China flag China: Economic outline

Economic Outline

Economic Indicators

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) 17,886.3317,700.9018,560.0119,781.7021,059.83
GDP (Constant Prices, Annual % Change) 3.05.04.24.14.1
GDP per Capita (USD) 12,67012,54113,15614,03114,952
General Government Balance (in % of GDP) -6.6-6.6-6.7-7.0-7.4
General Government Gross Debt (in % of GDP) 77.083.087.491.895.9
Inflation Rate (%) n/a0.71.72.22.2
Unemployment Rate (% of the Labour Force) 5.55.35.25.25.2
Current Account (billions USD) 401.86271.44250.86224.86207.85
Current Account (in % of GDP) 2.21.51.41.11.0

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Chinese Yuan (Renminbi) (CNY) - Average Annual Exchange Rate For 1 ZAR 0.450.510.500.480.42

Source: World Bank, 2015

 

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Latest Update: April 2024