Economy of China

China's economy has undergone a rapid and unprecedented transformation in three decades time. Since implementing reforms in the late 1970's, China has been among the world's fastest-growing economies and has emerged as a major global economic and trading power.

China is the world's largest economy

This is according to the CIA World Fact Book, closely followed by the United States.

GDP figures have been computed using the Purchasing Power Parity (PPP) method which measures the value of all goods and services produced in the country valued at prices prevailing in the United States. It has become a very close race, and although there are many arguments as to the methodologies employed to measure GDP to offer a fair comparison, the main take away here is the humongous size the Chinese economy has attained in recent years, the high rates of growth, averaging close to 10% all the way through 2013, and the unquestionable fact that China is now a leader and one of the top producers in the world.

But also because of China's massive population, its GDP per capita lags way behind that of other economies ranking only 99th in the world, reaching US$17,600 (PPP latest estimate in 2021), the United States was 15th at $63,700.

And here are some more facts to ponder:

• China is the world's largest producer of agricultural products. What does China farm?
• China is the world's largest manufacturer. What does China make?
• China is the largest exporter of goods in the world and the second largest importer of goods after the United States. What does China trade?
• China is the fastest growing consumer market, household consumption makes up 39.1% of GDP

So how was it that this economic tiger suddenly pounced taking over a leading role in the world economic stage?

From Agricultural Backwater to Rising Power

Merely some 35-40 years ago, China's economy was stagnant, controlled centrally by the Communist Party, under a policy of self-sufficiency that was vastly innefficient and isolated the country from the rest of the world.

After Chairman Mao's death in 1976, the new leadership under Deng Xiaoping launched the Four Modernizations namely Agriculture, Industry, Science and Technology and Defense. He came to power in December 1978 and proclaimed:

"The basic point is: we must acknowledge that we are backward, that many of our ways of doing things are inappropriate, and that we need to change."

And change they did... Deng Xiaoping enacted a series of reforms that unleashed China's rapid rise, lifting hundreds of millions out of poverty and creating waves and aftershocks everywhere they touched.

The reforms started in agriculture, the traditional base of the economy, by allowing farmers to profit from any surplus output from their crops beyond what was the required amount to be sold to the state at a fixed price.

This gave the necessary incentive for increased outputs and surpluses which further provided the foundation for trade and industry and created the demand for services.

To further its objectives in trade and industrialization, the government established four special economic zones (SEZ) along the coast in Shenzhen, Zhuhai, Shantou and Xiamen. This is where China started experimenting with free market policies and the cities quickly became magnets for foreign investment and trade as well as the millions of peasants that moved from the countryside to the cities in search for better opportunities setting off China's rapid urbanization trends.

The "Made in China" phenomenon and export prowess of the country had its roots in these highly succesful preferential cities which became the factories of the world and centers of manufacturing, trade and technology transfer.

This policy has continued and to date there are 20 Special Economic Cities and Areas, with many more free-trade zones and technological development zones. Most are mainly concentrated in the coastal areas but the new development strategies being deployed will focus on the relatively poorer areas in the West, North East and Central China.

A Snapshot of the Chinese Economy

Here are some top line facts on China's Economy. The figures are 2021 estimates as per the CIA World FactBook unless stated otherwise.

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