of the two-term limit on the presidency, effectively allowing Xi Jinping to remain in power for life.
Vice President:  WANG Qishan (since 17 March 2018)
Next Election Dates
Presidential: March 2023
National People's Congress: late 2022 or early 2023
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. Following the abolition of presidential term limits in early 2018, he is set to keep them beyond the expiry of the current terms in 2022-23 and is seen as the most powerful Chinese leader since Deng Xiaoping.

In 2021, the Chinese government continued to reinforce its official political rhetoric and control, both internally and in terms of foreign policy. Weak global demand and strained foreign relations are expected to intensify calls for economic self-sufficiency emphasising the importance of the domestic market. In 2022, China’s most immediate challenges remain related to addressing the economic, social and public health impacts of the COVID-19 pandemic. Reshaping the Chinese economy around the principle of self-reliance is in the current political agenda of the Communist Party of China - who has marked its 100th anniversary in 2021 - but it is a complex and multi-year process.

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 (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

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in China, please visit the Chinese government’s daily updates with the official data.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in China and the current sanitary measures in vigour, please consult the document “Protocol for Prevention and Control of COVID-19” and “Guidelines for Investigation and Management of Close Contacts of COVID-19 Cases” from the Chinese Center for Disease Control and Prevention.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), consult the website of the General Administration of Customs of the People’s Republic of China (GACC). Further information is available on the "Custom Measures" section on KPMG's page dedicated to China.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to China on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the Chinese government to address the impact of the COVID-19 pandemic on the Chinese economy, refer to the Top News from the State Council as well as Policies page of the State Council. More detail can be found on KPMG's page dedicated to China. More detail can be found in media such as China.org.cn and  China Briefing.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Chinese government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to China in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Chinese government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, China Briefing offers links to daily government announcements at China’s Support Policies for Businesses Under COVID-19: A Comprehensive List.
For a general overview of international SME support policy responses to the COVID-19 outbreak 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.
Support plan for exporters
For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Chinese Ministry of Commerce (MOFCOM). You can also refer to the page China’s Support Policies for Businesses Under COVID-19: A Comprehensive List.
 

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