The economy of China

Overview of China's economy


The economy of China

Since 1978 the economy of China started to open up and reform its economy,

  • the GDP has grown by an average of 9.5% annually,
  • and more than 800 million people have been pulled out of poverty,
  • Over the same time span, access to health, education,
  • and other services have also significantly improved.

China now has an income level above the middle class. Going forward, it will be crucial that efforts to reduce poverty concentrate more on addressing the vulnerabilities faced by the substantial population still classified as poor by middle-income country standards, including those residing in metropolitan areas.

China's GDP

China's gross domestic product (GDP), which contributed over 30% to the growth of the world economy last year, grew to more than 114 trillion yuan from 100 trillion yuan in 2020. The economy of China measured as GDP was 53.86 trillion yuan in 2012 or about 11.5% of the global GDP.

Export-driven economy

China's fast growth, which was built on exports, low-cost manufacturing, and investment, has reached its limits, and produced unbalances in the economy, society, and the environment. Changes in the economy of China's structure—from manufacturing to high-value services, from investment to consumption, and from high to low carbon intensity—are necessary to address these imbalances.

Foreign Trade

Such robust growth has fostered trade expansion. The economy of China will keep the top position globally for two years in a row when its trade in goods and services reaches 6.9 trillion dollars in 2021, making it a significant trading partner for more than 140 countries and regions.

For the first time in 2021, foreign direct investment on the Chinese mainland exceeded 1 trillion yuan (140.18 billion USD); this represented a growth of 62.9 percent from 2012 levels and placed China second internationally.

Environmental issues of the Chinese economy

China is a key player in many regional and international development challenges due to its size and fast-growing economy. Despite not being the primary source of historical cumulative emissions, the economy of China now contributes 27 percent of annual global carbon dioxide and a third of global greenhouse gas emissions. Its per capita emissions have surpassed those of the European Union, though they are still significantly lower than those of the United States and slightly below the average of the OECD. China's air and water pollution also have an impact on other nations. Without China's involvement, global environmental problems cannot be resolved. The worldwide demand is also significantly influenced by China's expanding economy. Its economic rebalancing will open up new possibilities for exporters of manufactured goods, albeit it might shorten the medium-term demand for commodities.

China's impact on other developing nations' economies through trade, investment, and ideas is expanding. Many of the difficult development that the economy of China faces, such as changing to a new economic model, increasing aging, establishing an affordable health system, and promoting a lower-carbon energy route, also apply to other nations.

Domestic and external headwinds

China's GDP growth is anticipated to drop significantly from 8.1 percent in 2021 to 2.8 percent in 2022 due to numerous internal and external challenges. Extreme weather events and widespread Omicron epidemics have slowed economic progress. Following Russia's invasion of Ukraine, the external environment has also considerably deteriorated, with declining global GDP, skyrocketing inflation, and tighter financial conditions.

Economic activity has been further hampered by the slump in the real estate industry, which was brought on by regulatory tightening that caused developers to face liquidity constraints. Due to low homebuyer confidence amid ongoing COVID-19 breakouts and mortgage boycotts by owners of unfinished homes, housing demand is still sluggish.

Governmental policies in response to challenges

The government has increased macroeconomic policy easing in response to these challenges by increasing public infrastructure expenditure, offering tax breaks, cutting policy interest rates, and loosening local purchase restrictions in the real estate market. However, the impact of policy stimulus has been constrained by resurgent COVID-19 outbreaks and related public health actions.

In recent years, growth in the economy of China has slowed due to fundamental limitations such as slowing productivity growth, declining labor force growth, and deteriorating investment returns. Future growth drivers must be found while also addressing the social and environmental consequences of China's previous development trajectory.

China is a proponent of free trade.

A variety of platforms have been launched by the country to encourage free trade in products and services. As a supporter of free trade, the nation has also worked to lower trade barriers with more partners, creating 21 domestic pilot free-trade zones and signing 19 free-trade pacts over the past ten years.

Challenges of the Chinese economy

China's rapid economic expansion outpaced the pace of institutional development, and in order to maintain a high-quality and sustainable growth path, China and the economy of China need to close significant institutional and reform gaps. The state's role must change to emphasize creating a transparent, egalitarian, and stable business climate, bolstering the regulatory framework and the rule of law to better support the market system and ensuring that all citizens have fair access to public services.

The economy of China would likely continue to see a fundamental decline in the medium future. Potential growth has been on the decline due to unfavorable demographics, sluggish productivity development, and growing limitations to a debt-fueled, investment-driven growth paradigm. The macroeconomic policy must be properly adjusted in light of these difficulties so as not to increase financial risks. To reactivate the transition to more balanced, high-quality growth, structural reforms are required.

Nevertheless, the economy of China, which is firmly dedicated to opening up and moving toward modernization, is poised to open up new prospects for global development when the global economy is beset by rising protectionism and other difficult issues.

The Comparison of the USA and the economy of China,

Doc
Indicators China United States
Population 1412.40M 331.90M
Birthrate 8.52 % 10.90 %
Deathrate 7.07 % 10.30 %
Unemploymentrate 4.80 % 5.50 %
Average-incomePC 11,890$ 70,430$

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