Chinese Economy



The Chinese economy is the second largest in the world (if we don’t count the EU).

It has a Gross Domestic Product (GDP) of 11.2 trillion USD (2016, IMF).

Now, you may be wondering:

China’s Yuan is traded a lot, but it isn’t one of the majors in FX markets. So why are we going over its economy profile?

Several reasons.

Got something against me?

First, many traders dabble into non-major currencies and I must cater to them (even though I don’t trade outside the majors myself).

Second, China is important, want it or not, it impacts global markets -period. By now, you know very well how China’s trade can affect AUD and even NZD.

Those were the major two reasons.

Now, without further ado:

Profile: Chinese Economy

So China has the world’s second biggest economy in terms of GDP.

You’ve probably heard it also has the largest amount of people.

Population: 1.379 billion people.

Damn… that’s a lot of people.

The only other country that big is India with 1.324 billion (2016, World Bank).

To put things in perspective, the United States has 323.1 million.

China has the biggest population in the world (India is close).

I made the calculations… that’s 426.8 or almost 427 times the amount of people (China vs USA).

Wow.

And yet, the US’s GDP is 1.65 times that of China (according to IMF statistics).

Note: if you’re Chinese, don’t dismay at the comparison. China’s economic growth is insane. Since it is a developing country, you can rest assured that well-being and conditions will improve with time (barring anything too abrupt).

In other words, give it time… China’s growth rate might double its size in less than 20 years (if it continues to like that).

End of note.

Not surprisingly, then we have China’s GDP per capita at $14,600. Which puts the Chinese economy at the 112th spot in the world (out of 230 ranked countries in the CIA World Factbook).

China’s per capita GDP neighbors?

Brazil ($14,800), Macedonia ($14,500), Venezuela ($15,100), and Serbia ($14,200), just to name a few.

What about China’s most prominent economic activities?

In contrast to other countries we’ve covered so far, China’s economy is not 70%+ made by service activities.

No. only about 50% of it is.

What covers the slack?

Industrial production.

Industry is the word in China.

Yes. China manufactures stuff. We all know that.

It does anything and everything, but among the most prominent?

Textiles, mining, steel, transportation equipment, electronics, footwear, and telecommunications, among many others.

Tell me about international trade.

China’s imports of goods and services were 18.49% of GDP (2015).

While exports of goods and services in the Chinese economy hovered around 21.97% of GDP.

This gives us a surplus (yay!)

As such, China’s total trade amounts to basically 40% of GDP which makes it an open economy.

Even so, China is the largest goods exporter there is, man.

Note: In this series, we’ve been treating openness with total trade as percent of GDP, but if we take the actual amounts exported and imported we have China as one of the world’s biggest exporters and importers (if not the top one).

Same can be said of the United States.

End of note.

Let’s jump into debt, shall we?

Chinese Debt Profile

China’s government debt to GDP is 46.2%, which places it at the bottom of the distribution for G20 countries.

Household debt to GDP?

44.4%.

Seems like the Chinese are conservative folk. I like that.

I’m not diving much deeper here since it seems they won’t have to give an arm and leg, or donate a kidney (or their kids) to pay off some loans.

Verdict: Sound

Good debt habits it seems.

And we end here.

See you soon,

Emil Christopher,

The Forex Economist

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