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).

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.

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.