Economy of China

China’s economy is structured as a socialist market system, guided by industrial policies and five-year strategic plans. It is the world’s second-largest economy by nominal GDP and, since 2016, the largest when measured by purchasing power parity (PPP). In 2025, China made up about 19% of global economic output in PPP terms and roughly 17% in nominal terms. The economy blends state-owned enterprises, mixed-ownership firms, and a sizable domestic private sector, which accounts for around 60% of GDP, 80% of urban jobs, and 90% of new employment.

China leads the world in manufacturing and goods exports, often called the “factory of the world” or a “manufacturing superpower.” Its manufacturing output surpasses that of the next nine largest producers combined. Exports represent about 20% of GDP. The country is the top trading nation globally and a major force in international trade. Manufacturing has shifted toward high-tech fields like electric vehicles, renewable energy, telecoms, and IT equipment, while services have also grown as a share of GDP. China is the largest high-tech exporter worldwide. As of 2023, it spends roughly 2.6% of GDP on research and development. It is also the second-largest importer of goods and a net importer of services.

China has free trade agreements with many countries, with the Regional Comprehensive Economic Partnership (RCEP) covering most of its trade integration. Of the world’s 500 largest companies, 142 are headquartered in China. The country hosts three of the top ten most competitive financial centers globally and three of the ten largest stock exchanges (by market cap and trading volume). Its financial assets, valued at $28.3 trillion in 2024, are the second-largest in the world. In 2025, China received $107 billion in foreign direct investment, making it one of the top recipients, and it had the third-largest outbound FDI at $192.2 billion in 2024. Economic growth in the 2020s has faced challenges, notably a property crisis.

The labor force, at 773 million workers in 2024, is the world’s largest but is shrinking due to rapid population aging. In March 2026, Forbes ranked China second globally (after the U.S.) in billionaires and millionaires, with 539 billionaires, while the Hurun Global Rich List placed it first with 1,110 billionaires. China also had 5.3 million millionaires in 2026, second only to the U.S. Public social spending is around 10% of GDP.

Historically, China was a top economic power for most of two millennia, from the 1st to the 19th century, accounting for roughly a quarter to a third of global GDP until the mid-1800s. In 1820, its share was one-third—six times Britain’s economy and nearly twenty times that of the young United States. After the Chinese Civil War, the economy was wrecked; the defeated Kuomintang stripped the mainland of gold, silver, and dollar reserves, leaving commerce destroyed, the currency worthless, and the system reduced to barter.

The PRC’s transformation from one of the poorest countries to a major economy was the fastest on record. From 1949 to the 1978 reforms, China ran a self-sufficient, state-led economy focused on rapid industrialization, with substantial underground market activity. The Great Leap Forward and the Great Chinese Famine hurt the economy. Reforms under Deng Xiaoping sparked the world’s fastest major economic growth, averaging 10% annually for 30 years. Many scholars view China’s model as authoritarian capitalism, state capitalism, or party-state capitalism under Xi Jinping, though they note differences between the Deng and Xi eras. The COVID-19 pandemic also had a lasting impact. Yuen Yuen Ang describes the post-pandemic period as “China’s economic paradox”: rapid technological progress paired with a broad slowdown.

China lifted more people out of extreme poverty than any other country in history. Between 1978 and 2018, it reduced extreme poverty by 800 million people. The share of the population in extreme poverty fell from 88.1% in 1981 to 0.2% in 2019. Its current account surplus grew 53-fold from 1982 to 2021, from $5.67 billion to $317 billion.

During this period, China became an industrial powerhouse, moving from low-wage sectors like clothing and footwear to sophisticated production of computers, pharmaceuticals, and automobiles. Its factories generated $3.7 trillion in real manufacturing value added—more than the U.S., South Korea, Germany, the UK, and France combined. China’s manufacturing benefits from one of the world’s largest domestic markets, immense scale, and highly developed supply chains. It also has two of the top five global science and technology hubs.