| Updated: September 12, 2025Profile of China’s yuan – overview of the economy
This lesson will cover the following
- Economic overview
- Monetary policy authority
- Monetary policy tools
Economic overview
China is the world’s second-largest economy, with a nominal GDP of $9.18 trillion in 2013, according to the International Monetary Fund (IMF). In terms of purchasing power parity, Chinese GDP is also the second-highest ($13.4 trillion in 2013), behind the United States. It is the fastest-growing major economy globally, with average growth of about 10% over the past three decades. China ranked 83rd in terms of GDP per capita in nominal terms ($6,747 in 2013, according to the IMF).
The country is the world’s largest manufacturer, having surpassed the United States. In 2009 about 8% of global manufacturing output was produced by China, while, in terms of industrial production, it ranked third that year. In 2010 the nation accounted for 19.8% of global manufacturing and became the world’s leading manufacturer after 110 years of US dominance in the sector.
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According to the CIA World Factbook, in 2012 the Chinese industrial sector accounted for 45.3% of the nation’s total GDP. In 2011 China was the largest steel-producing nation in the world (45% of global output, or 683 million tonnes). In 2010 the country became the world’s largest automotive manufacturer and consumer, with 18 million new cars sold. Considerable investment was made in the production of solar panels and wind turbines; however, by 2012 the nation’s production capacity far exceeded both domestic and international demand for these products. In 2011 China also became the largest market for personal computers.
The services sector accounted for 44.6% of China’s total GDP in 2012, while agriculture contributed 10.1%.
Monthly foreign direct investment (FDI) reached an all-time peak of $11.76 billion in December 2013. In January this year, FDI totalled $10.76 billion, with investment in the nation’s distribution services sector rising at an annualised rate of 7.4%, while FDI in sectors such as telecommunications equipment and IT increased by 9.2%. Within the period 1993-2010, companies in China were involved, either as an acquirer or a target, in 25,284 mergers and acquisitions with a total value of approximately $969 billion.
China is the world’s largest exporter and importer of goods. At the end of 2013 the nation’s global trade amounted to $4.16 trillion. Chinese exports totalled $2.21 trillion in 2013, while imports were $1.95 trillion. Most of the nation’s imports comprise industrial supplies and capital goods, predominantly machinery and high-technology equipment. Approximately 80% of the country’s exports consist of manufactured goods – textiles, electronic equipment, agricultural products, chemicals, etc. Export growth has been a major driving force behind Chinese economic growth.
According to the CIA World Factbook, China’s largest export partners in 2013 were Hong Kong (17.4% of total exports), the United States (16.7%), Japan (6.8%), and South Korea (4.1%).
During the same year, China’s largest import partners were South Korea (9.4%), Japan (8.3%), Taiwan (8.0%), the United States (7.8%), Australia (5.0%), and Germany (4.8%).
Monetary policy authority – the People’s Bank of China (PBOC)
The People’s Bank of China is the central bank of the People’s Republic of China, responsible for implementing monetary policy and regulating financial institutions operating within mainland China. The central bank holds more financial assets than any other public finance institution; its foreign-currency reserves rose to a record high of $3.201 trillion in September 2011.
The Monetary Policy Committee comprises the Governor, two Deputy Governors, a Deputy Secretary-General of the State Council, a Vice-Minister of the State Development and Reform Commission, a Vice-Finance Minister, the Administrator of the State Administration of Foreign Exchange, the Chair of the China Banking Regulatory Commission, the Chair of the China Securities Regulatory Commission, the Chair of the China Insurance Regulatory Commission, the Commissioner of the National Bureau of Statistics, the President of the China Association of Banks, and one academic expert. The Governor is appointed (or removed) by the President of the People’s Republic of China. The candidate for Governor is nominated by the Premier of the State Council and approved by the National People’s Congress. The Deputy Governors are appointed (or removed) by the Premier of the State Council. The Committee carries out its functions through regular quarterly meetings. The opinions expressed at these meetings are recorded in the form of ‘meeting minutes’.
The principal objective of the bank’s monetary policy is to maintain the stability of the national currency and to support economic growth. The main tools the PBOC uses to implement this policy include the reserve requirement ratio, the base interest rate, rediscounting, central-bank lending and open-market operations.