China’s economy has been at the forefront of pursuing its plan to become the world’s biggest economic power in the coming years.
What is China’s GDP?
It is worth noting that about 800 million people have been lifted out of poverty since China started opening up and reforming its economy in 1978. The country’s GDP growth has averaged over 9 percent annually since then. Over the same period, there have also been substantial improvements in the accessibility of health, education, and other necessary services.
The National People’s Congress plays a crucial role in adopting key legislation that impacts economic policies, including measures to boost GDP growth.
At present, China is a nation with an upper-middle income. Although the country reduced major poverty in 2020, about 17.0 percent of its population was believed to be living below the World Bank’s Upper-Middle-Income Country (UMIC) poverty level in 2021, which constitutes $6.85 per day.
China’s real gross domestic product (GDP) increased by 5.2 percent in 2023. The IMF projects a GDP growth rate of about 4.8 percent for 2024. In the first half of 2024, China’s economy expanded at a strong 5.0 percent, driven by exports, consumer spending on services, and investments in public infrastructure and industry, as per a report by Statista.
Historical growth of China’s GDP
Before trade liberalization and economic reforms were implemented about 40 years ago, China’s policies kept the economy stagnant, extremely poor, highly inefficient, centralized, and largely cut off from the rest of the world economy. With real annual gross domestic product (GDP) growth averaging 9.5 percent through 2018, China has been one of the fastest-growing economies in the world since opening up to foreign trade and investment, and establishing free-market reforms in 1979. The World Bank has referred to this pace as ‘the fastest sustained expansion by a major economy in history’. China’s GDP has doubled every eight years on average, attributed to this expansion, which has also helped elevate an estimated 800 million people out of poverty.
The economic contributions from regions like South China have been significant, particularly in manufacturing and trade.
China is now the world’s largest manufacturer, merchandise dealer, and foreign exchange reserve holder (measured by purchasing power parity). As a result, China is now one of the United States’ top trading partners. China is the third-largest U.S. export market, the largest import source, and the largest merchandise trade partner. In addition, China is the biggest foreign holder of US Treasury securities, which support the federal debt and maintain low interest rates in the U.S.
Through a number of high-profile initiatives, including ‘Made in China 2025’, a plan announced in 2015 to upgrade and modernize China’s manufacturing in 10 key sectors with extensive government assistance and make China a major global player in these sectors, the Chinese government has made innovation a top priority in its economic planning.
Gross domestic product (GDP) overview
China’s gross domestic product (GDP) is a pivotal indicator of the country’s economic performance, reflecting the total value of goods and services produced over a specific period. The GDP growth rate is closely monitored by economists and investors alike, as it provides critical insights into the overall health and trajectory of the economy. In recent years, China’s GDP growth rate has shown a pattern of steady increase, albeit with occasional fluctuations. Many factors, including robust government policies, dynamic consumer spending, and substantial investment, drive this growth.
China’s GDP has been a testament to the country’s economic resilience and strategic planning. The GDP growth rate, which measures the year-over-year change in economic output, has been a key metric for assessing the vitality of China’s economy. Despite global economic uncertainties, China has sustained a commendable GDP growth rate, underscoring its position as a global economic powerhouse.
Key factors driving China’s GDP
Several factors have contributed to the growth of China’s GDP over the years. Below are some pointers:
Manufacturing and exports
Manufacturing is one of the most important sectors supporting the global economy and a pillar of the Chinese economy. In 2023, the country’s manufacturing sector’s added value measured up to 26.2 percent of China’s total GDP. This highlights the sector’s significance in the country’s economic structure. Manufacturing continues to be a major engine of economic growth, generating significant employment, innovation, and export income despite a slow transition to a more high-tech and service-oriented economy. China’s manufacturing dominance is even more visible on a global scale. The nation cemented its status as the global manufacturing powerhouse in 2023 by contributing around 30 percent of the global manufacturing added value. This enormous contribution highlights how important the sector is to global supply networks, impacting everything from heavy machinery to consumer electronics.
Most countries in the world are aware of China’s dominance in manufacturing. In addition to China’s major textile manufacturing industry, the economy also provides consumer products, electronics, machinery, cement, food processing, and transportation equipment (cars, trains, and aeroplanes). Besides having many local hardware and software companies, China is a major global electronics assembly hub. From May 2021 to May 2022, the Chinese software and IT sector expanded by 10.8 percent, bringing in over $415 billion in Q1 revenue. Similarly, Chinese and international corporations hold plants in China that build automobiles. But the majority of cars are bought in the country. By the end of 2022, there were 318 million cars in the nation.
Most Chinese automakers sell their vehicles to South America, Africa, the Middle East, or Russia. Due to China’s distinctive distribution and sales strategies, automobile dealerships and salespeople profit greatly from each vehicle sale.
Domestic consumption, retail sales, and services sector
China’s spending contributed significantly to its economic growth in the first quarter of 2024, highlighting its gradual shift to a domestic consumer-driven economy. According to figures released by the National Bureau of Statistics, China’s GDP grew 5.3 percent year over year in the first quarter (Q1 2024), with domestic consumption accounting for 73.7 percent of economic growth. New purchasing patterns have emerged dramatically in China in various industries, including technology, entertainment, and travel. Chinese shoppers also show a preference for domestic brands. For instance, in the first two months of 2024, sales of neo-Chinese jewellery and horse-face skirts increased 1.7 and 6.3 times, respectively, compared to the same period last year.
The State Council released an action plan early this year that included specific steps to advance a program to increase consumer goods trade-ins and equipment upgrades. The government will offer tax breaks and interest rate subsidies to businesses upgrading their equipment and rebates to customers who trade in their high-emission passenger automobiles for new energy or energy-efficient models. The country will offer financial assistance to set up recycling facilities for discarded household equipment that employ renewable resources. Customers who buy or trade in green and smart home equipment are encouraged to get subsidies or exemptions from local governments and home appliance manufacturers.
In 2023, the service sector constituted 54.6 percent of China’s GDP, making it the country’s largest economic sector. It comprises several other subsectors, including healthcare, entertainment, and professional services. Since 2015, the service sector has contributed more than half of China’s GDP. In fact, the first three quarters of 2023 saw a robust 6.8 percent year-over-year growth in retail sales of consumer goods.
China GDP in 2024: Current statistics
Trading Economics global macro models and experts predict that China’s GDP will have grown to $18,649.00 billion by the end of 2024. Furthermore, the econometric models forecast that China’s GDP will trend between $19,488.00 billion in 2025 and $20,307.00 billion in 2026.
Breakdown of GDP by industry
The manufacturing sector contributed around 31.7 percent of China’s GDP in 2023. It was the biggest contributor, with the financial sector accounting for 8 percent and the wholesale and retail sector for 9.8 percent of the nation’s total economic output. Given that China has the second-largest economy in the world, the production of its industrial sector alone surpassed that of Germany’s whole economy, as per Statista.
Here is the distribution of GDP in China in 2023 by industry:
| Industry | GDP |
| Industrial sector | 31.7% |
| Wholesale and retail trade | 9.86% |
| Financial intermediation | 8% |
| Agriculture, forestry, animal husbandry and fishery | 7.5% |
| Construction | 6.8% |
| Real estate | 5.8% |
| Transport, storage and post | 4.6% |
| Information transmission, software and IT services | 4.4% |
| Leasing and business services | 3.5% |
| Hotels and catering services | 1.7% |
Exports and investments were the primary drivers of China’s economic growth in the early 2000s. The three main parts of a nation’s GDP are net exports, investments, and consumption. China was not an exception to the rule that rising economies primarily rely on exports and investments to expand their economies. By the end of the 2010s, exports accounted for almost an additional 20 percent of China’s GDP, while investments drove over 40 percent. In contrast, investments only account for 20 percent of economic production in most industrialized economies. Rather, consumption is the primary economic engine. China’s economic framework produced a significant manufacturing sector. For example, China exported more than a third of the world’s goods and was the largest exporter of steel and commerce.
Impact of global trade and economic policies
Chinese imports are the world’s second-largest goods imported, accounting for close to 11 percent of the world’s goods imports in 2022. Mongolia (83.9 percent), the Democratic Republic of the Congo (54.4 percent), Vietnam (27.5 percent), and Laos (26.5 percent) had the highest trade exposure to mainland China in terms of goods exports to China as a proportion of GDP exceeding 25 percent in 2022. The G20 economies with the highest exposure to mainland Chinese demand in 2020 (in terms of exports to mainland China as a share of GDP) included South Korea (11.4 percent), Saudi Arabia (8.8 percent), Australia (8.0 percent) and Indonesia (6.6 percent), as per the report by S&P Global.
Sectoral performance and regional trends
China’s economy is a complex tapestry woven from various sectors, each contributing uniquely to the overall GDP. The manufacturing sector remains a cornerstone, significantly bolstering the GDP, focusing on high-tech industries such as electronics and renewable energy. This sector not only drives economic growth but also positions China as a leader in global manufacturing.
The services sector is another critical component, encompassing finance, logistics, and tourism. This sector has been expanding rapidly, reflecting the country’s shift towards a more service-oriented economy. The agricultural sector, while smaller compared, continues to play a vital role, particularly in food production and rural development.
Regional trends further illustrate China’s diverse economic landscape. The eastern coastal regions, including economic hubs like Shanghai and Shenzhen, are pivotal in trade, finance, and technology. These areas are the engines of China’s economic dynamism. Meanwhile, the southern region, notably Guangdong and Fujian, is a powerhouse of manufacturing and trade. The western region, with provinces like Sichuan and Chongqing, is experiencing rapid growth driven by infrastructure development and industrialization. These regional dynamics collectively contribute to the Chinese economy’s robust industrial output and overall strength.
Read more | Largest economies in the world 2024: Top 10 ranked by GDP
Future projections for China’s GDP
As one of the economically strong countries, China’s GDP will likely grow further in the coming years. The country is aggressively pursuing its ambition to lead the world economy. Below are some key pointers:
Long-term GDP growth rate forecasts
Economic analysts focus a lot on projecting China’s future economic development, yet unanticipated circumstances can drastically change expected results. The IMF predicted in April 2023 that China’s GDP would grow to $27.5 trillion by 2028, extending its lead over other major countries and bringing it closer to the U.S. However, China’s economy has not recovered from COVID-19 as quickly as many had anticipated. The IMF’s April 2024 predictions were far more conservative than the previous year, estimating that China’s GDP would only reach $24.8 trillion in 2029. In the meantime, the IMF updated its projections for the U.S. GDP, predicting it would surpass China by a significant margin and reach around $35 trillion by 2029.
Factors that may influence future GDP: China’s central bank
Many economists think that China’s economy can continue to develop at a rate of 4 to 5 percent for many years to come. Few scholars, nonetheless, contend that China should continue its manufacturing-intensive and investment-driven approach from the last three to four decades. Other analysts, however, believe that China can only sustain rapid growth if it drastically cuts the investment sector’s proportion of GDP and substitutes it with a stronger dependence on consumption — something Beijing has been attempting to achieve for more than 10 years.
However, if China wants to sustain GDP growth rates of even 2-3 percent, both strategies must overcome enormous hurdles. According to the first set of experts, China’s share of global investment and manufacturing would rise far faster than its share of world GDP if it were to sustain current growth rates while maintaining its high GDP shares in these sectors. It would only be able to do so if the rest of the world agreed to allow for such expansion by lowering its production and investment levels to less than half of China’s. This would be extremely unlikely even without recent geopolitical tensions and actions taken by the U.S., India, and the EU to increase local production and investment.
According to the second group of experts, China’s consumption growth would need to accelerate if it continues growing at current rates while lowering its high levels of investment to a more sustainable level. Although such a surge is not implausible, it would need significant and politically sensitive shifts that would be extremely challenging to execute. There is no proof that Chinese authorities have even started to talk about how to get beyond political, financial, and economic barriers, let alone that they understand the magnitude of the necessary changes.
Policy implications and future prospects
The Chinese government has proactively implemented policies to sustain and enhance economic growth. Stimulus measures, tax cuts, and significant investment in infrastructure are among the strategies employed to maintain momentum. The government has set an ambitious annual growth target of around 5 percent, aiming to achieve this through a balanced mix of domestic consumption, investment, and exports.
However, China’s economy faces several challenges. Weak domestic demand, a struggling housing market, and slowing export growth are areas of concern. To address these issues, the government has introduced measures to stimulate economic activity. These include reducing the reserve requirement ratio for banks, thereby increasing liquidity, and boosting debt and deficit spending to spur growth.
Looking ahead, China’s economic growth is expected to continue, driven by a combination of domestic consumption, investment, and exports. The government’s commitment to implementing supportive policies, including further stimulus measures and infrastructure investment, will be crucial in navigating the economic landscape. Despite the challenges, the Chinese government remains focused on achieving its economic goals and sustaining the country’s growth trajectory.
Comparing China’s GDP to other major economies
Certainly, China has a competition from many other major economies in the world, but it is interetsing to see how U.S. and China compete each other on the economic level.
China vs. US GDP
According to nominal and PPP methodologies, the two biggest economies in the world are the U.S. and China. China has been at the top in PPP since 2016, surpassing the U.S., while the U.S. is at the top of nominal. In nominal and PPP figures, the two nations collectively account for 43.2 percent and 34.51 percent of the global GDP as of 2024. Both nations’ GDPs are significantly larger than those of the third-ranked nations, India (PPP) and Japan (nominal). As a result, only these two contend for the top spot.
According to IMF predictions for 2024, the United States leads by $10,248 billion, or 1.55 times, China ($18,533 billion), with $28,781 billion. In terms of purchasing power parity, China’s GDP (worth $35,291 billion) is valued $6,510 billion, or 1.23 times that of the U.S. ($28,781 billion). In 1960, China’s GDP accounted for around 11 percent of the U.S. GDP, but by 2023, it will have increased to 65 percent, according to World Bank forecasts.
Given that China has a population that is more than four times that of the U.S., there is a significant disparity in per capita income between the two nations. In nominal and PPP terms, the United States’ per capita income is 6.5 and 3.41 times more than China’s, respectively. China is ranked 72nd in the world in terms of wealth, whereas the United States is ranked sixth. China is ranked 78th and the United States is ranked 9th on a PPP basis.
China’s GDP grew at a minimum of -27.27 percent in 1961 and at a top of 19.30 percent in 1970. China increased by more than 10 percent in 22 years between 1961 and 2022. In 1984, the United States hit a record high of 7.24 percent, while in 2009, it hit a record low of -2.58 percent. For seven years, the U.S. GDP growth rate was negative. For five years, China’s growth was negative.
China’s position in the global economy
As the second-largest economy in the world (behind the U.S.), China continues to be a major economic force. But since then, the economy has grown considerably more slowly, replacing the explosive development of the previous decades. China’s GDP grew at a slightly better-than-expected annualized pace of 5.3 percent in the first quarter of 2024, but growth slowed to 4.7 percent in the second quarter. However, as compared to the early years of the 21st century, this marks a substantial shift in China’s economic trajectory. With slower development than in recent years, China is progressively moving from an emerging market stage to an established market stage.
Frequently Asked Questions (FAQs)
What is China’s current GDP?
The real gross domestic product (GDP) of China increased by 5.2 percent in 2023. The IMF projects a GDP growth rate of about 4.8 percent for 2024.
How has China’s GDP grown over the last decade?
In the third quarter of 2024, China’s GDP increased by 0.90 percent compared to the previous quarter. From 2010 to 2024, China’s GDP growth rate averaged 1.57 percent. It peaked at 11.50 percent in the second quarter of 2020 and fell to a record low of -10.40 percent in the first quarter of the same year.
What are the predictions for China’s GDP in the next few years?
The IMF projects that China’s GDP will reach $27.5 trillion by 2028.
Conclusion and outlook
In conclusion, China’s GDP growth rate is a vital indicator of the country’s economic health and performance. The economy is driven by a diverse range of sectors, including manufacturing, services, and agriculture, each contributing significantly to the GDP. Regional trends also play a crucial role, with key areas like the eastern coastal regions and the southern region acting as major economic drivers.
The Chinese government has been instrumental in supporting economic growth through various policies, including stimulus measures, tax cuts, and substantial investment in infrastructure. While challenges such as weak domestic demand, a struggling housing market, and slowing export growth persist, the government’s proactive approach is expected to mitigate these issues.
Overall, China’s economy is poised for continued growth, underpinned by robust domestic consumption, strategic investment, and strong export performance. The outlook remains positive, with the government’s ongoing efforts to implement measures aimed at sustaining economic growth and achieving the annual growth target. As China navigates the complexities of the global economic landscape, its focus on innovation, infrastructure, and policy support will be key to maintaining its position as a leading global economy.
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