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Banks & Taxes in China

China’s Economy: An Overview

Over the last 35 years, China’s economy has grown to an unprecedented degree. In another decade, it could become the largest in the entire world. Our overview briefly introduces several related topics: economic sectors, present challenges and opportunities, as well as the most important locations.

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China’s economy can easiest be described in superlatives. With an estimated gross domestic product (GDP) of 10.355 trillion USD in 2014, it is now the second largest national economy worldwide.

The GDP has increased more than tenfold since the end of the Maoist era, which also marked the start of economic liberalization. Though the spectacular growth rate of China’s economy has slowed down to a “mere” 7.3% per year, it remains the fastest-growing economy worldwide. By 2025, China is expected to outperform the United States.

China’s economy is already the world leader regarding the annual output in the manufacturing sector (as measured by gross value). No wonder that it’s the world’s largest trading nation and biggest exporter as well.

Last but not least, China’s economy is represented by the most numerous labor force worldwide. It adds up to nearly 800 million people. They form an expanding consumer market, which is going to have a huge impact on the future of China’s economy.

This article will take a closer look at China’s record-breaking economic miracle.

The Primary Sector: Agriculture

With an estimated population of 1.355 billion people in mid-2014, China is the globe’s most populous country. Its agricultural output needs to feed nearly 20% of the world’s population.

Most of the agricultural produce is indeed intended for the domestic market. Agriculture employs about a third of the country’s workforce, but it’s only responsible for 10% of the GDP. This uneven ratio points at a fairly low productivity. Most products are simply bought by local consumers, and the majority of agricultural exports from mainland China go to Hong Kong.

Agriculture in China yields food crops like rice, wheat, corn, millet, sorghum, soybeans, and tea, as well as such cash crops as cotton and tobacco. Animal husbandry, fishing, and aqua farming are also important parts of China’s economy.

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The Primary Sector: Mining

China is rich in natural resources, particularly in coal and oil. The reserves of natural gas, however, remain largely unexplored.

Though mining employs less than 1% of the national workforce, it is indispensable for China’s economy. The country has the largest consumption of electricity worldwide (another superlative), and it relies to a large extent on fossil fuels. Oil and coal account for about 70% of China’s energy production. Lots of small pits mine coal for local consumption, while additional oil has to be imported in huge quantities to meet the equally huge demand.

Moreover, natural resources include various ores, precious metals, and rare metals. Iron ore is essential for China’s heavy industry, and many rare metals are either used or exported as raw materials for the high-tech sector.

The Secondary Sector: Manufacturing

The most productive manufacturer around the globe, China’s economy is often nicknamed “the workshop of the world”. About 30% of the working population is employed in manufacturing in some capacity, creating 44% of the GDP.

Heavy industry – particularly steel-production and metalworking – makes up a large part of the secondary sector. However, the focus of China’s economy has traditionally been on quantity of output rather than on its quality. This, combined with government subsidies for many companies, has resulted in overcapacities and indebted enterprises – issues that the industry has to address sooner or later.

While the heavy industry produces mainly for the Chinese market, as does the growing automotive sector, the light industry has always been more export-oriented. Cheap textiles and apparel, consumer goods (e.g. plastic toys), and consumer electronics “made in China” add to the country’s export volume.

Other key industries of China’s economy include chemicals (especially plastics, fertilizers, and synthetic fibers) and telecommunications equipment.

The Tertiary Sector: The Service Industry

By now, the service sector employs the biggest part of China’s workforce (36%) and accounts for the largest slice of the GDP (46%). Jobs in China’s public administration are probably of little interest to expatriates, though they offer plenty of career opportunities to citizens of the PRC.

However, expats might want to look for job opportunities into industries like tourism and travel, or telecommunications, Internet, and e-commerce. Just like with the wholesale trade and retail in brick-and-mortar stores, online shopping benefits from the rising living standards of China’s expanding middle-class. Tourism and travel gets a fair share of their newly acquired discretionary income as well.

Expats might also be interested in shipping and logistics, which are still gaining in importance as China’s infrastructure develops further and foreign trade keeps growing. China joined the World Trade Organization in 2001: its foreign trade has increased at least tenfold ever since. Recently, the PRC entered into negotiations about two more free trade agreements, with Australia and South Korea.

South Korea and Australia are actually among the key trading partners for China’s economy, though neither is the #1. This rank belongs to the United States, which receives about 17% of Chinese exports. Other significant trading partners include Japan, Taiwan, and the EU, especially Germany.

Updated on: December 11, 2019
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