FACTS ON POLICY: China's Economic Growth

June 5, 2007

Over the past seventeen years, China’s economy has grown, on average, by more than 10 percent per year.

China, home to the world’s largest population, has seen its economy grow into one of the largest in the world.

Of the two ways to measure the size of a nation’s economy, the most common is to calculate its gross domestic product (GDP), the sum value of all goods and services produced within that country. Measured this way, China’s economy was the fourth largest, behind the United States, Japan, and Germany. In 2006, China’s GDP totaled $2.5 trillion.

The other way to measure a nation’s economy is to calculate GDP using purchasing power parity (PPP), which takes into account the price differences and exchange rates among countries to equalize the purchasing power among different currencies. In 2006, China’s gross domestic product, as measured by PPP, was $10.0 trillion, putting it second behind the United States, whose GDP was $13.0 trillion.

Since 2000,China’s GDP (as measured by PPP) has more than doubled from $4.5 billion.

China has become a leading economic power in many other ways. For example, China now has the largest current account surplus in the world, at $250 billion (as of 2006), followed by Japan and Germany. Since 2000, China’s current account surplus has grown more than eightfold.

Part of its large surplus is attributable to high volumes of trade with the United States: in 2006 trade between China and the United States totaled $343 billion. China is the United States’ second-largest largest trading partner; it is also the second-largest exporter of goods to the United States.

China’s current account surplus has also led to a large surge in foreign reserves, causing China to surpass Japan as the largest holder of foreign reserves in early 2006. At the end of 2006, China’s foreign reserves totaled $1.07 trillion.

Figure 1
Nations with highest GDP (in 2006, trillions of U.S. dollars)

Figure 2
China's GDP, 1990-2006 (current value, billions of U.S. dollars)

Sources:

• Central Intelligence Agency, The World Factbook.

• Organisation for Economic Co-operation and Development, “Purchasing Power Parities Data.”

• International Monetary Fund, World Economic and Financial Surveys: Regional Economic Outlook—Asia and Pacific (April 2007).

• World Bank, China Quarterly Update (May 2007).

Quiz Source Information:

• same as fact.