Economic Analysis


Population 1412.6 million
GDP 12,562 US$
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major macro economic indicators

  2020 2021 2022 (e) 2023 (f)
GDP growth (%) 2.2 8.1 3.0 4.7
Inflation (yearly average, %) 2.5 0.9 2.0 1.8
Budget balance (% GDP) -3.7 -3.1 -2.8 -3.0
Current account balance (% GDP) 1.7 1.8 2.3 1.2
Public debt (% GDP) 68.1 71.5 76.9 84.1

(e): Estimate (f): Forecast


  • Sovereign risk contained as public debt remains mainly domestic and denominated in local currency
  • Reduced risk of (private) external over-indebtedness thanks to the high level of foreign exchange reserves
  • Large labour market, but working-age population peaked in 2014
  • Robust services sector, led by e-commerce trends
  • Good level of infrastructure
  • Increasing presence in emerging and developing countries through the BRI


  • US-China strategic competition, and US sanctions on technology transfer
  • Reliance on imports of key technology components
  • Increasingly challenging external environment
  • Housing market correction
  • Unclear political succession plans
  • High corporate indebtedness set to impact growth potential
  • Ageing population, resulting in high public expenditure and higher labour costs
  • Environmental issues
  • Economic policy moving from pragmatism-led to ideologically-driven

Risk assessment

Disappointing growth momentum in China was driven by the Omicron wave and the country’s strict lockdown response, as 2022 GDP growth rate by far missed the official target of 5.5%, coming in at 3%. Zero-Covid response measures blunted the transmission mechanism of the government’s support policy measures, making them less effective in stimulating economic activity. Consumption (39% of GDP) was substantially curtailed by the impact of the zero-Covid policy (ZCP), contributing only 1.2 percentage-points (ppts) to GDP growth in the first three quarters of 2022, compared to around 4.1 ppts in the five-year period prior to the pandemic.

Solid export growth provided a strong lift for the Chinese economy over 2021 and most of 2022, with net exports (trade in goods and services stood at 34% of 2020 GDP) contributing 1.0 ppt to growth in the first nine months of 2022. But with the global environment souring amid a world economic slowdown, there will be a rotation of growth drivers from exports to household consumption as China moves rapidly towards reopening in 2023. Investment (42% of GDP) will likely maintain a stable contribution (0.8 ppts in the Jan-Sept 2022 period) as the real estate sector is expected to stabilise, while growth in manufacturing and infrastructure investment slows modestly.

The easing of the zero-Covid policy in December 2022 signalled a shift towards reopening in 2023, though the rollout remains highly uncertain given that looser rules contributed to a sharp rise in infections, which disrupted production and supply chains. While reopening boosts Chinese consumption, full recovery will take time as, barring the ZCP impact, weaker income recovery, the Chinese people’s strong preference to save, and shrinking net wealth (associated with declining financial and home asset prices) have also affected spending behaviour.

As far as the property market is concerned, a more comprehensive package of housing policy measures announced in November 2022, which addresses not just housing demand and project completions, but also developers’ financing woes, will likely help stabilise the real estate sector (7% of GDP, but up to 29% with property-related activities). Again, structural factors such as demographic changes and supply overhang in lower-tier cities are long-term downside risks to the housing market.

Inflation will likely remain subdued in 2023, reflecting weak domestic demand, but also other factors such as greater weight given to food items, especially hogs, than in other main economies, and lower imported consumer goods due to Chinese industrial capability. Sustained disinflation pressure and durably below-trend growth will provide justification for the PBOC to maintain an accommodative monetary policy, with some room for more easing measures, but contingent on China’s economic performance, CNY depreciation and capital outflow pressures. 


Fiscal and external balance

Strong export performances since 2020 are likely to come up against strong headwinds in 2023 amid weaker global demand and supply chain normalisation. Expected widening of the services trade deficit as China reopens coupled with the return of Chinese outbound tourism lead us to believe that the current account surplus will narrow in 2023. Fiscal policy will remain a key driver of the 2023 economic outlook, with the budget deficit staying around 3% of GDP. The government is expected to announce more stimulus support to stabilise the economy, following the Central Economic Work Conference, which emphasises boosting domestic demand in 2023. The National People’s Congress (NPC) in March will provide a clearer picture amid growing expectations of an official 2023 GDP target of above 5%.


Xi consolidates political power

Xi Jinping secured a norm-breaking third term as General Secretary of the Communist Party of China (CPC) in October 2022, with the politburo standing committee, the highest decision making body of the CPC, endorsing four changes, all known to be allies of Xi. Shanghai Party Chief Li Qiang is slated to be the next premier in March 2023 after the annual session of the NPC, replacing Li Keqiang. Conventions of the Party’s political transition appeared to have changed, with several people aged 68 or older promoted to the Politburo - for example, foreign minister Wang Yi is 68 - or extended their Politburo membership  - CMC vice-chair Zhang Youxia is 72. More important, the economic and financial team is set to be completely reshuffled. The outcome of the 20th Party Congress highlighted Xi’s prevailing dominance within the Party, suggesting that recent troubles, including economic woes, discontent with the zero-Covid policy, and increasingly strained relationships with Western advanced economies, failed to loosen Xi’s grip on power. There was no mention of a designated successor, which hints at the possibility of Xi holding on to power beyond a third term.


Last updated: April 2023


Cash payment is usually used for face-to-face domestic retail transactions. Due to tight capital controls imposed by the authority, an individual can only purchase up to USD 50,000 each year. Furthermore, when a Chinese company makes an international payment in a foreign currency, the company must submit a foreign currency payment application with the local bank, along with supporting documents like sales contracts and invoices. The whole process can be quite lengthy and it is possible that the bank will reject the transaction.

Commercial Acceptance Drafts (CAD) and Bank Acceptance Drafts (BAD) are both common methods of payment for Chinese companies. These are two negotiable instruments: whereas CAD is issued by companies to entrust the payer to unconditionally pay the specified amount to the beneficiary on the date, BAD is issued by the acceptance applicant, entrusting the acceptance bank to make unconditional payment of a certain amount of money to the payee or bearer on the designated date. In practice, BAD is regarded as safer and therefore more accepted than CAD.

Letter of credit and cheques are also used, but are less popular in China. The use of letters of credit is typically confined to big companies; and cheques are used infrequently by both individuals and companies.

SWIFT bank transfers are also among the most popular means of payment as they are rapid, secure, and supported by a developed banking network, both internationally and domestically.

Debt Collection

Amicable phase

The creditor makes phone calls and sends letters of collection to chase the debtor for payment. If debtor is responsive and acknowledges the debt, the two parties will negotiate payment plans to try to have payment settled. In the existence of a dispute, both parties need to come to an agreement or offer discount on debt amount.


Legal proceedings

The Chinese court system is complex. It is divided into multiple tribunals at different levels. The basic People’s Courts are at the lowest level with the County People’s Courts or Municipal People’s Courts. The basic People’s Courts have jurisdictions over most cases of first instance. Intermediate People’s Courts handle certain cases in first instance, such as major foreign-related cases, as well as appeal proceedings brought against decisions rendered by the basic People’s Courts. At the Higher level, the High People’s Courts decide on major cases in first instance. The Supreme People’s Court is at the highest level, which handles interpretation issues, and has jurisdiction over cases that have a major impact nationwide.


Fast-Track Procedure

If the debt is purely monetary, there are no other debt disputes between the creditor and the debtor, and the repayment order can be served on the debtor, the creditor can apply for a repayment order against debtor with the court. The debtor has 15 days to repay the debt after the order is issued; otherwise, he must submit a defence before the payment deadline. If debtor fails to do either, the creditor can apply for enforcement. However, if debtor’s written defence or objection is approved by the court and the ruling for terminating the debt payment order is issued, the debt payment order will be invalidated and the creditor can choose to pursue legal action. In practice, creditors do not usually use the fast-track procedure and will immediately initiate legal proceedings when the amicable phase fails.


Ordinary Procedure

Legal proceedings commence with the creditor lodging the case and submitting statement of claims with the court with corresponding jurisdiction. Once the case is accepted, court summons will be delivered to parties involved. Usually within one month, the first hearing will be arranged and the court will make a final attempt to reach a payment agreement between creditor and debtor via

mediation. If no agreement can be reached, the litigation continues with several rounds of hearings, before a judgement is rendered by the court.

In theory, a first instance ruling could be rendered within six months after the case’s acceptance, but in practice, proceedings can last longer as the complexity of the case increases (for example, when there is more than one creditor, or when a foreign party is involved). In some cases, the whole process can last to one to two years. Furthermore, appeal proceedings must be terminated within three months after appeal acceptance.

Enforcement of a Legal Decision

Domestic judgments, once obtained, can be executed by, for example, seizing the debtor’s bank accounts, property, or by a transfer of rights. The creditor can apply for enforcement with the People’s Court or with an enforcement officer.

For foreign judgments, the recognition and enforcement is based on the provisions of an international treaty concluded or acceded to by both China and the foreign country or under the principle of reciprocity. In practice, enforcing foreign arbitral awards is easier than enforcing foreign court decisions in China, because over 150 countries including China have signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, June 10, 1958).

Another method of enforcement is the “Arrange­ment on Reciprocal Recognition and Enforcement of judgments in Civil and Commercial Matters” (REJA) between China and Hong Kong. There are similar arrangements between mainland China and Macao, as well as between mainland China and Taiwan. It provides a legal basis for Chinese courts to enforcement judgments from Hong Kong, Macao, and Taiwan. It allows creditors to use courts from Hong Kong, Macao, and Taiwan for cases in mainland China.

Insolvency Proceedings

Parties may agree debt restructuring arrangements without going to court. However, such arrangements must not jeopardize the interests of any other creditors – otherwise, they may subsequently be declared invalid in any court bankruptcy proceedings.

The 2007 Chinese enterprise bankruptcy law sets out three types of formal bankruptcy proceedings: bankruptcy, reorganization and reconciliation.


Restructuring proceedings

This can prevent a company with plentiful assets while experiencing cash flow difficulties from entering bankruptcy. Either debtor or creditor can apply with the court for Restructuring, which allows debtor to manage its properties under an administrator’s supervision. A restructuring plan should be approved by a majority of creditors in each voting class (secured, creditors, employees…) at creditor’s meetings, then sent to the court for approval within ten days from the date of adoption.

After the implementation of the restructuring plan, the administrator will supervise and submit report on debtor’s performance with the court. The administrator or debtor must file an application to the court for approval within ten days from the date of adoption.



This procedure allows the company to settle its liabilities with its creditor prior to the court declaration of debtor’s bankruptcy. The debtor directly submits a payment proposal to the court and upon receiving court’s approval on compromise payment proposal, the debtor will recover its properties and business from the administrators. The administrator will supervise debtor’s performance and report to the court. If the debtor fails to implement the compromise proposal, the court will terminate this procedure and declare debtor bankrupt as requested by the creditors.



The procedure has the purpose to liquidate an insolvent company and distribute its assets to its creditors. The bankruptcy request should be applied with the court and the request can be sent both in the name of debtor and a creditor. Once accepting the bankruptcy petition, the court will appoint an administrator from the liquidation committee and debtor will be notified within five days and is required to submit financial statement to court within 15 days. The administrator will verify the claims and distribute the assets to creditors. After the final distribution is completed, the court will receive administrator’s report and decide whether to conclude the proceedings within 15 days.


Special provisions regarding enterprise bankruptcy proceedings during the 2020 COVID-19 pandemic:
  • In the event of creditors applying for a company’s bankruptcy proceedings due to debtor’s debt payment default as a result of the pandemic or pandemic prevention measures, the people’s court should endeavour to prevent debtor’s bankruptcy by actively facilitating debt negotiation between debtor and creditor with measures such as payment instalments, extension of credit terms, revising the contract prices.
  • The court should distinguish the companies under financial distress mainly due to COVID-19 from the ones already suffering from financial difficulties prior to the pandemic. For the former, the bankruptcy proceeding shall be prevented, while for the latter, the court shall let them go bankrupt.
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