China

China

Latest Development

  • China’s GDP grew by 6.8% in the last quarter of 2016.

  • The added-value industrial output grew by 6% in December 2016, down from 6.2% in November.

  • Fixed assets investment grew by 8.1% in Jan-Dec 2016 (8.8% in real terms).

  • Retail sales increased by 10.9% (9.2% in real terms) in December 2016.

  • Inflation edged down to 2.1% in December 2016 from 2.3% in November.

  • In December 2016, exports (in terms of US$) dropped by 6.1%, while imports (in terms of US$) increased by 3.1%, resulting in a trade surplus of US$40.8 billion.

  • The Manufacturing Purchasing Managers’ Index moved down to 51.4 in December 2016 from 51.7 in November.

Major Economic Indicators2015Jan-Dec 2016
ValueGrowth (%)ValueGrowth (%)
Area (sq km, mn)9.69.6
Population (mn)1,374.61,382.7
Gross Domestic Product (RMB bn)68,905.26.9174,412.76.71
Urban Per Capita Disposable Income (RMB)31,1956.6133,6165.61
Rural Per Capita Disposable Income (RMB)11,4227.5112,3636.21
Fixed Assets Investment2 (RMB bn)55,159.010.059,650.18.1
Added-Value of Industrial Output36.116.01
Consumer Goods Retail Sales (RMB bn)30,093.110.733,231.610.4
Consumer Price Index1.42.0
Exports (US$ bn)2,274.7-2.92,097.4-7.7
Imports (US$ bn)1,680.6-14.11,587.5-5.5
Trade Surplus (US$ bn)594.1509.9
Utilised Foreign Direct Investment (US$ bn)126.35.6103.940.2
Foreign Currency Reserves (US$ bn)3,330.4-13.33,010.5-9.6

Note:
1 Real growth
2 Urban investments in fixed assets
3 All state-owned and other types of enterprises with annual sales over RMB20 million
4 Jan-
Nov 2016

Sources: The National Bureau of Statistics, Ministry of Commerce, and General Administration of Customs.

 

Current Economic Development

The Chinese economy grew by 9.3% in 2011 and slowed to 7.7% in both 2012 and 2013. In 2014 and 2015, GDP grew by 7.3% and 6.9% respectively. Per capita GDP reached RMB49,351 in 2015. In the four quarters of 2016, GDP grew by 6.7% in the first three quarters and 6.8% in the last quarter, resulting in an average growth of 6.7% for 2016.

After reducing the reserve requirement ratio five times in 2015, the PBOC cut the reserve requirement by 0.5 percentage points again on 1 March 2016. The base lending rates were cut by 0.25 percentage points each on 1 March 2015, 11 May 2015, 28 June 2015, 26 August 2015 and 24 October 2015.

 

Chart: Quarterly GDP Growth (China)
Chart: Quarterly GDP Growth (China)
Chart: Fixed Assets Investment Growth (China)
Chart: Fixed Assets Investment Growth (China)

 

Fixed assets investment is one of the major driving forces of the economy. In 2014, fixed assets investment grew by 15.7%. In 2015, it grew by 10.2%, down from 11.4% in the first six months. In Jan-Dec 2016, fixed assets investment grew by 8.1% (8.8% in real terms).

 

Chart: Added-value of Industrial Output Growth (China)
Chart: Added-value of Industrial Output Growth (China)
Chart: Changes in CPI (China)
Chart: Changes in CPI (China)

 

Added-value of industrial output (by large enterprises with annual sales exceeding RMB20 million) grew by 8.3% in 2014 and slowed to 6.1% in 2015. In Jan-Dec 2016, added-value of industrial output grew by 6% with foreign-invested enterprises grew by 4.5%.

In 2014, consumer price index (CPI) increased by 2% with food prices increased by 3.1% and non-food prices up by 1.4%. In 2015, CPI went up by 1.4% with food prices up by 2.3% and non-food prices up by 1%. In December 2016, CPI went up by 2.1% with food prices up by 2.44% and non-food prices up by 2%.

In 2014, retail sales grew by 12% (real growth at 10.9%). In 2015, retail sales grew by 10.7% (real growth at 10.6%). In Jan-Dec 2016, retail sales increased by 10.4% (real growth at 9.6%) with sales of household electrical appliances growing at 8.7%, garments & footwear at 7%, furniture at 12.7%, automobiles at 10.1% and jewellery remained unchanged.

China’s Manufacturing Purchasing Managers’ Index (PMI) (compiled by China Federation of Logistics & Purchasing and China Logistics Information Centre) stood at 51.4 in December 2016 compared to 51.7 in November.

Money supply - total loan grew at 12.8% in December 2016, up from 12.5% in November and the growth rate of RMB loans was up from 13.1% in November to 13.5% in December.

 

Chart: Growth of RMB loans (China)
Chart: Growth of RMB loans (China)
Chart: Manufacturing PMI (China)
Chart: Manufacturing PMI (China)

 

Chart: RMB against the US$ (China)
Chart: RMB against the US$ (China)

China's non-state sector expands rapidly and experiences healthy development in recent years. The status and economic contribution of private enterprises received official recognition in the 9th National People’s Congress held in March 1999. By the end of 2015, there were 19.08 million private-owned enterprises (comparing to 845,520 at end-2010).

Beginning 21 July 2005, China reformed the Renminbi (RMB) exchange rate regime by moving into a managed floating exchange rate system with reference to a basket of currencies, and the exchange rate of RMB was re-valued to 8.11 per US dollar on 21 July 2005. On 21 May 2007, the floating band of RMB against the US dollar was enlarged from 0.3% to 0.5% around the central parity published by the People’s Bank of China (PBOC) on each working day. On 16 April 2012, the floating band was expanded to 1% and since 17 March 2014, the floating band has been further expended to 2%. As PBOC modified the RMB exchange rate fixing mechanism, on 13 August 2015, the exchange rate of RMB depreciated to 6.3982 per US dollar from 6.2083 on 10 August 2015. On 18 January 2017, the exchange rate per US dollar stood at 6.8381.

China's foreign exchange reserves stood at US$3,010.5 billion by the end of December 2016, the largest in the world. Foreign debts amounted to US$1,389.3 billion at the end of June 2016, of which 38% was medium- or long-term debts and 62% was short-term debts. The debt service ratio stood at 5% in 2015.

Foreign Trade and Investment

In 2015, China's total external trade reached US$3,956 billion, ranked the first in the world. In 2016, exports and imports dropped by 7.7% and 5.5% (in terms of US$) respectively, resulting in a trade surplus of US$509.9 billion.

 

Chart: Growth of Trade (China)
Chart: Growth of Trade (China)
Chart: Trade Balance (China)
Chart: Trade Balance (China)

 

The share of export-processing trade is declining in recent years. Export-processing trade accounted for 51% of China's total exports in 2007, but dropped to 34% in 2016. In 2016, exports of processing trade dropped by 10.3%.

In 2015, exports of electrical and electronic products grew by 0.1% (In US$ terms), exports of garment and footwear dropped by 6.4% and 4.8% respectively. In Jan-Dec 2016, exports of electrical and electronic products dropped by 7.7% (In US$ terms), exports of garment and footwear dropped by 9.6% and 12.1% respectively.

In 2015, China's top ten export markets were US, Hong Kong, Japan, South Korea, Germany, Vietnam, UK, Netherlands, India and Singapore. China's total exports with these ten economies together accounted for about 59% of China's total exports in 2015.

In 2015, exports of foreign-invested enterprises (FIEs) declined by 6.5%, accounting for 44.2% of China’s total exports, and imports dropped by 8.7%, representing 49.3% of China’s total imports.

By the end of 2015, China approved a cumulative of 836,404 foreign investment projects, with actual utilised overseas FDI amounting to US$1,639 billion. The leading sources of investment included Hong Kong, Taiwan, Japan, Singapore, the US, South Korea, UK and Germany.

In 2014, FDI made by Chinese enterprises in overseas markets stood at US$123.1 billion (+14.2%). In 2015, China’s outward FDI grew by 18.3% to US$145.7 billion, ranked as the second largest source after the US. As at end-2015, China’s stock of outward FDI reached US$1,097.9 billion, ranked the eighth in the world. Business services (mainly investment holdings), financial services, wholesale and retail, mining and manufacturing are the leading sectors of China's outward FDI.

Economic Relations with Hong Kong

The Chinese mainland and Hong Kong signed the Closer Economic Partnership Arrangement (CEPA) on 29 June 2003 and supplemented with further liberalisation measures in subsequent years. At present, all products of Hong Kong origin can be imported into the mainland tariff free under CEPA. For products which have no agreed CEPA rules of origin at present, Hong Kong will initiate discussions with the mainland twice a year upon requests by local manufacturers. Hong Kong service suppliers enjoy preferential treatment in entering into the mainland market in various service areas. There are also agreements or arrangements on mutual recognition of professional qualification. On 18 December 2014, the Agreement on Achieving Basic Liberalization of Trade in Services in Guangdong was signed and to be implemented on 1 March 2015. The Agreement adopts a hybrid approach of positive and negative lists to set out the liberalisation measures in the Guangdong province applying to Hong Kong. The breadth and depth of liberalisation surpass the previous measures for early and pilot implementation in Guangdong. On the basis of the Guangdong Agreement, the Agreement on Trade in Services was signed on 27 November 2015 and to be implemented on 1 June 2016, extending the geographical coverage to the whole Mainland for basic liberalisation of trade in services.

 

Hong Kong's Direct Investment in the Chinese Mainland

Projects, contracted and
utilised direct investment
2015 1979-2015
No./
Value
Share of the
national total (%)
No./
Value
Share of the
national total (%)
Number of approved projects13,14649.5373,71144.7
Utilised direct investment (US$ bn)86.468.4832.350.8

Sources: China Monthly Statistics

 

Hong Kong is the largest source of overseas direct investment in the Chinese Mainland. By the end of 2015, among all the overseas-funded projects approved in the Chinese Mainland, 44.7% were tied to Hong Kong interests. Cumulative utilised capital inflow from Hong Kong amounted to US$832.3 billion, accounting for 50.8% of the national total. Hong Kong is also the leading destination for China’s FDI outflow. According to Chinese statistics, by 2015, the stock of FDI going to Hong Kong accumulated to US$656.9 billion, or 59.8% of the total outflow of FDI.

Chinese Mainland is one of the leading sources of inward investment in Hong Kong. According to Hong Kong statistics, the stock of Hong Kong's inward investment from the Chinese mainland amounted to US$448 billion at market value or 30.1% of the total at the end of 2014. As of December 2015, 951 mainland companies were listed in Hong Kong, comprising H-share, red-chip and private companies with total market capitalisation of US$1.97 trillion, or 62.1% of the market total.

Hong Kong's Trade with the Chinese Mainland *

Hong Kong was the Mainland's second largest trading partner (after the US) in 2015. According to China's Customs Statistics, bilateral trade between the Mainland and Hong Kong amounted to US$344 billion (8.7% of the Mainland's total external trade) in 2015. Of which exports from the Chinese Mainland to Hong Kong stood at US$332 billion, making Hong Kong the second largest export market.

The Mainland has been Hong Kong's largest trading partner since 1985. Share of the Mainland in Hong Kong's global trade jumped from 9.3% in 1978 to 51.2% in 2015. The Chinese Mainland was Hong Kong’s largest import source accounting for 49% of Hong Kong’s total imports, and the largest export market accounting for 53.7% of Hong Kong’s total exports in 2015.

Hong Kong's trade with the Chinese Mainland is to a large extent related to outward processing activities. In 2015, 28.5% of Hong Kong's total exports to the Chinese Mainland were related to outward processing activities. Meanwhile, 39.7% of Hong Kong’s imports from the Mainland and 71.8% of Hong Kong's re-exports of the Mainland origin to all countries were related to outward processing.

 

Hong Kong's Trade with the Chinese Mainland

Unit
(US$ million)
2015Jan-Nov 2016
ValueGrowth
(+/-,%)
RankingValueGrowth
(+/-,%)
Ranking
Total exports248,271-2.11224,594-0.91
   Domestic exports2,620-11.912,166-10.41
   Re-exports245,652-2.01222,428-0.81
Imports254,365-0.11221,722-3.91
Total Trade502,636-1.11446,316-2.51
Trade Balance-6,094 — —2,872

Sources: Census & Statistics Department of Hong Kong
* Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessary reflect the total business managed by Hong Kong companies.