China Economy Overview

Over 800 million people have risen out of poverty since China’s economy started to open up and reform in 1978, and GDP growth has averaged over 9% annually. Over the same period, access to health, education, and other services has also significantly improved.

China’s economic growth has slowed during the last five years, with 2020 seeing the worst slowdown. China’s average five-year growth rate is currently roughly half what it was a decade ago. Following a decade-long incline, China’s economic freedom reached its apex in 2020. Due mostly to declining ratings for judicial performance and fiscal soundness, those gains have since been undone, and China has been placed in the “Repressed” category. Although trade freedom is still largely intact, the absence of financial and investment freedom seriously hampers the growth and development of productivity.


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Because China’s economic growth was more rapid than the pace of institutional development, China needs to make significant institutional and reform changes to keep its high-quality and permanent future growth. To effectively support the market system, the state’s role must shift to emphasize fostering an open, equitable, and stable business environment, strengthening the legal system, and guaranteeing that all people have equal access to public facilities.

Many regional and international development challenges revolve around China. China produces 30% of the world’s greenhouse gas emissions and 27% of the world’s annual carbon dioxide emissions. Its emissions per capita have surpassed those produced by the European Union, while they are still far lower than those of the U.S. and the OECD standard. China’s pollution of air and water also has an impact on surrounding countries. Without China’s engagement, environmental issues on a global scale cannot be handled. Another significant driver of worldwide demand is China’s expanding economy. Although it might shorten the demand for commodities in the medium term, its economic balance will open up new prospects for manufacturers that export their products.

Through trade, investment, and ideas, the Chinese economy is having an increasing impact on other developing nations. Many of the difficult development difficulties that 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.

China’s GDP growth is anticipated to drop significantly from 8.1 percent in 2021 to 2.8 percent in 2022 as a result of 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.

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.

China’s economy will likely continue to see a fundamental decline in the medium term. Potential growth has been on the decline due to unfavorable demographics, sluggish productivity development, and the growing limitations of 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.

China Economic Policy

The country’s growing integration into the global economy and the government’s audacious support for economic activity were the key drivers of the recent economic boom. The country’s remarkable economic and social development, which let hundreds of millions of people escape poverty, has come with numerous hurdles, too. To preserve the viability of the nation, the new administration led by President Xi Jinping will need to address serious economic imbalances, growing environmental problems, expanding economic disparity, and an aging population.

China Economic Strategy

Over 40 years have passed since China and the World Bank Group (WBG) first collaborated. According to the capital enhancement pledges made by its shareholders in 2018, the WBG’s new CPF for 2020 to 2025, which was released in December 2019, reflects the change in the Bank Group’s relationship with China toward a fall in lending and a more selective involvement.

The CPF intends to improve crucial Chinese institutions involved in economic and social development as well as assist China in tackling some of its ongoing development issues, including the shift to more ecologically sustainable growth and the reduction of inequality in underdeveloped areas.

Over the CPF period, World Bank (IBRD) lending will decrease and shift its attention to helping China’s economy contribute to global public goods. The contribution of knowledge and consulting services to the WBG collaboration will increase. Additionally, the International Finance Corporation (IFC) will keep making investments in China’s private sector while advocating high standards and assisting businesses that provide goods and services with significant social and environmental benefits.

The CPF’s three main interaction areas are as follows:

  • Market and fiscal changes are progressing by enhancing the conditions for competition and the growth of the private sector; achieving more effective and long-lasting subnational budgetary management; and financing infrastructure.
  • Promoting greener growth by lowering pollution of the air, soil, water, and marine environments; enhancing the management of sustainable natural resources; encouraging low-carbon transportation and cities; and easing the switch to a lower emissions energy source.
  • distributing the advantages of growth by raising the standard of early childhood development; and expanding access to social and health services.

The Bank Group’s SCD, which was released in early 2018, and other Bank studies, such as Innovative China: New Drivers of Growth, which was released in 2019, are used to inform the CPF. The Bank Group will evaluate implementation success at the CPF halfway mark.

Wealth In China

An upcoming report finds that the number of wealthy families in China remained largely unchanged last year despite Beijing placing greater emphasis on taking steps to address inequality as part of its strategy for “shared prosperity ”.

The Hurun Research Institute and Citic Prudential the two insurance companies that publish the report on China’s affluent families, in 2021, measured the number of “affluent” families with a net worth of at least 6 million yuan (US$838,000) and the number of “high net wealth” families with a net worth on or above 10 million yuan, according to the report. The report states that there are at least 130,000 Chinese families with a net wealth of at least 100 million yuan.

Earlier, Credit Suisse released its annual Global Wealth Report, which showed that Chinese people have experienced growth in their wealth much faster than any other country in the world, resulting in a median wealth of $26,752, as opposed to the $26,690 Europeans.

Although the gap is not very large, it is significant since it is indicative of China’s astounding economic growth rate. This is because it means that it accounts for some of the growth. In the period from 2013 to 2021, China’s gross domestic product (GDP) grew by 6.6 percent on average annually, and the trend is expected to continue. As a result, from 1996 to 2022, the average annual growth rate of the European Union’s GDP was 1.66 percent.