Overview of China’s Economy

The economy of the People's Republic of China is a dynamic mixed socialist market economy, combining state-owned enterprises (SOEs), private sector contributions, and foreign business openness. As the world's second-largest economy by nominal GDP and the largest by purchasing power parity (PPP) since 2017, China accounted for 19% of global economic output in PPP terms in 2022. Its private sector drives 60% of GDP, 80% of urban employment, and 90% of new jobs.

Economic reforms initiated in 1978 accelerated growth, with average annual GDP growth of 8.93% between 1979 and 2023. In 2023, GDP reached CN¥126.06 trillion (US$17.89 trillion), reflecting 5.2% growth from the previous year. China is a leader in global innovation, ranking 11th globally in 2022, and it dominates in patents, research output, and high-tech exports, with 2.43% of GDP dedicated to R&D.

China boasts the world's largest high-speed rail network (45,000 km), the largest manufacturing economy, and the highest volume of global exports. Its focus is shifting toward high-tech industries, renewable energy, and services, with exports now accounting for 20% of GDP. It remains a key player in international trade, the fastest-growing consumer market, and the largest importer of goods.

Financially, China hosts 142 of the world's largest companies, three top-ten stock exchanges, and the second-largest financial assets globally (valued at $17.9 trillion). It also holds the world's largest foreign-exchange reserves at $3.1 trillion, which increases to nearly $4 trillion when including state-owned commercial banks.

Challenges include a slowing economy in the 2020s due to an aging population, rising unemployment, and a property crisis. Despite these issues, China remains a significant economic force, with the world's largest labor force, the second-highest number of billionaires, and a middle class exceeding 500 million. Its public social expenditure is 10% of GDP, with pensions accounting for 5.2%.

Structures of Chinese of economy

China's economic system is described as a socialist market economy, blending state-led investment with market mechanisms. Guided by five-year plans, such as the ongoing 14th plan (2021–2025), the government prioritizes consumption-driven growth and technological self-sufficiency, aiming for the transition from an upper-middle-income to a high-income economy.

The public sector remains pivotal, with state control over key industries like infrastructure, telecommunications, and finance. This aligns with long-term national goals, including achieving moderate prosperity by 2021 and becoming a modern socialist country by 2049. Government influence is exercised through public property rights, administrative oversight, and the CCP's supervision of senior managers.

China intervenes selectively in markets, particularly where prices have social or political sensitivity, such as in commercial banking. This oversight helps stabilize the economy and mitigate market volatility. Local governments also play a significant role, offering incentives like tax breaks to attract businesses and drive economic growth. This system of centralized planning combined with localized economic decision-making underpins China's ongoing economic transformation and resilience.

Chinese big companies

State-owned enterprises (SOEs) play a critical role in China's economy, fulfilling functions that align with state objectives. They generate revenue through taxes and dividends, support urban employment, maintain low prices for essential inputs, direct capital to strategic industries, aid in regional redistribution, and contribute to crisis management during natural disasters, financial instability, and social unrest.

China hosts approximately 867,000 enterprises with varying degrees of state ownership, more than any other country. As of 2019, SOEs accounted for over 60% of China's market capitalization and contributed 40% of its GDP, with private businesses generating the remaining 60%. SOEs also dominate the global landscape, with 91 of them listed among the 2020 Fortune Global 500 companies.

The total assets of China’s SOEs reached an impressive $58.97 trillion by 2015, demonstrating their substantial economic footprint. However, private firms constitute only 37% of the top 100 listed companies in China as of 2023, highlighting the dominant presence of SOEs in the nation’s corporate hierarchy. This dual structure of state and private sectors underpins China's unique economic model.

Problems with data about Chinese economy

There is a debate over the accuracy of China's official economic data. Some claim that official figures, especially GDP growth, are overstated, while others argue that China's actual economic growth may be higher than reported. Critics suggest that between 2008 and 2016, the Chinese government may have overstated GDP growth by 1.7% per year. In response, some researchers, such as those from the Federal Reserve, believe China's official GDP data is generally reliable, though likely smoothed. Alternative methods, like the Li Keqiang index, also use data on energy consumption and transportation. At the local level, there are frequent concerns about data manipulation, as local officials are motivated to report high economic figures.

Financial sector

China has the world’s largest banking sector, with total assets around $45.8 trillion. The financial sector is largely state-owned, with the People's Bank of China (PBC) and the Ministry of Finance overseeing the economy. The PBC handles currency issuance, budget disbursements, and financial supervision, alongside foreign trade management. Other significant banks include the China Development Bank (CDB), Agricultural Bank of China (ABC), China Construction Bank (CCB), and Industrial and Commercial Bank of China (ICBC), which fund various sectors from agriculture to infrastructure.

China has four of the top ten financial centers globally, and three of the largest stock exchanges by market capitalization, including the Shanghai and Shenzhen exchanges. As of 2020, the total market capitalization of Chinese stock markets exceeded $10 trillion, with significant foreign investments.

China’s financial markets are growing, with stricter regulations around initial public offerings (IPOs), requiring good financial standing and corporate governance. Stock exchanges were initially dominated by state-owned enterprises but have shifted to include more diverse companies, playing an increasingly important role in the market economy.