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.

As first country to experience the Covid-19 outbreak, China faced significant human and economic costs, especially in the first quarter of 2020. However, the country was able to curtail the impact of the pandemic and was the only major world economy to record growth in 2020, expanding its GDP by 2.3%.

China GDP Annual Growth Rate (in %)


In order to mitigate the economic impact of the Covid-19 crisis, policymakers offered financial relief and fiscal support to companies. They protected the financial market stability by providing liquidity to the banking system. According to the International Monetary Fund (IMF), macroeconomic and fiscal policies helped boost China’s economic recovery.

The IMF is revising its growth forecast for the China economy in 2021 by -0.3% to 8.1%. The slight downgrade is due to the lower-than-expected fiscal support in the country.

The IMF is also slightly upgrading its growth forecast for 2022 by 0.1% to 5.7% due to improved external demand. According to the IMF, the upward revision for global growth for that year helps China because of its status as a major exporter.

Despite the global pandemic, China’s unemployment rate only went up from 3.6% to 3.8% in 2020. This is why the IMF expects the unemployment rate to return to its pre-pandemic level of 3.6% in 2021 and 2022.

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.

The China economy has shown resilience from the impact of the pandemic but gains have slowed down. China’s central bank, the People’s Bank of China (PBOC), has stated that it will maintain a prudent, flexible and targeted monetary policy for the second half of 2021.

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. The central bank said it would “maintain a high level of pressure” on companies speculating in digital currencies.

It also pledged to keep the stability of its yuan exchange rate within “a reasonable and balanced range”.

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. In 2020, the country posted a trade surplus of over $500 billion.

   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 holdings of onshore bonds are now approximately $650 billion and S&P Global expects it to expand further to between $4 trillion to $5 trillion by 2030.

Real Estate Market

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

Demand in the market has been boosted by urbanization, as approximately 415 million new residents settled in China’s cities between 2000 and 2020. United Nations (UN) estimates show that around 208 million more will settle by 2040.

Additionally, per capita income in China is rising, giving Chinese residents higher purchasing power. In 2020, it was around 4,900 USD – more than twice as high as in 2010. 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.

In the last 10 years, the Housing Index in China averaged 4.68 percent, reaching an all time high of 12.60 percent in November of 2016.

China Housing Index (in %)


IMF estimates indicate that 24% of the housing stock in China’s cities are without private kitchens/bathroom facilities. More than a third dates from pre-1990, suggesting a need for Chinese buyers to upgrade to better homes.


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