China country overview

The economy of China

Geography, People, Culture, and Economic Profile

China information index

Industry of China

Since the establishment of the communist regime, the industrial sector has received significant focus. The annual growth rate of industrial production has frequently exceeded 10 percent, positioning China’s industrial workforce as potentially the largest in comparison to the combined workforce of all other developing nations. The industrial sector has outpaced other economic sectors in terms of growth and modernization. While the majority of heavy industries and those considered strategically important remain under state ownership, there is a growing trend towards privatization and joint ventures between private and state entities in the manufacturing of lighter and consumer-focused products.

The metallurgical and machine-building sectors have been prioritized within the manufacturing industry, now contributing to approximately two-fifths of the total industrial output value. Despite this, innovation has been stifled by a system that favors quantity over quality and variety, leading to continued reliance on imports for specialized steel types. Steel production is concentrated in a few key centers, with Anshan in Liaoning being the most significant.

In the chemical and petrochemical sectors, the expansion of chemical fertilizer, plastic, and synthetic fiber production is a primary goal. This expansion has placed China among the leading global producers of nitrogenous fertilizers. The consumer goods sector, focusing on textiles, clothing, footwear, processed foods, and toys, is also a significant contributor to China’s export economy. Textile production, increasingly dominated by synthetics, remains vital, although its importance has diminished slightly. The industry is widespread, with notable centers in Shanghai, Guangzhou, and Harbin.

Post-1990, China’s industrialization accelerated and diversified, with notable advancements in the automobile, aircraft, and aerospace manufacturing sectors. The country also made significant strides in electronics, semiconductors, software, and precision equipment production, frequently in collaboration with international companies.

Despite efforts to decentralize industry from the mid-1950s through the late 1970s by promoting development in the interior regions at the expense of the coastal cities, industrial distribution has remained largely concentrated. The interior provinces saw higher percentage growth in industry, but the substantial initial industrial base of the coastal regions meant that a few of these areas continued to dominate China’s industrial landscape. The creation of special economic zones in coastal regions further accentuated this imbalance. For instance, Shanghai alone contributes approximately 10 percent of China’s industrial output value, with the east coast representing around 60 percent of the national manufacturing output.


Financial institutions within the People’s Republic of China are predominantly state-owned entities. The key mechanisms for fiscal and financial governance include the People’s Bank of China and the Ministry of Finance, both of which operate under the auspices of the State Council. Established in 1950 as the successor to the Central Bank of China and subsequently absorbing private banking entities, the People’s Bank of China undertakes a variety of functions akin to those of Western central and commercial banks. Among its primary responsibilities are the issuance of the national currency, the renminbi (yuan), the regulation of its circulation, and the significant role it plays in the allocation of budgetary funds. Additionally, it manages the financial transactions of government agencies and other institutions, thereby facilitating comprehensive oversight of their fiscal and operational performance in accordance with the nation’s economic strategies.

The People’s Bank of China also oversees international trade and transactions, including remittances from the Chinese diaspora. These responsibilities, however, are executed through the Bank of China, which operates branches across various European and Asian nations.

Other pivotal financial entities include the China Construction Bank, tasked with funding a segment of the overall investment and supplying capital to specific industrial and construction sectors; the Industrial and Commercial Bank of China, which handles routine commercial activities and functions as a savings institution for the populace; the Agricultural Bank of China, dedicated to the agricultural industry; and the China Investment Bank, which manages foreign investments. Numerous international banks have established presences within China’s major urban centers and its designated special economic zones. In a landmark event for the financial sector, the China Construction Bank became the first among China’s “big four” banks to initiate public trading in 2005, with the Bank of China and the Industrial and Commercial Bank following suit shortly thereafter. The Agricultural Bank of China’s initial public offering in 2010 set a record as the largest of its kind globally at the time.

The banking system’s role in China’s economy has been significantly amplified by the nation’s economic reforms. Investment capital, once exclusively allocated as grants within the state plan, is now increasingly disbursed as loans through state financial institutions. Banks have become a vital source of funding for economic activities, offering loans to enterprises and individuals beyond the confines of the state plan, thus fueling the establishment of new companies and the enhancement of existing operations.

Moreover, international capital has grown in importance for China’s economy. The nation has secured loans from the World Bank, various United Nations programs, and multiple countries, with Japan being a notable lender, as well as from commercial banks. Hong Kong and Taiwan have emerged as significant channels and sources of foreign investment. The establishment of stock exchanges in Shanghai and Shenzhen since 1990, coupled with the government’s authorization in 2003 for foreign firms to participate in the market, underscores the expanding integration of China’s financial system with the global economy.


International trade has become a pivotal component of China’s economic framework, playing a crucial role in the nation’s economic advancement and modernization efforts. Since the 1950s, there has been a notable shift in the orientation of China’s international commerce. Initially, in 1950, approximately 75% of China’s trade was with non-communist nations. However, by 1954, following the cessation of the Korean War, this pattern had dramatically reversed, with communist countries representing about three-quarters of China’s trade volume. Over the subsequent period, the significance of the communist bloc diminished somewhat, yet it was not until the Sino-Soviet split in 1960, which led to the termination of Soviet financial aid and the withdrawal of technical advisors, that trade with non-communist countries began to flourish significantly. By 1965, trade with other socialist nations constituted merely one-third of China’s total trade.

China’s commercial engagement with developing nations has been substantially supported by financial mechanisms such as credits, grants, and other assistance forms. Initially, between 1953 and 1955, this support was primarily directed towards North Korea, North Vietnam, and other communist states. However, from the mid-1950s, substantial aid, predominantly in the form of grants and long-term interest-free loans, was extended to non-aligned developing nations. Asia received the majority of this aid, particularly to countries like Indonesia, Burma (now Myanmar), Pakistan, and Ceylon (now Sri Lanka), with significant loans also being made in Africa (to nations such as Ghana, Algeria, Tanzania) and the Middle East (Egypt). Following Mao Zedong’s passing in 1976, China reduced these aid programs.

By the 1980s and 1990s, China’s foreign trade had evolved full circle. Commerce with communist states had dwindled to a negligible level, particularly after the collapse of most socialist regimes. In stark contrast, trade with non-communist developed and developing countries surged to the forefront. Since 1990, China has generally maintained a favorable trade balance with its commercial partners. Prior to its reintegration with China, Hong Kong emerged as a key trading partner, a status it has maintained, particularly in its dependence on the mainland for agricultural commodities. Taiwan has also emerged as a significant trade partner.

China’s import portfolio is dominated by machinery and equipment (including semiconductors, computers, and office machinery), chemicals, and fuels. The primary sources for these imports include Taiwan, South Korea, Japan, the United States, Australia, and the European Union (EU) member states. Geographically, nearly half of China’s imports are sourced from East and Southeast Asia, with approximately a quarter of its exports destined for these regions.

Manufactured goods constitute the majority of China’s export goods, with electrical and electronic machinery and equipment, as well as clothing, textiles, and footwear, being the most significant categories. Agricultural products, chemicals, and fuels also represent important export commodities. The main export destinations include the United States, Hong Kong, Japan, EU countries, and South Korea.


The tertiary sector, encompassing services, represents approximately 50% of China’s Gross Domestic Product on an annual basis and engages the majority of the nation’s labor force. Nonetheless, when juxtaposed with advanced economies, this sector’s contribution to the GDP remains relatively modest. Key elements within this sector include wholesale and retail commerce, hospitality and food service industries, as well as the real estate market. Additionally, tourism has emerged as a pivotal contributor to job creation and a vital generator of foreign exchange revenue.

Labor and taxation

Historically, the agricultural sector has been the predominant employer within China, yet its share of the national workforce has been in gradual decline over the years. Specifically, from 2012 to 2022, the percentage of the workforce employed in agriculture decreased from approximately 33% to around 24%. The manufacturing sector has also seen a reduction in its labor force, albeit at a less rapid pace, partly due to the implementation of reforms across numerous state-owned enterprises. These reforms, among other factors, have contributed to heightened levels of unemployment and underemployment across both urban and rural communities. Since the establishment of the People’s Republic of China, women have consistently constituted a significant portion of the labor force, with workforce participation rates for women hovering around 60%.

Trade unions in China are structured on an industrial basis and are open to individuals who earn a majority of their income from wages, a criterion that typically excludes the majority of agricultural workers. While union membership is not officially mandatory, the unions’ historical involvement in the distribution of social benefits creates substantial economic incentive to join. The foundational level of the union structure is the enterprise union committee. Individual unions also function at the provincial level, and trade union councils exist to coordinate union activities within specific regions, operating at county, municipal, and provincial levels. The apex of the union hierarchy is the All-China Federation of Trade Unions, which executes its responsibilities through various regional federations.

In principle, trade unions are consulted on wage levels and differentials, but their influence in these areas has been minimal in practice. The unions have not traditionally engaged in collective bargaining, which aligns with their primary responsibilities of supporting the party’s objectives and promoting production. In this capacity, they have played a role in upholding labor discipline. For union members, the most significant functions of the unions have been related to social and welfare services. These services include overseeing industrial safety, organizing social and cultural events, and providing amenities such as clinics, rest homes, hostels, libraries, and clubs. They also manage social welfare programs including old-age pensions, workers’ insurance, disability benefits, and other welfare provisions. More recently, there has been a shift in the administration of social security, with responsibilities for pensions and other welfare programs being transferred to provincial authorities.

From the 1950s through the 1980s, the central government’s revenue was primarily derived from the profits of state-owned enterprises, which were remitted to the state. Additional revenue was obtained through taxation, with the general industrial and commercial tax being particularly significant. Over time, the trend has shifted from relying on remitted profits to taxing those profits. The tax system was initially tailored to account for differences in capitalization and pricing among firms, but more standardized tax schedules were introduced in the early 1990s. This period also saw the introduction of personal income and value-added taxes.

Transportation and telecommunications

Significant focus has been directed toward the enhancement of the nation’s transport infrastructure, recognizing its integral role in advancing the national economy, fortifying the defense system, and promoting unity within the country. In 2013, President Xi Jinping inaugurated the Belt and Road Initiative (BRI), an ambitious global infrastructure strategy designed to foster increased connectivity, commerce, and communication spanning Eurasia, Latin America, and Africa. This initiative has notably elevated the stature of the nation’s transportation sector.

Historically, rail transport has been the cornerstone for freight movement, yet the contribution of roadways and water transport to China’s comprehensive transport network has been growing.

Since the establishment of the People’s Republic of China in 1949, the nation’s transport and communication policies have evolved, shaped by the interplay of political, military, and economic factors. In the immediate aftermath of 1949, the focus was on restoring existing communication networks, prioritizing military transportation, and consolidating political governance. The 1950s saw the construction of new transport lines and the enhancement of pre-existing ones. During the Great Leap Forward, regional transport improvements were largely delegated to the populace, resulting in the creation of numerous small-scale railways. Post-1963, the development strategy shifted towards augmenting transportation in rural, mountainous, and particularly forested regions to support agricultural output. Concurrently, there was a vigorous expansion of international communication channels and a significant widening of maritime transport capabilities.

Originally, China’s transportation infrastructure, particularly railways and highways, was predominantly situated in coastal areas, which impeded access to the country’s interior. This challenge has been substantially mitigated through the construction of transport routes in the remote border regions of the northwest and southwest. Today, nearly every region of China is accessible via an extensive network of rail, road, waterway, or air transport.

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