China is the second largest economy in the world and is now considered an upper-middle-income nation. Since opening up and reforming its economy in 1978, China’s gross domestic product (GDP) has steadily grown at an average of almost 10% annually.

However, its economic growth has slowed down over the past few years due to various factors, including falling productivity, diminishing returns to investment, and declining labor force growth.

Due to the Covid-19 outbreak, China’s economy increased by only 2% in 2020, its lowest annual growth rate in 45 years. However, China was able to bring its lockdown-affected markets back to life in 2021 and recorded a GDP growth of 8.1% year on year to $ 18 tn, up from $ 15.42 tn in 2020.

The rate of growth recorded in 2021 was the fastest in over a decade and was far higher than the government’s aim of 6%. Amid renewed Covid outbreaks, the economy grew by 4% in the fourth quarter of last year, compared to 4.9% growth in the third quarter, as per data published by the National Bureau of Statistics.

China GDP Full Year Growth Rate (in %)


However, the country’s zero-Covid policy intended at containing the pandemic has resulted in additional limitations on corporate activity, adding to concerns about the economy’s recovery.

The International Monetary Fund (IMF) reduced its growth forecast for China’s GDP to 4.8% for 2022 in January 2022, citing severe mobility restrictions, real estate sector upheaval, and reduction in consumption figures as reasons. According to the IMF, growth is expected to reach 5.2% in 2023.

In 2021, the urban unemployment rate stayed relatively constant at 5.1%, down 0.5 percentage points than the same period in the previous year, with total new urban jobs created during the year rising to 12.69 million, compared to 830,000 in 2020. According to IMF data, China’s unemployment rate is expected to be 4.9% in 2021, down from 5.2% in 2020.

China Unemployment Rate (in %)

Currency and Central Bank

The Chinese currency is officially named Renminbi, which means “people’s currency,” in Chinese, but is more commonly known worldwide as the yuan.

In 2021, the authorities rolled out measures to curb excess in its yuan exchange rate within “a reasonable and balanced range”.

Setting goals for 2022, China’s central bank, the People’s Bank of China (PBOC), has stated that it would keep its prudent monetary policy “flexible and targeted” and strike a balance between economic growth and risk controls. The PBOC also aims to maintain steady and healthy development of the real estate market and protect consumers.

China Inflation (in %)


The PBOC is seeking to foster growth while keeping an eye on its digital economy, particularly e-commerce and other tech firms. In 2021, China’s private sector saw a flood of regulations.

Industry and Trade

Manufacturing and agriculture remain the biggest sectors in China’s highly diversified economy but its services sector has become its biggest GDP contributor and job creator in the past few years. Services’ share is more than half of the total GDP and it employs almost half of the country’s workforce.

The low labour cost in China has made it one of the most preferred destinations in terms of manufacturing outsourcing. Foreign capital is used in more than half of the exports made by Chinese companies.

Having the biggest population in the world, China is also one of the largest producers and consumers of agricultural products globally. While only 15% of the country’s soil is arable, it is still the leading producer of cereals, rice, cotton, potatoes and tea in the world.

The country’s main export products include transmission apparatus for radio-telephony, automatic data processing machines and units, electronic integrated circuits and micro-assemblies, and petroleum oils.

Meanwhile, its main import products include electronic integrated circuits and microassemblies, petroleum oils, iron ores, petroleum gas, and motor vehicles.

The US, Hong Kong, Japan, South Korea, Vietnam, Australia, and Germany are China’s main trade partners.

   China Balance of Trade


Survey and Rankings

China has significantly improved its ranking in the World Bank’s Ease of Doing Business ratings from 46th in 2018 to 31st in 2020. In terms of economic freedom, the Heritage Foundation ranked the China economy at 107th in 2021 among 178 countries worldwide. China received a score of 58.4 and fell under the “mostly unfree” category.

Stock Exchanges and Capital Markets

Investing in Chinese stocks was historically off-limits to foreign investors, but the market has slowly opened up as the government continued to loosen regulatory requirements.

China has two stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). In these exchanges, companies incorporated in the country may issue A-shares, B-shares, and H-shares.

Onshore A-shares and B-shares were previously restricted from foreign investors, but the Chinese government has launched various programs to allow them to participate in the onshore market.

Foreign investors looking to invest in Chinese stocks may do so through an exchange-traded fund (ETF) tracking one of the major indices, such as the SSE Composite Index and the SZSE Component Index. They may also use an actively managed mutual fund.

Bond Market

China’s domestic bond market is the second largest in the world, worth over $13 trillion. Since 2016, when the market was opened to foreign investors, interest in China’s onshore bond market has steadily increased.

Foreign investors’ overall holdings in Chinese government bond surged to a record-high of $377 bn by November 2021, as per data by Chinabond. Analysts expect China sovereign bonds to see total inflows of $105 bn to $156 bn  from the FTSE Bond Index Inclusion in October 2021. S&P Global expects it to expand further to between $4 tn to $5 tn by 2030.

Real Estate Market

China’s real estate market has steadily grown alongside the country’s economic progress.

However, the growth in the property market slowed down since June 2021, as developers including real estate giants like Evergrande, Kaisa showed signs of financial distress, after regulators stepped up their deleveraging campaign. As per analysts, China’s real estate sector is more than $5 tn in debt. A report by S&P global in November 2021 warned that up to one-third of Chinese developers could be heading towards bankruptcy in the next 12 months.

Recent data by the National Bureau of Statistics of China (NBS) showed that average new home prices in China’s 70 major cities declined 0.2% in December 2021, after a steep drop of.3% drop in November, the biggest decline recorded since February 2015. Meanwhile, new home prices rose 2.6% year-on-year in December, with 15 of 70 cities recording monthly gains.

On the other hand, per capita income in China is rising, giving Chinese residents higher purchasing power. Higher per capita income, in addition to government programs such as public welfare fund loans, are prompting more people to enter the real estate market.

According to data by NBS, China’s per capita income rose was around $12,551 in 2021. The county passed the $10,000 benchmark in 2019.

In the last 10 years (2011-21), the Housing Index in China averaged 4.67%, reaching an all time high of 12.60 %in March of 2015.

China Housing Index (in %)


According to the IMF, in the near term, the authorities need to guard against systemic contagion within the property sector. The priority should be to prevent developer sector stresses from creating large-scale negative spillovers to housing demand and economic activity while still allowing market forces to reduce vulnerabilities.


Source of charts: