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GDP growth in China 1952-2015

Latest update: 7 April 2016
Sharp increase in GDP during the reform period
GDP rose from Rmb364 billion in 1978, at the start of the reform period, to Rmb63.6 trillion in 2014
(both figures at current prices).
Major slowdown in GDP growth rate
After peaking at 14.2% in 2007, real GDP growth has subsided to 6.9% in 2015. This is not a cyclical
fluctuation but a long-term slowdown resulting from the restructuring of the economy away from
dependence on a high rate of investment, mainly in infrastructure and manufacturing capacity and
towards greater reliance on private consumption and services.

GDP Rmb
billion at
GDP per
current head Rmb
prices

Real
annual
GDP
growth
rate
(%)

1952

67.9

119

1953

82.4

142

15.6

1954

85.9

144

4.2

1955

91.0

150

6.8

1956

102.8

165

15.0

1957

106.8

168

5.1

1958

130.7

200

21.3

1959

143.9

216

8.8

1960

145.7

218

-0.3

1961

122.0

185

-27.3

1962

114.9

173

-5.6

1963

123.3

181

10.2

1964

145.4

208

18.3

1965

GDP ups and downs,

1952 -2015
1953 Hyperinflation conquered;
civil war and land reform ended:
GDP up 15.6% in real terms.
1958-59 So-called "Great Leap
Forward" devastated agriculture:
result was falling GDP in 1960-62.
(Figures for 1958-59 highly
suspect, as the statistical network
was largely destroyed in the
"Leap", when absurdly high
increases in output were reported
by frightened local officials.)
1963-66 Partial restoration of
market economy in the countryside
promoted faster growth of
agriculture.
1967-68 Production undermined by
the so-called "Great Proletarian
Cultural Revolution", that was
initiated by Mao in mid-1966 and
effectively ended by People's
Liberation Army intervention in
1968.
1969-70 High growth rates
followed the restoration of order
after the "cultural revolution".
1976 Widespread earthquakes,
including the worst ever at
Tangshan, hit industrial centres,
while agricultural output was hit by
drought; policy paralysis resulted
from the anti-Deng campaign,
followed by Mao's death and the
arrest of the Gang of Four. GDP
fell.
1978-1982 Smashing the
communes and restoring family
farming jacked up agricultural
(especiallygrain) output.
1983-85 Double-digit real GDP
growth accompanied the first wave
of foreign investment into China,
and non-state enterprises started
to develop.
1989-91 Growth slowed after the
government braked the

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Chinese steel production and power generation contracted last year for the first time in at least a quarter of a century,
according to official statistics released on Tuesday, as theeconomygrew at its slowest pace since 1990.

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The data come as fears about Chinas economy shake global markets and capital leaves the country at anunprecedented
pace. Investors are eager for clues about whether slides in Chinas equity market andcurrency depreciationat the start of
this year were a sign of acute distress in the real economy, or whether policymakers can engineer a gradual slowdown that
avoids financial crisis and social instability.
Fourth-quarter gross domestic product growth came in at an inflation-adjusted 6.8 per cent, according to the National
Bureau of Statistics, placing the full-year figure at 6.9 per cent in line with Beijings target of around 7 per cent for the
year and with economists expectations. The 2016 growth target is 6.5 per cent.
Meanwhile. steel output last year fell 2.3 per cent to 802.8m tonnes, while power generation declined 0.2 per cent. Coal
production fell for the second consecutive year.
[Steel] demand is down even more, said Sebastian Lewis at Platts Metals in Shanghai. With prices where they are now,
some mills have exited the market or pulled back production. In a report posted on its website this week, the China Iron &
Steel Association predicted domestic steel consumption would fall as much as 5 per cent in 2016 after declining 4.6 per
cent to 705m tonnes last year.
According to CISA, falling demand for steel is now the norm in sectors as diverse as machinery, real estate and
shipbuilding, with a few exceptions such as Chinas resilientcar industry.
Last year was the turning point for these industries, said Thomas Gatley at Gavekal Dragonomics, who predicts a further 5
per cent fall in Chinese steel output this year. Things are not getting better for these sectors . . . Net profit margins are

negative. They are basically wearing down what equity they have.
Podcast
How fast is China really growing?

George Magnus, senior economic adviser to UBS, discusses how reliable Chinas data are and what countrys leaders need to do to reassure investors

Resilient growth in the emerging services sector helped cushion the slowdown in manufacturing and construction. The
services sector grew 8.2 per cent in real terms in the fourth quarter versus 6.1 per cent for the industrial sector.
Despite the respectable headline growth figure, pain is deepening in the sectors that have traditionally driven Chinese
growth and global commodity demand. Without adjusting for inflation, growth in industry and construction was a paltry 0.9
per cent for the full year, a sign that nearly four years of producer-price deflation has ravaged cash flow in the factory sector.
Overall, nominal GDP grew just 5.8 per cent in the fourth quarter and 6.4 per cent for the full year, implying that the overall
economy is in deflation.

China is still adding a G20-sized economy every year

Absolute annual growth remains higher than Turkish GDP

Fixed-asset investment which covers infrastructure and factory construction grew 10 per cent in 2015, the weakest
full-year growth since 2000 and down from 10.2 per cent in the first 11 months of the year. Infrastructure was the biggest
drag, as growth fell back in December after fiscal stimulus had sparked a brief rally in previous months.
The GDP figure looks fine but the disappointing part is very weak fixed-asset investment, said Zhu Haibin, China
economist at JPMorgan in Hong Kong.
It raises questions about how effective fiscal policy has been. A big concern is whether the manufacturing slowdown will
cause big unemployment. But if the service sector is resilient, that will create new jobs. The divergence in the economy will
continue, he added.

Factory output rose 5.9 per cent in December, down from 6.2 per cent in November and within range of October's sevenyear low.
While the rebalancing of the economy away from manufacturing and construction continued, services growth slowed from
8.6 per cent in the third quarter as the contribution from financial services weakened.

Based on this data, policymakers definitely need to do more, said Xu Gao, chief economist at Everbright Securities in
Beijing.
The slide in services growth was expected, given the stock market. Thats going to continue in 2016, so if theres not a
clear recovery in the industrial sector and infrastructure investment, it will be very tough to meet next year's 6.5 per cent
target.
Economists widely agree that Chinas potential growth is slowing as an ageing population shrinks the labour force and
catch-up growth achieved by shifting labourfrom agriculture to the modern, urban economy is exhausted.

The countrys leadership has promised structural reforms to boost long-term growth. President Xi Jinping has said that
policy in 2016 will focus on supply-side reforms, including shuttering zombie businesses in industries such as steel and
shipbuilding that are rife with excess capacity. Authorities have also pledged to streamline the bloated state-owned
enterprise sector, whose return on assets lags behind the private economy.
But policymakers are also relying on demand-side stimulus to cushion the slowdown. Chinas central bank cut interest rates
five times in 2015 and pumped Rmb2.5tn ($380bn) into the banking system through reserve-ratio cuts in an effort to lower
financing costs for corporate investment and home loans, and keep credit flowing

Chinas meteoric rise over the past half century is one of the most striking examples of the impact
of opening an economy up to global markets.
Over that period the country has undergone a shift from a largely agrarian society to an industrial
powerhouse. In the process it has seen sharp increases in productivity and wages that have

allowed China to become the worlds second-largest economy.

While the pace of growth over recent decades has been remarkable, it is also important to look at
what the future might hold now that a large chunk of the gains from urbanization have been
exhausted. A new paper published by the NBER attempts to do just that, looking back over
Chinas growth story between 1953-2012 and using the data to model plausible scenarios for the
country up to 2050.
Here are some of the key charts that help explain Chinas rise:
Lessons from history

The first two decades following the founding of the Peoples Republic of China in
1949 was marked by periods of substantial growth in per capita GDP growth, the growth of output
per person, followed by sharp reversals.

The authors of the NBER paper suggest this represented the success of the First Five-Year Plan,
during which 6000 Soviet advisers helped establish and operate the 156 large-scale capital
intensive Soviet-assisted projects, significantly increasing the pace and quality (productivity) of
industrialization in the country. However, it was followed by the Great Leap Forward (1958-1962),
which undid many of the gains through worsening of incentives by banning material incentives and
restricting markets.
These reforms were then unwound between 1962 and 1966, leading to another period of
productivity and per capita GDP growth, before the events of the Cultural Revolution (where
strikers clashed with the authorities) set the economy back once again.
According to the authors, the Third Plenary Session of the 11th Central Committee of the
Communist Party in December 1978 was the defining moment in shifting the country from its
unsteady early economic trajectory on to a more sustainable path. It laid the groundwork for future
growth by introducing reforms that allowed farmers to sell their produce in local markets and
began the shift from collective farming to the household responsibility system.
A year later the Law on Chinese Foreign Equity Joint Ventures was introduced, allowing foreign
capital to enter China helping to boost regional economies although it took until the mid-1980s for
the government to gradually ease pricing restrictions and allow companies to retain profits and set
up their own wage structures. This not only helped to boost GDP from an annual average of 6%
between 1953-1978 to 9.4% between 1978-2012 but also increased the pace of urbanization as
workers were drawn from the countryside into higher-paying jobs in cities.
This process of market liberalization led to the establishment of China as a major global exporter.
It eventually allowed for the reopening of the Shanghai stock exchange in December 1990 for the
first time in over 40 years and, ultimately, to Chinas accession to the World Trade Organisation
These reforms had a significant impact both on per capita GDP and the pace of the falling share
of the labour force working in agriculture.