In 2012, China was the 18th fastest growing economy in the world, with a real GDP growth rate (constant prices, national currency) of 7.8 percent. Although the figure is its slowest growth since 1999, it is also representative of a maturing economy as it gradually transition from a developing to developed nation.
Since 1949, the Chinese government has been responsible for planning and managing the national economy. But it was only in 1978 – when Deng Xiaoping introduced capitalist market principles –that the Chinese economy began to show massive growth, averaging 10 percent GDP growth over the last 30 years. During that period the size of the Chinese economy grew by roughly 48 times, from $168.367 billion (current prices, US dollars) in 1981 to $8.227 trillion.
From 2003 to 2010, the Chinese economy experienced near-uninterrupted double-digit growth – with the exception of 2008 and 2009, during the global economic downturn. Nevertheless, the Chinese economy still managed to post respectable growth figures during that period – 9.635 percent and 9.214 percent respectively.
In 2013, its GDP (PPP) is expected to reach $13.623 trillion – or a 9.81 percent increase. Comparatively, China’s GDP (PPP) grew by 9.73 percent from 2011 to 2012. Forecasts for the next five years predict the nation’s GDP (PPP) will grow by an average of 13.24 percent per annum, reaching $22.641 trillion in 2018.
Nonetheless, while its GDP (PPP) is set to overtake that of the US’s, China’s nominal GDP (current prices, US dollars) will still be below that of its rival in 2018. The US’s GDP (current prices) is forecasted to hit $21.101 trillion in five years, significantly higher than China’s $14.911 trillion. Going by current growth rates, it will take another 30-40 years for China to become the world’s largest economy in both GDP (PPP) and GDP (current prices).
Since initiating market reforms in 1978, China has shifted from a centrally planned to a market based economy. More than 600 million citizens have been lifted out of poverty as a result, but over 170 million people still live below the $1.25-a-day international poverty line. In 2012, China’s GDP (PPP) per capita was $12,405.67. This is 37 times higher than what it was just 30 years ago. By 2018, China’s GDP (PPP) per capita will climb from the 90th to 75th highest in the world – at $16,231.50. This however will still be below the forecasted world average of $18,867.17.
Find out more about the Chinese Economic Forecast on the Economy Watch Economic Statistics database.
China has one of the most diverse spread of industrial production in the world, fitting for a country that is called 'The World’s Factory'. Since 1978, the nation has gradually reduced its reliance on state-owned enterprises (SOEs) – though they still account for 46 percent of China’s industrial output, down from 77.6 percent 35 years ago
Nonetheless, the government has in recent years renewed its drive to support state-owned enterprises in sectors it considers important to national economic security – particularly natural resources, banking and telecommunications. In a major push to boost the state sector in 2003, Beijing set up the State-owned Assets Supervision and Administration Commission as a watchdog to expand and strengthen large industrial state enterprises.
Consequently SOEs, combined assets rose to 28 trillion yuan ($4.56) 2011 from 7.13 trillion yuan in 2002. Revenues have also soared from 3.36 trillion yuan to 20.2 trillion yuan.
Critics argued that the SOEs are stifling innovation and restricting opportunities for private companies. Though fewer in number than before, as a result of massive state consolidation, today’s SOEs are far more powerful. As of 2012, large state-owned enterprises produced over 50 percent of China’s goods and services and employed over half of the nation’s labour force. 65 of the Chinese SOEs also made it into 2012 Fortune Global 500 list, including State Grid Corporation of China, which operates the country's power grid, and oil companies China National Petroleum Corporation and Sinopec.
The Chinese economy can also be understood as a decentralised collection of several regional economies, with large imbalances between the rural and urban population.
The three wealthiest and most important economic regions are all on the east coast: the Pearl River Delta close to Hong Kong, The Yangtze River Delta surrounding Shanghai and the Bohai Bay region near Beijing. It is the rapid development of these areas that is expected to have the most significant effect on the Asian regional economy as a whole, and Chinese government policy is designed to remove the obstacles to accelerated growth in these wealthier regions.
Over the past two decades however, China has embarked on an ambitious program of expressway network expansion. By facilitating market integration, this program aims both to promote efficiency at the national level and to contribute to the catch-up of lagging inland regions with prosperous Eastern ones.
The consequence of the program saw China’s two major financial centres, Beijing and Shanghai, experience the lowest growth in 2012 – 7.7 percent and 7.5 percent respectively – compared to growth rates of over 13 percent for Tianjin, Chongqing, Guizhou, Yunnan in the more impoverished interior.
Find out more about China Economic Structure on EconomyWatch.com
China is the world’s second largest trading nation behind the US – leading the world in exports and coming in second for imports. From 2009-2011 its trade to GDP ratio was 53.1 percent, while its trade per capita was $2,413.
Since its accession into the WTO in 2001, China‘s share in global trade has doubled – accounting for 10.38 percent of the world’s merchandise trade exports and 9.43 percent of merchandise trade imports.
For many countries around the world, China is rapidly becoming their most important bilateral trade partner. In 2011, they were the largest exporting/importing partner for 32 and 34 countries respectively.
However, there have been concerns over large trade imbalances between China and the rest of the world. The US in particular has the largest trade deficit in the world with China at $315 billion, more than three times what it was a decade ago.
There have also been a growing number of trade disputes brought against, mainly for dumping, unfair subsidies by the Chinese government, intellectual property and the valuation of the yuan. Nonetheless its WTO entry ensures that the country will remain a key figure in international trade.
Domestically, the Chinese government has been keen to reduce the economy’s reliance on exports and focus on internal consumption. In March 2013, China’s new leadership announced that they would move to recalibrate the economy, acknowledging that there is a “growing conflict between downward pressure on economic growth and excess production capacity.”
Find out more about China Exports, Imports & Trade on EconomyWatch.com
The most dominant sector of China’s economy remains its manufacturing and industries. Despite seeing a 3.3 percentage point drop in its composition of the nation’s GDP, industries still accounted for 45.3 percent of China’s GDP in 2012 – cementing China’s position as the world leader in gross value of industrial output.
Nevertheless, despite the dominance of Industries in the composition of China’s GDP, Services is catching up quickly – and may overtake Industries by the end of the year. In 2012, Services accounted for 44.6 percent of China’s GDP, just 0.7 percentage points behind Industries. Comparatively just three years ago, that gap was 8.1 percentage points wide.
Finally, Agriculture accounted for 10.1 percent of China’s GDP in 2012. The economic reforms introduced in 1978 saw China de-collectivize agriculture, yielding tremendous gains in production as a result.