MACROECONOMIC

OUTLOOK &
ANALYSIS
ON THE PEOPLES REPUBLIC OF CHINA
 COUNTRY:
PEOPLES REPUBLIC OF CHINA

TABLE OF CONTENTS

1. ECONOMIC AND GENERAL INFORMATION

2. RANKING IN THE WORLD
3. TYPE OF ECONOMY
4. POLITICAL SYSTEM
5. ECONOMICALLY CONTRIBUTING SECTORS
6. FOREIGN TRADE AND PARTNERS
7. CURRENCY, CENTRAL BANK AND
MONETARY POLICY
8. WAR/ CONFLICTS AND ECONOMICAL
AFFECTS
9. GDP GROWTH AND UNEMPLOYMENT
10. TRADE ORGANIZATIONS AND CPEC
11. CPI AND INFLATION

1
 GENERAL INFORMATION

PEOPLES REPUBLIC OF CHINA

China, the world’s most populous country is located in East Asia and is the world's third-

largest country by land area, covering approximately 9.6 million square kilometers. With

a population of over 1.4 billion people, it has a diverse population with Han Chinese

being the majority ethnic group, but there are also numerous ethnic minority groups. Its

capital is Beijing the economic and educational center of all China. The Chinese

government is a socialist political estate governed by the Chinese Communist Party

(CCP). It follows a one-party system with a centralized political structure. Mandarin

Chinese, also known as Standard Chinese, is the official language of China. However,

there are numerous regional languages and dialects spoken across the country.

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China has the world's second-largest economy worth over $19.373 trillion as their Gross

Domestic Product that increased at 5.2% since last year. Over the past few decades, it

has experienced rapid economic growth and has become a major player in international

trade and investment. China is known as the “factory of the world “for its manufacturing

industries, its every evolving technology sector, and exports of goods and variety of

services. China has a rich cultural heritage that spans thousands of years. It is known

for its ancient philosophy (Confucianism, Taoism), traditional arts such as calligraphy,

painting, and opera, martial arts including Kung Fu, and cuisine.

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 RANKING IN THE WORLD

As of last year, China has been growing economically rapidly and is the world's second-

largest economy by nominal GDP, measuring to $19.373 trillion approx. it grew

drastically by 8.4% in 2021, 3.0% (2022), and an estimated 5.2% in 2023

and 4.5% (2024). China is the largest economy in the world by Purchasing Power Parity

(PPP) GDP that is $33.014 trillion as estimated in 2023. China is the leading exporter of

goods globally and among the top recipients of Foreign Direct Investment (FDI) Inflows.

They are also leading in terms of Manufacturing Output, Infrastructure Development

within China and throughout the world notably CPEC in Pakistan. They also hold the

world's largest foreign exchange reserves (US $3,120 billion). China has 899 million

people contributing to consumer markets globally, with a growing middle class which is

largest in the world. With 36 million people increased in the last year. China is the

world's largest e-commerce market that generates almost 50% of the world’s

ecommerce transactions. An estimated $2.29 trillion in 2020 by 710 million digital

buyers, with forecasts to reach $3.56 trillion by 2024. Renewable Energy Capacity:

China leads in renewable energy capacity, particularly in solar and wind power

installations.

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 HDI Ranking
85
Human Development Index
0.761
Gender Inequality Index ranking
39
Adult literacy rate
96.4%
Life Expectancy
77
Gross National Income Per Capita
$16,470
Population living in urban areas.
60.46%
Population annual growth rate
0.49%
In 2021, China was the number 2 economy in the world in terms of GDP (current

US$), the number 1 in total exports, the number 2 in total imports, the number 58

economy in terms of GDP per capita (current US$) and the number 25 most complex

economy according to the Economic Complexity Index (ECI).

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 TYPE OF ECONOMY
China maintained a command economy until 1978 when it began its transition to a

mixed economy that blends communist and capitalist elements. Its current system has

been described as a socialist market economy.

At the same time, in December 1978, Deng Xiaoping, the Chinese military and

revolutionary leader, announced a new policy, the Open Door Policy, to open the door to

foreign businesses that wanted to set up in China. For the first time since the

Kuomintang era, the country was opened to foreign investment.

While initially founded as a socialist state with a centrally planned economy, it now has

a mixed economy, described by its government as “Socialism with Chinese

characteristics”. China has enjoyed almost 30 boom years with GDP growing in double-

digits, raising 500 million people out of poverty.

In a socialist market economy, the government plays a significant role in guiding

economic development and setting strategic objectives. State-owned enterprises

(SOEs) still exist and are present in key industries such as energy, finance, and

telecommunications. However, China has also embraced elements of a market

economy, including private ownership, competition, and profit motives. China's

economic model combines features of state intervention, centralized planning, and

market forces. The government exercises control over key sectors of the economy

through policies, regulations, and strategic planning. It provides support to targeted

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industries and promotes domestic companies through subsidies, infrastructure

investments, and other forms of assistance.

At the same time, China encourages market competition and foreign investment. It has

established special economic zones, where market reforms and liberalized trade

policies are implemented to attract foreign businesses. The country has also become a

major player in global trade and is known for its manufacturing and export-oriented

industries.

7
 POLITICAL SYSTEM
The political system of China is characterized as a one-party socialist state, with the

Communist Party of China (CPC) as the ruling party. The CPC has maintained its

position of power since the establishment of the People's Republic of China in 1949.

The highest decision-making body in China is the National People's Congress (NPC),

which is the country's legislative branch.

At the apex of political power is the CPC's Central Committee, which consists of senior

party officials. The Central Committee elects the Politburo Standing Committee, which is

the highest authority in the country. The General Secretary of the CPC, who holds

significant power and influence, is usually the top leader of China.

The CPC exercises control over key aspects of governance and decision-making

through its party organizations at various levels, from national to local. This system of

party control extends to different sectors of society, including government institutions,

state-owned enterprises, the military, and social organizations. China's political system

places a strong emphasis on collective leadership and consensus-based decision-

making within the party. The top leadership, including the General Secretary and the

Politburo Standing Committee, plays a central role in formulating policies and setting the

direction for the country. It is important to note that China's political system has its own

unique characteristics and is different from the political systems found in liberal

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democracies. The CPC's leadership and its role in governance have been a subject of

debate and scrutiny, both domestically and internationally.

Xi Jinping is the current President/ General Secretary of the CPC and the

chairman of the Chinese Military Commission since 2012.

ECONOMICALLY CONTRIBUTING SECTORS

Share of GDP by top Economic Sectors on China

Services: The services sector has been growing in importance, contributing significantly
to China's GDP. This sector includes areas such as finance, retail, transportation,
tourism, and telecommunications. Also, the service sector includes transportation,
storage, and shipping, the wholesale and retail trades, hotel and catering services,
financial services, and real estate, among others.

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Manufacturing/ Industry: China is known as the "world's factory" and has been a major
global manufacturing hub. It has a diverse manufacturing sector, including industries
such as electronics, textiles, automotive, machinery, and more.

Agriculture: Although its share of GDP has decreased over time, agriculture remains an
important sector in terms of food production and employment, particularly in rural areas.
China is a leading producer of various agricultural products, including rice, wheat, corn,
vegetables, and pork.

Construction and Infrastructure: China has experienced significant infrastructure

development in recent years, including the construction of roads, railways, airports,
ports, and urban areas. This sector has been a major driver of economic growth and
investment.

Financial Services: China's financial sector has expanded rapidly, with the growth of
banking, insurance, and capital markets. Major Chinese banks and financial institutions
have played a crucial role in supporting economic activities and facilitating investment.

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 FOREIGN TRADE AND PARTNERS
As reported by WTO in 2023, exports of goods in 2021 were USD 3,363.8 billion

and imports USD 2,688.6 billion, while exports and imports of services in 2021

reached USD 390.6 billion and USD 438 billion respectively.

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 Thanks to its enormous trade surplus over the past few years, China has become

the world's largest exporter and ranks second among the world’s largest

importers. Despite its strict policies, the country is fairly open to foreign trade,

which represented 37% of its GDP in 2022 (World Bank, 2023). China's main

exports include Electrical and electronic equipment (27%), machinery, nuclear

reactors, boilers (16%), furniture, lighting signs, prefabricated buildings (4,1%),

plastics (3,9%), toys (3%), optical, photo, technical, medical apparatus (2,9%),

vehicles other than railway, tramway (3.6%), articles of iron and steel (2,8%). On

the other hand, the country mainly imports Electrical and electronic equipment

(25%), Mineral fuels, oils, distillation products (15%), machinery, nuclear

reactors, boilers (8,6%), iron ores slag and ash (10%), optical, photo, technical,

medical apparatus (4,1%), vehicles other than railway, tramway (3.2%).

Foreign Trade 2017 2018 2019 2020 2021

Values

Imports of 1,843,793 2,135,748 2,078,386 2,057,217 2,688,634

Goods (million
USD)

Exports of 2,263,345 2,486,695 2,499,457 2,590,221 3,363,835

Goods (million
USD)

Imports of 464,133 520,683 496,967 377,528 441,312

Services (million
USD)

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Exports of 226,389 269,697 281,651 278,084 392,198
Services (million
USD)

Source: World Trade Organization (WTO) Latest available data

Foreign Trade
2017 2018 2019 2020 2021
Indicators

Foreign 37.6 37.6 35.9 34.8 37.5

Trade (in % of
GDP)

Trade 475,941 380,074 392,993 511,103 562,724

Balance (million
USD)

Trade Balance 217,010 87,905 131,844 358,573 462,808

(Including
Service) (million
USD)

Imports of 17.9 18.5 17.5 16.2 17.4

Goods and
Services (in % of
GDP)

Main Partner Countries

The country's main partners include the United States, Hong Kong, Japan, South

Korea, Vietnam, Australia, and Germany. Tensions in the U.S. - China economic

relationship has heightened business uncertainties since 2020, given that the US

is the country's main trade partner. China's trade surplus dropped to USD 78.01

billion in December 2022 from a revised USD 93.21 billion in the same month the

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 prior year and compared to market forecasts of USD 76.2 billion. The data came

in amid weakening global and domestic demand. Exports plunged 9.9%, the

largest decline in nearly three years, while imports fell at a softer 7.5%, the third

straight month of decrease. Considering 2022 full year, the country's trade

surplus widened 31 percent year-on-year to USD 876.91 billion, the highest since

records started in 1950, as exports rose 7% and imports increased by only 1%.

(China General Administration of Customs, 2023).

Main Customers
2021
(% of Exports)

United States 17.2%

Hong Kong SAR, China 10.4%

Japan 4.9%

South Korea 4.4%

Vietnam 4.1%

Source: Comtrade, Latest Available Data

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And China’s main suppliers were:

Main Suppliers
2021
(% of Imports)

South Korea 8.0%

Japan 7.7%

United States 6.7%

Australia 6.1%

China 5.8%

CURRENCY, CENTRAL BANK AND MONETARY

POLICY

China's central bank is the People's Bank of China (PBOC). It was established on
December 1, 1948, and has been the country's central monetary authority since then.
The PBOC is responsible for formulating and implementing monetary policies,
maintaining financial stability, regulating the banking system, and managing the
currency.

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 MONETARY POLICY

China's monetary policy has undergone significant changes since 1959, reflecting the
country's economic development and evolving priorities. These were first initiated in the
great leap of 1959 and then revitalized in the 1960s cultural revolution and again in the
1978 timeline.

1. Early Years and the Planned Economy (1959-1978): During this period, China
followed a centrally planned economy, and monetary policy was primarily used to

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 support the state's economic plans. The focus was on financing investments in
key sectors and controlling inflation. The currency used during this time was the
Renminbi (RMB),
2. Economic Reforms and Opening Up: From the late 1970s, China embarked on
economic reforms and adopted a more market-oriented approach. Monetary
policy reforms were implemented to facilitate economic liberalization, attract
foreign investment, and promote domestic growth. The PBOC introduced
measures such as interest rate reforms, liberalization of foreign exchange
controls, and the development of financial markets.
3. Currency Reforms and Exchange Rate Regime: China has made significant
reforms to its currency system. In 1994, the RMB was pegged to the U.S. dollar
at a fixed exchange rate, allowing for greater exchange rate stability. However, in
2005, China adopted a managed floating exchange rate regime, which allows the
value of the RMB to fluctuate within a certain range against a basket of
currencies. The PBOC plays a role in managing the exchange rate and
intervening in the foreign exchange market to maintain stability.
4. Financial Reforms and Policy Adjustments: China has implemented various
financial reforms to strengthen the banking system, deepen capital markets, and
improve financial regulation. These reforms aim to enhance financial stability,
increase access to credit for businesses and individuals, and support sustainable
economic growth. The PBOC has been actively involved in these reforms,
including adjusting interest rates, reserve requirements, and liquidity
management.

CURRENCY
Chinese Yuan (Renminbi) (CNY)

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The currency of China is the Chinese Yuan (CNY), also known as the Renminbi (RMB).
The terms "Yuan" and "Renminbi" are often used interchangeably, with Yuan being the
primary unit of the currency and Renminbi being the broader term that encompasses all
forms of the currency. China has been gradually internationalizing its currency, aiming
to increase its global usage and promote its role in international trade and finance. The
offshore version of the Yuan, known as CNH (Chinese Yuan - Hong Kong), is used in
Hong Kong's financial markets. Additionally, China has established currency swap
agreements with various countries to facilitate trade settlement in Yuan. The PBOC
monitors and influences the exchange rate based on economic factors and policy
considerations.

Exchange Rate Regime

Managed floating exchange rate regime, allowing Central Bank interventions.

Level of Currency Instability

Significant risks of instability. Volatility may increase with China’s economic slowdown, a
change in U.S. monetary policy or international pressures on the Government for a
revaluation of the currency.

WAR/ CONFLICTS AND ECONOMICAL AFFECTS

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 Chinese Civil War (1927-1949)
The Chinese Civil War between the Chinese Communist Party (CCP) and the

Nationalist Party (Kuomintang) had a profound impact on China's economy. The conflict

disrupted economic activities, led to massive internal displacement, and caused

significant damage to infrastructure and industries. The war resulted in a divided China,

with the CCP establishing the People's Republic of China in 1949.

The Great Leap Forward

Launched by Chairman Mao Zedong in 1958, was an ambitious socio-economic

campaign aimed at rapidly transforming China from an agrarian society to a modern
industrial nation. However, it had severe economic consequences and is often
considered one of the most disastrous policies in Chinese history. The economic effects
of the Great Leap Forward were profound, causing a significant setback to China's
economy. Agricultural production plummeted, industrial output suffered, and essential
infrastructure and social services were neglected. The economic disruption and human
suffering inflicted by the Great Leap Forward took years to recover from, and it had
long-term repercussions for China's economic development.

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 Korean War (1950-1953)
China's participation in the Korean War as an ally of North Korea had economic
consequences. China suffered heavy casualties and incurred substantial economic
costs due to the deployment of troops, military spending, and the strain on resources.
The war also strained China's relationship with the United States and impacted
international trade.
Cultural Revolution (1966-1976)
The Cultural Revolution, launched by Mao Zedong, aimed to transform Chinese society
but had severe economic consequences. The movement disrupted education, cultural
institutions, and economic activities, leading to a decline in productivity and economic
growth. Industries and infrastructure suffered, and the economy experienced a
significant downturn during this period.
Sino-Vietnamese War (1979)
The brief conflict between China and Vietnam had economic repercussions for both
countries. China faced international isolation and economic sanctions, which impacted
trade and foreign investment. The war also strained relations with neighboring countries
and affected regional stability.
Tibet Conflict
China's control over Tibet has been a long-standing issue with political and economic
implications. The Chinese government's policies in Tibet have aimed to integrate the
region into the national economy, but the conflict has resulted in social unrest and
affected economic development in the region.
Ukraine War
Nowadays, The Chinese government refused to condemn the Russian invasion of
Ukraine, repeated Russian propaganda and disinformation about the war, opposed
economic sanctions against Russia, and abstained or sided with Russia in United
Nations votes on the war in Ukraine and helped prop up the Russian economy.

GDP AND UNEMPLOYMENT

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Forty years ago, after a long period of economic stagnation, China was not in the

world’s top eight economies. Today, thanks to a breathtaking social and economic

transformation that began in the late 1970s, China is on track to overtake the United

States as the world’s number one economy within a few decades, if not sooner. By

some measures, it has already done so. We are living in what many are now calling

‘The Chinese Century’.

China’s economy is the second largest in the world, behind only the United States. But

after three decades of spectacular growth, China is now moving into a slower growth

phase – an inevitable result of its transition from a developing economy to a more

mature, developed economy. In the 1980s, 1990s and early 2000s, China’s annual GDP

growth frequently exceeded 10 per cent, with an estimated 2019 growth of 6.3 per cent,

21
although this is likely to be closer to 6 per cent with the impact of the US-China trade

war.

In coming years, the International Monetary Fund (IMF) forecasts China to continue

growing at a rate of 6.3 per cent in 2019 and 2020 and 6 per cent in 2021.

These forecast figures still put it well ahead of most other major economies’ growth

rates and keep it on track to eventually overtake the US as the world’s largest

economy. Manufacturing, services, and agriculture are the largest sectors of the

Chinese economy – employing the majority of the population and making the largest

contributions to GDP. Since 1949, the Chinese Government has been responsible for

planning and managing the national economy. But it was only after 1978 – when

Deng Xiaoping began market-based reforms –that growth began to take off, averaging

10 per cent annually for some 30 years. During that period, the size of the Chinese

economy grew by roughly 48 times, from USD 168.367 billion (current prices) in 1981 to

USD 11.01 trillion in 2015.

Since the introduction of Deng Xiaoping’s economic reforms, China has what

economists call a socialist market economy – one in which a dominant state-owned

enterprises sector exists in parallel with market capitalism and private ownership. It was

the active encouragement of private enterprise from 1978 that enabled China to kick-

start the long expansionary boom that continues today. Private businesses now produce

more than half of China’s GDP and most of its exports.

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 UNEMPLOYMENT
In April 2023, the surveyed unemployment rate in urban areas of China ranged at 5.2
percent, slightly down from 5.3 percent in the previous month. The quarterly
unemployment rate in China stood at 5.5 percent in the first quarter of 2023.
One of the major reasons for this unemployment is The Chinese government's
crackdown on the technology, education and property sectors has also left a large
number of young people in these industries out of a job. Many technology giants have
laid off thousands of workers.
China's youth unemployment rate (the proportion of unemployed 16-to-24-year-olds) hit
a record high of 20.4% in April 2023.

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 Unemployment refers to the share of the labor force that is without work but
available for and seeking employment.
 China unemployment rate for 2021 was 4.82%, a 0.18% decline from 2020.
 China unemployment rate for 2020 was 5.00%, a 0.48% increase from 2019.
 China unemployment rate for 2019 was 4.52%, a 0.24% increase from 2018.
 China unemployment rate for 2018 was 4.28%, a 0.16% decline from 2017.

During its initial 3-4 decades, China had a centrally planned economy with limited

market mechanisms. The concept of unemployment was not prevalent. The state was

the primary employer, and urban employment was generally guaranteed. However,

underemployment/ disguised unemployment was common in the agricultural sector.

The economic reforms initiated by Deng Xiaoping from 1978 onwards led to significant

changes in China's labor market. The dismantling of collective agriculture and the

promotion of market-oriented reforms gradually shifted the economy towards a more

market-based system. This period witnessed the emergence of unemployment as a

more visible issue, particularly in the context of the restructuring of state-owned

enterprises (SOEs) and the introduction of market forces.

The COVID-19 pandemic changed the Chinese Labor Market. The strict measures

implemented to contain the virus, such as lockdowns and travel restrictions, temporarily

disrupted economic activities and led to job losses and reduced employment

opportunities. The government implemented measures to support businesses, protect

jobs, and provide social safety nets for affected workers.

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 TRADE ORGANIZATIONS

The PRC has bilateral investment agreements with over 100 countries and economies,

including Austria, the Belgium-Luxembourg Economic Union, Canada, France,

Germany, Italy, Japan, South Korea, Spain, Thailand, and the United Kingdom.

World Trade Organization (WTO): China became a member of the WTO on December

11, 2001. As a member, China is subject to WTO rules and regulations, including

commitments on tariff levels, market access, and intellectual property rights. The WTO

provides a forum for negotiations, dispute settlement, and the promotion of global trade

liberalization.

Asia-Pacific Economic Cooperation (APEC): China is one of the 21 member economies

of APEC, which aims to promote economic cooperation, trade facilitation, and

sustainable development in the Asia-Pacific region. APEC provides a platform for

dialogue, economic policy coordination, and initiatives to enhance regional economic

integration.

BRICS: China is a founding member of the BRICS grouping, which includes Brazil,

Russia, India, China, and South Africa. BRICS aims to promote cooperation and

coordination among its members in various areas, including trade, finance, and

development. The organization seeks to enhance the role of emerging economies in

global governance and foster mutual economic benefits.

Shanghai Cooperation Organization (SCO): China is a member of the SCO, a regional

organization comprising eight member states, including China, Russia, and several

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Central Asian countries. While the SCO's primary focus is on political and security

cooperation, it also promotes economic cooperation and trade facilitation among its

member states.

Free Trade Agreements (FTAs): China has entered into 17 bilateral and regional FTAs

till date, such as the China-ASEAN FTA, China-South Korea FTA, and China-Australia

FTA. These agreements aim to reduce trade barriers, promote market access, and

enhance economic integration between China and its trading partners.

Belt and Road Initiative (BRI): Although not a formal trade organization, the BRI is an

ambitious development strategy initiated by China. It seeks to enhance connectivity and

cooperation among countries along the Silk Road Economic Belt and the 21st Century

Maritime Silk Road. The BRI involves infrastructure development projects, trade

facilitation initiatives, and economic cooperation to promote regional integration and

boost trade.

CHINA-PAKISTAN ECONOMIC CORRIDOR (CPEC)

The China-Pakistan Economic Corridor (CPEC) is a major infrastructure and

development project between China and Pakistan. It is a flagship component of China's

Belt and Road Initiative (BRI) and aims to enhance connectivity, trade, and economic

cooperation between the two countries. Here is a short summary of CPEC:

CPEC aims to deepen economic ties between China and Pakistan, promote regional

integration, and spur economic growth and development in Pakistan. It involves a range

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of infrastructure development projects, including transportation networks, energy

projects, industrial parks, and special economic zones.

Strategic Importance: CPEC holds strategic significance for both China and Pakistan.

For China, it provides an alternate trade route to the Arabian Sea, reducing reliance on

the Strait of Malacca and enhancing energy security. For Pakistan, it offers an

opportunity to address infrastructure gaps, boost economic growth, create jobs, and

develop its less-developed regions.

Infrastructure Projects: CPEC includes various infrastructure projects that aim to

improve transportation and energy infrastructure in Pakistan. This includes the

construction and upgrading of highways, railways, ports, and airports, enhancing

connectivity within Pakistan and with China. It also involves the development of energy

projects, including coal, hydroelectric, and renewable energy sources, to address

Pakistan's energy needs.

Industrial Cooperation: CPEC seeks to foster industrial cooperation between China and

Pakistan by establishing special economic zones (SEZs) and industrial parks. These

zones aim to attract foreign investment, promote manufacturing, and create

employment opportunities. Chinese companies are encouraged to invest in these SEZs,

which offer incentives such as tax breaks and streamlined regulations.

Socioeconomic Development: Alongside infrastructure development, CPEC emphasizes

socioeconomic development in Pakistan. It includes initiatives in sectors such as

agriculture, education, healthcare, and tourism to uplift local communities, improve living

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 standards, and enhance human capital.

CPEC faces several challenges and has attracted criticism. Concerns include issues

related to debt sustainability, transparency, environmental impact, social displacement,

and the equitable distribution of benefits. Critics argue that CPEC may

disproportionately benefit China and raise questions about the long-term implications for

Pakistan's economy and sovereignty. CPEC has the potential to significantly transform

Pakistan's infrastructure, energy sector, and economy. However, its success depends

on addressing challenges, ensuring transparency, fostering local participation, and

implementing projects in a sustainable and inclusive manner.

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 CPI AND INFLATION
The most well-known indicator of inflation is the Consumer Price Index (CPI),

which measures the percentage change in the price of a basket of goods and services

consumed by households.

What happens to the inflation rate when CPI increases?

When the CPI is rising it means that consumer prices are also rising, and when it falls it

means consumer prices are generally falling. In short, a higher CPI indicates higher

inflation, while a falling CPI indicates lower inflation, or even deflation.

What causes inflation?

More jobs and higher wages increase household incomes and lead to a rise in

consumer spending, further increasing aggregate demand and the scope for firms to

increase the prices of their goods and services. When this happens to a large number of

businesses and sectors, this leads to an increase in inflation.

Over the past few decades, China has experienced varying levels of inflation. In the

early 1990s, China faced high inflation rates, reaching double-digit figures due to factors

such as rapid economic growth, supply-demand imbalances, and structural reforms.

However, in recent years, China has generally maintained relatively stable inflation

rates.

The Chinese government sets an annual inflation target as part of its economic policy.

In recent years, the target has been around 3%. The actual inflation rate may fluctuate

around this target due to various factors affecting the economy.

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In 2022, the average annual inflation rate in China ranged at around 2.0 percent

compared to the previous year. Projections by the IMF published in October 2022

expect the inflation rate to reach about 2.2 percent in 2023. The monthly inflation rate in

China increased in the first half of 2022 but ranged still at a moderate level.

China's inflation in comparison

Among the main industrialized and emerging economies worldwide, China displayed

comparatively low inflation in 2021. In previous years, China's inflation ranged

marginally above the inflation rates of established industrialized powerhouses such as

the United States or the European Union. However, this changed in 2021, as inflation

rates in developed countries rose quickly, while prices in China only increased

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moderately. According to IMF estimates for 2021, Venezuela was expected to be the

country with the highest inflation rate, with a consumer price increase of about 500

percent compared to 2020. Samoa was estimated to have the lowest price increase

worldwide with prices actually decreasing by about three percent.

Inflation Rate in China is expected to be 1.20 percent by the end of this quarter,

according to Trading Economics global macro models and analysts’ expectations. In the

long-term, the China Inflation Rate is projected to trend around 2.10 percent in 2024

and 2.20 percent in 2025, according to our econometric models.

In conclusion, in China, over 20 years, high inflation had a negative influence on

economic growth, while moderate inflation favored economic growth.

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