Caixin
Sep 30, 2019 08:21 PM

China in Charts: A 70-Year Journey to Economic Prominence

China is celebrating its 70th anniversary with great pride in its transformation into an economic superpower, even as concerns rage over a deepening trade war with the United State and weakening growth momentum.

The country has come a long way over the past seven decades, expanding the size of its economy by more than 450 times to become the world’s second-largest, thanks to its huge population and cheap production costs. Today, China’s economy is under unprecedented global scrutiny as market players search for clues to its growth outlook.

There is a lot at stake. In 2018, China’s economy totaled $14 trillion, representing nearly 16% of global GDP, according to the International Monetary Fund. It is the world’s largest trading nation, second-largest source of outbound foreign direct investment and home of more than one-fifth of Global Fortune 500 companies. China is likely to overtake the U.S. to become the world's largest consumer of goods this year.

China’s economy also faces unprecedented challenges as it sails into uncharted waters. The country is entering a new normal featuring a slower pace of economic growth while facing greater uncertainties from the external environment.

The charts below offer a snapshot of how China’s economy got here and what challenges it faces.

Journey to prominence

China’s GDP expanded from about $30 billion in 1952 to $13.61 trillion in 2018. The pace of China’s rise was uneven as business activities tumbled in the 1960s due to social and political turmoil. Reforms and opening-up that started in 1978 set off four decades of rapid growth at rates of more than 10% a year, driving the economy to surpass Japan in 2010 as the world’s second-largest behind the U.S. The momentum has shown signs of weakening since 2011, and growth slowed below 7% in 2015. In 2018, the economy expanded by 6.6%.

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Despite the ballooning size of the economy, China’s per capita GDP remains relatively low, ranking 67th among 210 countries and regions worldwide in 2018, according to IMF. Per capita GDP was $9,608 in 2018, up from $200 in 1978.

China’s Gini coefficient, a measurement of income inequality, has remained around 0.47 over the past two decades, indicating a higher degree of inequality.

The driving forces of China’s economic growth — investment, exports and consumption — have shifted over time as the economy evolved. Investment and exports have surrendered their leading role to consumption as the domestic market grew and people’s livelihoods improved. In 2017, domestic market contributed more than 90% of the economy’s growth.

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The establishment of the Shenzhen and Shanghai stock exchanges in 1990 set off the growth of China’s capital market. As of August 2019, more than 3,000 companies are traded on the two markets, including 2,000 private companies and 400 central government-owned enterprises. Banking stocks, with total market value of 9.1 trillion yuan by Aug. 29, form the biggest segment of the market.

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Gallery: Images of the People’s Republic of China, 1949-2019

People’s well-being

Ordinary people in China experienced profound changes in all aspects of their daily lives over the past few decades, from earning wages to giving birth. All of the changes reflect the development issues and policy agenda facing the country at certain times.

The population policy shift is a key change mirroring the evolution of China’s society and economy. Backed by the world’s largest labor force, China became the world’s factory while keeping a tight grip on the increase in population for more than three decades.

In 2013, the strict family-planning policy eased as some families were permitted to have a second child. The policy eased further in 2016, allowing all families to have two children. The easing population controls reflected demographic changes in China — a shrinking labor force and an increasingly greying population.

China’s population structure underwent a significant change in 2011 and 2012, leading to a reversal after 36 years of a declining dependency ratio — an indicator of how much pressure an economy faces in supporting its nonproductive population, said Li Jianmin, a demographic professor at Nankai University.

“It means the demographic dividend (that fueled China’s economic growth) has ended,” Li said.

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In 2018, China’s per capita disposable income reached 28,000 yuan ($3,927), a 165-fold increase from that of 1978. During the same period, the country’s inflation index expanded 5.5-fold, indicating expanding livelihoods.

Measured by Engel's coefficient, the proportion of money spent on food in household expenses, Chinese people reached the “wealthy” category for the first time in 2017 when the reading dropped below 30% to 29.3%. It took China 40 years to reduce the reading from around 60% — a poverty category — to less than 30%.

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Although Chinese people spend less of their income to prevent starvation, their investment in housing continues growing. Total social investment in housing surged to 8.7 trillion yuan in 2017 from 29.6 billion yuan in 1981.

That reflects a major change in China’s housing market. The country scrapped a state-backed welfare housing policy in 1978, setting the stage for a commercial housing market. It offered people the freedom to improve their living standards based on their financial capacity but also put a great burden on most families as home prices surged.

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The development of the public transportation system improved people’s mobility. In 2012, Chinese people made a record 38 billion trips on public transportation, mainly via the country’s extensive road system.

The prevalence of private cars has started to erode the growth of public transportation since 2013, but the rapidly expanding high-speed railway system offered another option for Chinese travelers. By the end of 2017, the country operated 25,000 kilometers of high-speed railway lines, two-thirds of the world’s total.

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China’s health-care system has expanded quickly over the past 70 years, but getting affordable medical treatment is still a headache for many ordinary people. By the end of 2018, China had 997,000 medical institutions and 3 million registered physicians.

From 1978 to 2018, Chinese people’s disposable income grew 165-fold while their average medical spending surged 330-fold.

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In 2017, China’s total investment in education exceeded 4 trillion yuan for the first time. Most of the money came from government budgets. Nevertheless, China’s fiscal spending on education was equivalent to just 4% of GDP, at the bottom of a proper range between 4% and 6% as set by the United Nations. In 2017, education spending accounted for 4.14% of GDP but has since declined slightly.

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Contact reporter Han Wei (weihan@caixin.com)

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