Prepared & Presented

By:

Avhinandan Khajuria

MBA 4TH Sem.

0601MBA14

Kathua Campus,

University of Jammu

ECONOMIC CONDITIONS OF CHINA

CHINA - An Overview of

EconomyThe Chinese economy experienced astonishing growth

in the last few decades that catapulted the country to

become the world's second largest economy.

In 1978—when China started off the economic

reforms—the country ranked ninth in nominal gross

domestic product (GDP) with USD 214 billion; 35 years

later it jumped up to second place with a nominal GDP

of USD 9.2 trillion and the world's largest economy by

purchasing power parity according to IMF.

Since the introduction of the economic reforms in 1978,

China has become the world’s manufacturing hub,

However, in recent years, China’s modernization

propelled the tertiary sector and, in 2013, it became

the largest category of GDP with a share of 46.1%,

while the secondary sector still accounted for a

sizeable 45.0% of the country’s total output.

Meanwhile, the primary sector’s weight in GDP

has shrunk dramatically since the country opened

to the world.

China is a global manufacturing hub and largest

manufacturing economy in the world as well as the

largest exporter in the world.

Until 2015 China was the world's fastest-

growing major economy, with growth rates

averaging 10% over 30 years.

As of 2015 there was talk of a "slowing"

Chinese economy, but that referred to a

slowing of the rate of economic growth, not to

a recession.

The slowdown manifested in industrial

regions as excess capacity in basic industries

2010 2011 2012 2013 2014

Population (million) 1,341 1,347 1,354 1,361 1,368

GDP per capita (USD) 4,510 5,579 6,264 7,040 7,574

GDP (USD bn) 6,048 7,516 8,481 9,579 10,360

Economic Growth

(GDP, annual variation

in %)

10.5 9.3 7.7 7.7 7.4

Consumption (annual

variation in %)

10.6 14.6 10.2 8.7 -

Investment (annual

variation in %)

24.5 24.0 20.6 19.6 15.7

Industrial Production

(annual variation in %)

15.7 13.9 10.0 9.7 8.3

Recent Chinese Economic Data

Retail Sales (annual

variation in %)

18.4 17.1 14.3 13.1 12.0

Unemployment Rate 4.1 4.1 4.1 4.1 4.1

Fiscal Balance (% of GDP) -1.7 -1.1 -1.6 -1.9 -1.8

Public Debt (% of GDP) 16.5 14.9 14.5 14.8 -

Money (annual variation in

%)

19.7 13.6 13.8 13.6 12.2

Inflation Rate (CPI, annual

variation in %, eop)

4.6 4.1 2.5 2.5 1.5

Inflation Rate (CPI, annual

variation in %)

3.3 5.4 2.6 2.6 2.0

Inflation (PPI, annual

variation in %)

5.5 6.0 -1.7 -1.9 -1.9

Policy Interest Rate (%) 5.81 6.56 6.00 6.00 5.60

Stock Market (annual

variation in %)

-14.3 -21.7 3.2 -6.7 52.9

Exchange Rate (vs USD) 6.59 6.29 6.23 6.05 6.21

Exchange Rate (vs USD,

aop)

6.77 6.46 6.31 6.15 6.16

Current Account (% of

GDP)

3.9 1.8 2.5 1.5 2.1

Current Account Balance

(USD bn)

238 136 215 148 220

Trade Balance (USD

billion)

184 154 231 258 383

Exports (USD billion) 1,578 1,898 2,049 2,209 2,343

Imports (USD billion) 1,394 1,744 1,819 1,952 1,962

Exports (annual

variation in %)

31.3 20.2 8.0 7.8 6.1

Imports (annual

variation in %)

38.7 25.0 4.3 7.3 0.4

International Reserves

(USD)

2,847 3,181 3,312 3,821 3,843

External Debt (% of

GDP)

9.1 9.2 8.7 9.0 8.6

In 2015 as a whole, the economy

increased 6.9%, which was in line with

the government’s target of

“approximately 7.0%”.

China’s economic growth slipped down to 6.8% in

Q4 of 2015, which was marginally below the

6.9% registered in Q3 of the same year.

Nonetheless, growth fell short the 7.4%

observed in 2014 and marked the slowest pace

since 1990.

The currency’s weakness observed in December

2015 worsened at the beginning of the year as

the Chinese currency remains under pressure due

to strong capital outflows amid concerns about

the health of the economy.

Current Trends & Projections

Currently, China’s economy has shifted to a slow gear,

having a bigger impact on those resource-exporting

countries which highly depend on China’s market, but

having no remarkable impact on European and US

economic growth.

In particular, China’s slow economy is not the “culprit”

of the recent US stock market slump. Instead, the US

stock market fall was caused by its excessive high

growth in recent years.

The Chinese leadership has promised structural

reforms to boost long-term growth, and economic

Economic growth is projected to decline to 6.7 by2016 & gradually to 6.2% by 2017.

The announced infrastructurestimulus measures will help overall investment, butadjustment in several heavy industries is set tocontinue and this stimulus is not sustainable in thelonger term.

Real estate investment is bottomingout, but working off housing inventories will takesome more time. Consumption is set to remainrobust.

Food and services prices are rising, but theabsence of price pressures in other areas will keepconsumer price inflation low.