Date posted: 26/10/2021 5 min read

Five things to know about China’s economy

It’s the world’s most populous nation and China is predicted to overtake the US to have the world’s biggest economy by 2028.

In Brief

  • China has lifted 800 million of its people out of poverty since 1978.
  • Alibaba moves three times as much merchandise as Amazon.
  • China’s trade surplus in the 12 months to June 2021 was US$617.6 billion.

By Josh Gliddon

1. The Chinese economy is growing despite COVID-19

From 1949 when the People’s Republic was founded to 1978 when significant reforms were undertaken, China had a closed economy. It did little business with the rest of the world, but a process of engagement has seen that change – massively. Since 1978, China’s GDP has averaged about 10% each year, according to the World Bank. This has had a huge effect on the wellbeing of the Chinese people, with more than 800 million citizens being lifted out of poverty in that time. Along with the reduction in poverty, there have been major improvements in access to education and care, as well as other services.

2. There is an infrastructure boom underway

China has invested heavily in infrastructure to keep pace with its economy and drive future growth. Its investment in railways, for example, means that total linear kilometres of rail either in place or under construction in China would stretch around the world twice. China’s railways measured about 141,400km in 2020, Reuters reports. The nation aims to have about 200,000km of railway tracks by the end of 2035, including about 70,000km of high-speed railway, according to a plan issued by state-owned China State Railway Group.

3. Think Amazon’s big?

It’s got nothing on Alibaba When Westerners think of online retail, they probably think of Amazon, which has propelled its founder, Jeff Bezos, into the position of the world’s richest man (and to the edge of space on his Blue Origin rocket). But Amazon’s got nothing on the scale of Alibaba, the giant Chinese online retailer that moves nearly three times as much merchandise as Amazon. When you count its bricks-and-mortar subsidiaries, Alibaba is even bigger than Walmart, the US retail giant. Yet despite Alibaba’s success, its founder, Jack Ma, hits only number 26 on the Bloomberg Billionaires Index, the list of the world’s richest people.

4. Chinese people love luxury goods

With so many of its citizens lifted out of poverty, China has a large middle and upper-middle class, and those folks love their luxury goods. The average disposable household income in China’s urban areas has more than doubled in the past decade and is continuing to rise, according to Statista data. And people are spending up big. A 2017 McKinsey & Company report, Chinese Luxury Consumers, found that 7.6 million Chinese households were wealthy enough to spend on luxury goods. During 2020, when China’s rich were less willing or able to jaunt off to Europe or America because of the pandemic, they spent US$54 billion at home on luxury goods, a 48% lift on the previous year, according to a Bain & Company report.

5. Look out USA – here comes China

The US economy is still the world’s biggest but it may not be for much longer. The UK based Centre for Economics and Business Research predicts China will have a bigger economy than the US by 2028. Although the COVID-19 pandemic has taken some of the gloss off the Chinese economy, it has bounced back faster than expected. It was the only major economy to post positive growth in 2020, with a 2.3% lift in GDP.

The fact that China exports far more than it imports – its trade surplus in the month of June 2021 was US$51.5 billion, and its 12-month trailing merchandise trade balance was US$617.6 billion surplus – is fuelling the economic growth. This trade surplus also means China is the world’s largest holder of foreign exchange reserves.

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