Economic Studies


Population 1400.1 million
GDP per capita 10,522 US$
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major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 6.6 6.1 2.3 7.5
Inflation (yearly average, %) 2.1 2.9 2.5 1.3
Budget balance (% GDP) -4.7 -6.3 -11.4 -9.6
Current account balance (% GDP) 0.2 0.7 1.9 0.7
Public debt (% GDP) 36.5 38.1 44.7 47.2

(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
  • Gradual strengthening of global value-chains as part of China 2025
  • Dynamic services sector, led by e-commerce trends
  • Good level of infrastructure
  • Increasing presence in emerging and developing countries through the BRI


  • High corporate indebtedness set to impact growth potential
  • Reliance on imports of key technology components
  • Current account surplus expected to narrow and eventually turn into a deficit
  • Misallocation of capital to the SOE sector could erode long-term potential growth
  • Ambiguous government strategy on arbitrating between reform and growth
  • Ageing population, resulting in high public expenditure and higher labour costs
  • Environmental issues
  • Increasing tensions with India
  • Risks that the real estate bubble bursts

Risk assessment

Recovery losing momentum

China’s GDP is on track for a rebound in 2021, but the economic recovery is facing pressures into the second half of the year. While the Chinese economy expanded by 12.7% in the first half of the year, the recovery remains uneven and unbalanced, with domestic consumption growth lagging behind the rate of increase in exports and real estate development. Moreover, a sharp rise in prices of bulk commodities, including base metals and fossil fuels, has constrained the profitability of midstream and downstream enterprises. It is expected that there will be more supportive policies from the central authorities, and a greater push to tap into the quota of local government special bonds (mainly to finance infrastructure projects and only about one-third used in H1). Targeted easing of the monetary policy will also be deployed to ensure ample liquidity and improve access to credit, especially for small and medium enterprises. Exports were resilient in the first half of 2021, driven by a strong demand for technology products, auto parts and metal products. However, there were recent signs of slowing growth in external demand. For instance, the PMI new export orders has declined continuously since March. Although the unemployment rate is back to its pre-pandemic level, at 5% in May 2021, household demand could still be dampened by uncertainty over the trajectory of the pandemic, as well as China’s zero-COVID response to virus flare-ups. The recovery in private investment - which is yet to recover from a 29.5% drop in the first half of 2020 despite a 15.4% year-on-year increase in the first half of 2021 - is expected to continue for the remainder of the year. The inflation rate is expected to slow, led by falling food prices, particularly pork, which has been declining since October 2020 due to a recovery in local production capacity to pre-ASF (African swine fever) levels. High corporate indebtedness (162% of GDP in 2020) and an ageing population remain concerns to the outlook in the longer-term. Cyclical factors will also continue to weigh on the outlook.


High debt levels exacerbated by the pandemic

The current account surplus is likely to narrow in 2021, in the wake of a reduction in the trade balance surplus. Private consumption, which should gradually recover, is expected to prompt imports to expand at a faster rate than exports. The renminbi has been under upward pressure in 2020, as China recovered quickly after getting the pandemic under control. So far, in 2021, the currency has remained broadly stable, as policymakers loosened currency controls and intervened occasionally on forex markets to stem a steep appreciation. Despite the pandemic-induced shock, China appeared to be spared from capital outflows due to capital controls. China continues to receive a large amount of Foreign Direct Investment (FDI), but an ageing population and a dwindling trade surplus may impair its ability to generate savings that are significant enough to finance adequately the systemic build-up of debt in the long-term.


Debt levels, exacerbated by the pandemic, will remain high (323% of GDP in Q1 2021), with half being owed by non-financial corporations. These corporations, many of which are state-owned (SOE), are struggling with high levels of debt and overcapacity. While SOEs are mostly owned by provinces, defaults on their bonds have been on the rise, as a result of Beijing’s increasing willingness to impose market discipline and to break away from the idea of an implicit state guarantee for SOE debt. While the continued tightening of the shadow banking sector should lead shadow lending to shrink further in 2021 as regulators introduce more restrictions on the sector, these practices make it difficult to assess corporate debt. For instance, China Banking and Insurance Regulatory Commission (CBIRC) announced new rules in June 2021 that restrict banks and wealth managers from using money raised from cash wealth management products (WMP) to invest in financial assets such as bonds and stocks. These products will also be subject to a maximum leverage ratio of 120%. These rules should reduce the incentive for financial institutions to invest cash WMPs in risky assets or extend loans to highly leveraged companies, which, in turn, would help to contain systemic risks.


Domestic demand and innovation

Beijing unveiled the 14th five-year Plan (FYP) and set a GDP growth target of at least 6% for 2021. The new FYP focuses on a “dual circulation” development model that aims to rebalance the economy from a predominantly export-led strategy over the past decades to a domestic-driven economic activity that relies on domestic production, distribution, consumption and innovation. This would help reduce the dependence on foreign markets for economic growth. On the external front, strategic competition and tensions between the U.S. and China is a long-term trend. Biden has taken a tough stance against China, seeking to build a coalition of U.S. allies to confront China, especially regarding human rights violations. Existing tariffs should continue to exert downside pressure on Chinese growth.  While the Phase One trade deal signed in January 2020 had eased tensions, China has been falling short on the import target since then, which could become a threat to the agreement. Through June 2021, China had only imported just under 70% (USD 63.9 billion) of the year-to-date target of USD 99 billion from the U.S.


Last updated: September 2021


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.