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Growth, Development + Macro Issues in China
Key Macro Data
Latest annual GDP
Growth (%)
6.7
GDP or GNI per capita
(US $, P...
Contextual Background on Chinese Economy
Economic Structure of the Chinese Economy
Share of GDP by value added (% of GDP)
...
Main Strengths and Weaknesses for China
Economic / Competitive Strengths for China
1/ Huge FX reserves ($3.3T) + a soverei...
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Economic Profile for China

The government’s economic policy is defined by five-year economic plans. China is at a critical stage of her development China will have move up the ‘value chain’ as it loses its competitive edge in labour-intensive sectors. China is still a relatively poor country with an estimated GDP per capita on a PPP basis of US$12,879 in 2014, lower than Thailand. Policies to increase the real incomes of China’s middle class will encourage more consumption as a share of GDP and make the economy less reliant on exports and investment as key sources of economic growth.

The Chinese economy has many structural imbalances that will need to be addressed for sustainable growth to be maintained:
Chinese economy remains reliant on credit growth, with overall debt rising to 280% of GDP in mid-2015
China will need to shift away from imitating/copying Western technologies to generating more innovation Increasing competitive challenges are coming from lower-unit cost countries such as Vietnam, Indonesia and Mexico. Wages in the Chinese manufacturing sector have more than tripled since 2008.

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Economic Profile for China

  1. 1. Growth, Development + Macro Issues in China Key Macro Data Latest annual GDP Growth (%) 6.7 GDP or GNI per capita (US $, PPP) $13170 Inflation (%) 1.7 Unemployment rate (% of labour force) 4.1% Fiscal balance (% of GDP) -2.6% Govt debt (% of GDP) 17% Yield on 10-Yr Govt Bonds (Per Cent) Investment (% of GDP) 45% Gross national savings (% of GDP) 50% Background Information Currency unit Yuan Exchange rate system Semi- Fixed Policy interest rate 3.5% Member of a Regional Trade Agreement WTO in 2001 Current account balance (% of GDP) +2.6% Main corporate tax rate (Per Cent) Competitiveness rank 28/144 Corruption Perception Ranking Ease of Doing Business Ranking 90/189 External Debt (% of GDP) 9% Aspects of Development Latest HDI ranking 91/189 Income inequality HDI ranking Gender inequality HDI ranking % of population living in extreme poverty 6.2% Life Expectancy at birth (years) 75.4 Gini coefficient (Latest published estimate) 0.42 Inward FDI (% of GDP) 3.5% Remittances (% of GDP) Aid (% of GDP)
  2. 2. Contextual Background on Chinese Economy Economic Structure of the Chinese Economy Share of GDP by value added (% of GDP) Primary: 9% Industrial: 43% Services: 48% Main export industries (+ major firms) 1/ ICT equipment, industrial machinery 2/ Office and electrical machinery 3/ Clothing and other textiles Key risks to sustainable growth 1/ Rising inequality places strains on social stability 2/ Excess capacity in many industries risks deflation 3/ Declining working age population from 2016 4/ Threats from rising pollution / water scarcity Development and Growth Issues / Policies for China 3 factors limiting development progress 1/ Hukou registration system limits labour mobility 2/ Dual economy - low per capita incomes in rural areas 3/ Under-funded state health care & pension systems 3 policies used to improve the supply-side 1/ Creation of new special trade zones & open up more industries to private sector investment 2/ Crack down on corruption, end of 1 child policy 3/ Basic medical insurance for 90% of the population Long term challenges facing this country Challenge 1: Growing rich before China grows old Challenge 2: Shifting to lower, but higher quality growth Challenge 3: Re-balancing towards higher value manufacturing and service industries and land reforms to improve farming Challenge 4: Improve the allocation of resources – raise productivity, move from Made in China to Created in China
  3. 3. Main Strengths and Weaknesses for China Economic / Competitive Strengths for China 1/ Huge FX reserves ($3.3T) + a sovereign wealth fund 2/ Large and growing domestic consumer market 3/ China leads way in renewable energy investment 4/ Rising number of globally scaled Chinese businesses 5/ Open econ (X>25% of GDP) rising world influence Other Notes • China’s econ policy is defined by five-year economic plans. China is at a critical stage of her growth and human development • China will have move up the ‘value chain’ as it loses its competitive edge in labour-intensive sectors. China is still a relatively poor country with an estimated GDP per capita on a PPP basis of US$12,879 in 2014, lower than Thailand. • Policies to increase the real incomes of China’s middle class will encourage more consumption as a share of GDP and make the economy less reliant on exports and investment as key sources of economic growth. Main Weaknesses in the Chinese Economy 1/ High rate of corruption, poor human rights record 2/ Excessive investment and low rate of consumption 3/ Very high rates of debt (municipal & household) 4/ Rapid wage growth is shifting some FDI out of China 5/ Incomes are three times higher in urban than in rural areas with much worse basic health care available Other Useful Contextual Knowledge • China has many structural imbalances that will need to be addressed for sustainable growth to continue • The economy remains reliant on credit growth, with overall debt rising to 280% of GDP in mid-2015. • China will need to shift away from imitating/copying Western technologies towards generating innovation. • Increasing competitive challenges are coming from lower-unit cost countries such as Vietnam, Bangladesh, Indonesia and Mexico. • Wages in Chinese manufacturing have more than tripled since 2008.

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