Explainer | China GDP: what is it and why is it important?

China’s gross domestic product (GDP) is the value of all goods and services produced within the country over a certain time period
Beijing’s embrace of market forces in the late 1970s unleashed an economic boom that saw GDP grow at nearly 10 per cent annually from 1989 to 2019

China GDP

SCMP Reporter

Published: 5:05pm, 30 Oct 2020

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What is China’s GDP and why is it important?

China’s gross domestic product (GDP) is the value of all goods and services produced within the country over a certain time period. Only final goods and services sold for money are included.

Usually calculated on a quarterly basis, it provides a snapshot of an economy’s health, capturing the size of output and its growth. This in turn can guide policymakers, investors and businesses.

In China, contributions to GDP come from three main sectors: agriculture, industry and services.

China’s agriculture sector accounted for 7 per cent of GDP in 2019, industry made up 39 per cent and services 54 per cent, according to the World Bank.

China’s economy grew by 18.3 per cent in the first quarter of 2021 versus year ago.

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What is gross domestic product (GDP)?

How has China’s GDP changed over time?

China’s economy has grown rapidly since former leader Deng Xiaoping introduced a policy of reform and opening up in the late 1970s.

Beijing’s embrace of the market unleashed an economic boom that saw GDP grow at nearly 10 per cent annually from 1989 to 2019, climbing as high as 15.4 per cent in the first quarter of 1993.

But China’s once-formidable growth rate has slowed in recent years. It fell to a revised 6.0 per cent in 2019 amid pressure from the trade war with the United States, and plunged further last year amid the coronavirus pandemic.

GDP shrank by 6.8 per cent in the first quarter of 2020 from a year earlier – the first contraction since the end of the Cultural Revolution in 1976. But it rebounded steadily throughout the year, with year-on-year growth rates of 3.2 per cent in the second quarter, 4.9 per cent in the third quarter and 6.5 per cent in the fourth quarter, according to data from the National Bureau of Statistics.

This combined for a full-year economic growth rate of 2.3 per cent in 2020, surpassing the International Monetary Fund’s (IMF's) growth forecast for China of 1.9 per cent. Meanwhile, the outlook for advanced economies including the US, German and Japan, were expected to contract for the year as a whole.

How does China’s GDP compare to other countries?

As of 2019, the United States has the world’s largest GDP, followed by China, Japan, Germany and India.

China was the first major economy to rebound from the effects of the coronavirus pandemic in 2020 and it is set to outperform the rest of the world in terms of GDP growth, according to the IMF.

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China GDP: economy grew by 4.9 per cent in third quarter of 2020

What is the outlook for China’s GDP?

China’s economic growth could reach as high as 9 per cent in 2021 and its rapid rebound from the coronavirus pandemic may help the economy overtake the US to become the world’s largest later this decade, analysts said.

Given China’s rapid rebound, the Centre for Economics and Business Research, a UK think tank, predicted in December 2020 that China will overtake the US to become the world’s biggest economy in 2028, five years earlier than previously estimated.

China’s recovery has seen a number of brokers, including Nomura and China International Capital Corporation (CICC), predict its GDP growth for 2021 will be 9 per cent.

How coronavirus turned China’s economic expectations on their head

The IMF expects China’s GDP growth to be 8.2 per cent in 2021, while the Organization for Economic Co-operation and Development places it at 8 per cent.

The World Bank and CASS each project a slightly lower growth rate of 7.8 per cent.

In its latest global outlook, Standard Chartered Bank projects China’s GDP growth to accelerate to 8 per cent in 2021, adding that year-on-year growth may surge to 18 per cent in the first quarter due largely to the low base following the historic contraction earlier this year, rather than real economic activity.

Want to know more?

In every episode of the Inside China podcast, we take a deep-dive into a specific topic, mixing independent reporting and exclusive interviews to bring you unique insights into an emerging potential superpower. Now, we are featuring regular updates on the coronavirus pandemic from across the country.

Also, each week political economy journalist Finbarr Bermingham wraps up the latest developments in tariffs, diplomacy and economics from reporters and editors at the Post in the US-China trade war podcast.

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