China: Macroeconomic Country Outlook
- GlobalData forecasts the real GDP to grow by 4.5% and consumption by 6.5% in 2022.
- China ranked 31st out of 190 countries in the World Bank’s doing business ranking in 2020.
- According to GlobalData, e-commerce value in China is expected to grow at a strong CAGR of 11.6% between 2021 and 2025, to reach CNY21.4 trillion ($3.3 trillion) in 2025.
PESTLE Summary
- Political: Effect of Russia-Ukraine war on China. China being Ukraine’s major exporting destination, the conflict is likely to cast a shadow on Chinese businesses operating in Ukraine. Due to its strategic location, Ukraine is a major hub in China’s Belt and Road initiative. Also, free trade deal with Ukraine will allow China to access European markets. However, with the conflict, the future of all these investments and projects is in danger. China imports soybean, grains and hi-tech equipment from Ukraine and hence, the war may alter trade prospects. On the other hand, China-Russia trade surged despite war, especially in military equipment.
- Economic: Exports surged. In March 2022, according to customs data released by the government, Chinese exports in Jan–Feb increased by 16.3% (YoY) due to spike in global demand and increase of trade with Russia amid Ukraine war.
- Social: Increased life expectancy and decreased infant mortality. China’s average life expectancy increased from 68.3 years in 1990 to 76.3 years in 2021, according to GlobalData estimates. The infant mortality rate decreased from 42.7 deaths per 1,000 births in 1990 to 11.2 deaths per 1,000 births in 2021. Ongoing medical reforms as part of “Healthy China 2030”, initiated under the National Health and Family Planning Commission, aim to develop comprehensive insurance plans for the population and improve medical facilities, including hospitals and health centers.
- Technology: Increasing R&D intensity is expected to provide an additional growth push to R&D segment in China. In the field of R&D, China has prioritized information and communication technology, rare earth materials, aerospace, and nanotechnology. In addition to these primary areas, China has R&D interests in the agriculture, food and bio-products; mining and energy sector; environmental sustenance, health and life sciences; and biotechnology. China spent $2.8 trillion on R&D in 2021, an increase of 14% from 2020, according to the National Bureau of Statistics.
- Legal: Amendments to criminal procedure law. In March 2021, a new amendment was made to the existing criminal law procedure that seeks to lower the age of criminal responsibility for certain crimes. More changes include public safety, food and drug safety, and public health, by adding new crimes and adjusting penalties for existing ones.
- Environmental: Deteriorating environmental parameters are a major cause of concern. The Environmental Performance Index (2020) published by Yale University ranked China 120th out of 180 countries. In terms of air quality and environmental health, the country was ranked 137th and 96th, respectively, according to the EPI 2020. In 2017, the Ministry of Environment Protection in China estimated that the cost of reducing soil pollution by 2030 could reach $146.4 billion. The main challenge for the Chinese government is to replace traditional energy sources, especially coal, with clean energy sources at a massive scale. Moreover, due to rise in global temperatures, China is facing frequent flooding, which has led to massive destruction to physical capital, human loss and displacement of people.
Key fundamentals
Macroeconomic outlook
- In March 2022, according to customs data released by the government, Chinese exports in Jan–Feb increased by 16.3% (YoY) due to spike in global demand and increase of trade with Russia amid Ukraine war.
- According to the Ministry of Commerce, Chinese economy witnessed FDI inflow to increase by 37.9% to reach $38.2 billion in first two months of 2022. In the first two months of 2022, the services sector witnessed a 24% (Y-o-Y) rise in FDI inflow while that of high-tech industries rose by 73.8% (Y-o-Y). China remained the top destination for foreign companies at the start of this year.
- As of March 2022, Chinese oil refineries are purchasing Russian oil at discounted prices. Cheaper oil prices will help Chinese manufacturers to cut down the cost of production. This will also help the Chinese government to take advantage of lower import bill and reduce financial burden. Lower oil prices would also mean lower commodity prices in medium run.
- The Chinese government introduced a $2.3 trillion infrastructural plan and the cabinet approved to quicken the pace of 102 major projects outlined under the 2021–25 development plan as of January 2022. This mega plan will lead to creation of job opportunities and , enhance production, thereby accelerating economic activities.
GlobalData Country Risk Index (GCRI) - Q4 2021
China ranked 31st out of 190 countries in the World Bank’s doing business ranking in 2020. According to the World Bank’s Doing Business 2020, China scored 77.9 out of 100, higher than the East Asia and Pacific (EAP) regional average of 63.3. This comparatively high score helps the country to attract foreign investment. China was ranked 31st out of 190 countries globally in terms of ease of doing business. Starting a business takes nine days with four procedures as compared to the EAP average of 25.6 days with 6.5 procedures. To start a business, the cost requirement as a percentage of income per capita is zero paid in capital, which is considered as the best regulatory performance in the world.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Asia Pacific nations in this publication include China, Thailand, Indonesia, Singapore, Australia, Vietnam, the Philippines, and New Zealand.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: China PESTLE Insights – A Macroeconomic Outlook Report
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