The rising importance of China's economy cannot be ignored

The skyline of downtown Guangzhou, Guangdong Province, China, July 22, 2022. (Photo: CFP)

Recently a global investigation conducted by CGTN and multiple think tanks has shown that over 78 percent of global interviewees are convinced that the Chinese economy is now an important economic engine for the world.

Indeed, after economic reforms that has been conducted for over four decades, the Chinese economy is now the world's second largest in term of the real gross domestic product (GDP) and is playing a very important part in many aspects of the world economy.

China's fast-growing economy

According to National Bureau of Statistics (NBS), China's total GDP* was 368 billion yuan ($54.64 billion) in 1978, when economic reforms started. In the year of 2021, the total GDP reached 114.37 trillion yuan, or 311 times of the level in 1978.

According to World Bank data, in 2021 the total global GDP was $96.1 trillion. In the same year, China's total GDP was $17.7 trillion, or 18.4 percent of that of the world.

A comparison between the GDP of China and the U.S. can show us how significant Chinese economic development has been in the past four decades. According to the World Bank, in 1978, China's total GDP was $149.5 billion, while in the same year the GDP of the U.S. was $2.35 trillion, which means China's total GDP was 6.4 percent of the U.S.

In the year of 2021, after over four decades of economic reforms, China's total GDP reached $17.7 trillion. Meanwhile, the total GDP of the United States reached $23 trillion. China's total GDP is now 77 percent of that of the United States.

Moreover, since this calculation conducted by the World Bank has used the gauge of the international currency, then the real GDP, as calculated by using local purchasing power, can mean that China's economy weighs more in its share in the global economy.

Booming market in different sectors

The growing importance of China's GDP can be felt in many industries. For example, the electric vehicle (EV) industry, of which the country is now leading globally.

According to International Energy Agency data, in 2021, 3.5 million EVs have been sold in China, while only 0.63 million EVs were sold in the U.S., 0.7 million in Germany and 0.3 million in France, respectively.

With a massive market for EVs, China is now capable of leading the global EV market. The Chinese EV industry can now benefit from economies of scale, where large production volumes can make China's electric cars cheaper than ever.

Meanwhile, the large EV network that has been set up by millions of cars is now enabling China to conduct the industrial strategy that cannot be conducted with only a small amount of EVs, such as nationwide provision of battery switch for electric vehicles. This can significantly reduce the time of recharging the EVs.

In the high-speed railroad sector, China is also leading globally. According to the NBS, China's total length of high-speed railroad is now taking up around 70 percent of the total length in the world. The high-speed train can usually travel at a speed between 300 to 400 kilometers per hour.

For trips below 1,000 km, it is usually believed that the high-speed train has an advantage when compared with the aircraft, because the high-speed train takes less time taking off, landing, and conducting safety checks, and so on. Furthermore, the high-speed train is also more "cost friendly" as it relies much less on crude oil. Electricity is the power for high-speed trains and China is now taking a leading position globally for electricity produced through new-energy means.

Alongside the growing economy, China has been able to contain its inflation in a very moderate range. In the global inflation environment nowadays, this is critical for helping the world economy bring down overall prices. China's latest consumer price index (CPI) growth rate in July was 2.7 percent year on year. This is much lower than the inflationary level that is now persisting in many major economies around the world.

China's financial sector is now also becoming more closely connected to the global financial market. Recently, four Chinese companies have issued their global depository receipts in Switzerland. The Chinese mainland and Hong Kong connection program is now enabling global investors to invest in most of China's public companies and many investments have brought tremendous returns.

China's fixed-income market is now also opening to the global investor. With the high yields offered by Chinese bond issuers, global investors can now find multiple carry trading opportunities in this market. That is, by shorting the bonds in other markets that have lower yield and going long on the bonds in China that have higher yields, investors can find a profit yield by "carrying the trade over."

Overall, the Chinese economy is now becoming increasingly important in the world and the Chinese market is opening even wider to the global market. There is no reason for global investors and businessmen to ignore this market.

*GDP calculations are based on current prices