Population 1412.6 million
GDP 12,562 US$
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major macro economic indicators

  2019 2020 2021 (e) 2022 (p)
GDP growth (%) 6.0 2.3 8.1 5.4
Inflation (yearly average, %) 2.9 2.5 0.9 2.0
Budget balance (% GDP) -6.3 -11.2 -7.5 -6.8
Current account balance (% GDP) 0.7 1.9 1.6 1.5
Public debt (% GDP) 57.1 66.3 68.9 72.1

(e): Estimate (f): Forecast


  • Sovereign risk contained as public debt remains mainly domestic and denominated in local currency
  • Reduced risk of (private) external over-indebtedness thanks to the high level of foreign exchange reserves
  • Gradual strengthening of global value-chains as part of China 2025
  • Dynamic services sector, led by e-commerce trends
  • Good level of infrastructure
  • Increasing presence in emerging and developing countries through the BRI


  • High corporate indebtedness set to impact growth potential
  • Reliance on imports of key technology components
  • Current account surplus expected to narrow and eventually turn into a deficit
  • Misallocation of capital to the SOE sector could erode long-term potential growth
  • Ambiguous government strategy on arbitrating between reform and growth
  • Ageing population, resulting in high public expenditure and higher labour costs
  • Environmental issues
  • Increasing complex and uncertain external environment
  • Risks that the real estate bubble bursts
  • Unclear political succession plans

Risk assessment

Slower growth 

China’s GDP growth is expected to moderate from its 2021 recovery, and return to its pre-COVID trend in 2022, as the focus is maintained on economic transition, but also emphasising macroeconomic stability. However, efforts to maintain balance between multiple objectives will be tenuous. In recent years, the government has de-emphasised the importance of GDP targeting, opting not to set a numerical growth target for the 14th Five-Year Plan (2021-2025), and announced only a conservative GDP goal of ‘at least 6%’ for 2021. The Chinese economy grew 8.1% in 2021, partially lifted by the low base effect in 2020. Total consumption, a combination of household (39% of GDP) and government spending (17% of GDP), contributed 6.4 percentage points (%pts), followed by net exports (2.4% of GDP) at 1.9 %pt, and investments (42% of GDP) at 1.5 %ps. However, sequential growth rates (seasonally adjusted) were muted in the first 9 months of 2021 (0.2 to 1.2% QoQ), and notably weaker than the long-run average of 1.8% QoQ.


Indeed, domestic demand remains subdued. Retail sales rose by 3.9% YoY in November 2021, well short of their approximately 8% growth pre-pandemic, suggesting an impact from prolonged and ad hoc mobility restrictions. Yet, the surveyed urban jobless rate fell to a near three-year low of 4.9% in September 2021, down from the 2020 average of 5.6%. Meanwhile, fixed asset investments (FAI) rose by 5.2% in the January-November 2021 period linked to softening growth in real estate development (about a quarter of FAI) at 6%, and a near-flat increase in infrastructure investments (0.5%). However, fixed investment growth, particularly in infrastructure spending at local and regional levels, may accelerate in 2022 as the authorities indicated greater fiscal support, stressing the importance in maintaining a stable and healthy economic environment ahead of the 20th National Party Congress (NPC). On foreign trade, the possible boost to demand for Chinese exports (IT, phones, electronics, home furnishing, automotive, clothing) from potential renewed restrictions of production capacities and mobility abroad may be offset by chip and shipping shortages, as well as rising costs of raw materials and energy.


With the revived theme of ‘common prosperity’, raising peoples’ income and improving access to housing and other social services will remain a top priority of the Chinese Communist Party (CCP). However, in the near term, the prolonged zero-COVID strategy will prevent a full recovery of household consumption, delaying the transition to a consumption-led economy. The authorities will also face formidable challenges to achieve their longer-term dual-carbon goals while avoiding shorter-term energy transition pains, such as power shortages experienced in the second half of 2021. The pandemic’s trajectory remains the main immediate risk to China’s economic outlook, but the slowdown in the property sector (29% of GDP) is also a major risk, with important implications for real estate development, construction activity, and local governments’ finances that have a significant reliance on land sales. While tighter measures will continue to be implemented, the government will seek to avoid a collapse in the housing market by tapping into various policy levers (e.g. normalising property-related financing) to ensure completion of projects and payments to contractors and suppliers, especially by preventing default from major developers. Further monetary easing expected in 2022 should also add some support.


Deleveraging on backburner

We expect the current account surplus in 2022 to be broadly similar to 2021’s level, supported by a strong goods trade surplus, while the services balance deficit should see little change as prolonged restrictions on outbound travel will continue to constrain tourism services outflows. The renminbi has appreciated through 2021, with the authorities concerned about the currency strength, and imposing measures such as raising banks’ FX reserves twice in the year. China continues to receive a large amount of Foreign Direct Investment (FDI), with FDI growth in January-November 2021 at 15.9%.


Overall domestic non-financial sector debt will remain high (265% of GDP in Q3 2021), with 60% being owed by non-financial corporations. These corporations, many of which are state-owned (SOE), are struggling with high levels of debt and overcapacity. While SOEs are mostly owned by provinces, defaults on their bonds have been on the rise, as a result of Beijing’s increasing willingness to impose market discipline and to break away from the idea of an implicit state guarantee for SOE debt. However, deleveraging efforts are expected to slow or even come to a temporary halt in 2022 as the government prioritises stability ahead of the autumn NPC.


Leadership succession in focus

The Chinese Communist Party (CCP) will hold its 20th National Congress in late 2022. This twice-a-decade event will provide clues as to the next generation of leadership, especially potential successors to Xi Jinping, who is widely expected to remain as the top leader for an unprecedented third term. On the external front, strategic competition and tensions between the U.S. and China is a long-term trend. The Phase One trade deal signed in January 2020 had eased tensions, but China has fallen short on import targets, which could become a threat to the agreement.


Last updated: February 2022


Cash payment is usually used for face-to-face domestic retail transactions. Due to tight capital controls imposed by the authority, an individual can only purchase up to USD 50,000 each year. Furthermore, when a Chinese company makes an international payment in a foreign currency, the company must submit a foreign currency payment application with the local bank, along with supporting documents like sales contracts and invoices. The whole process can be quite lengthy and it is possible that the bank will reject the transaction.

Commercial Acceptance Drafts (CAD) and Bank Acceptance Drafts (BAD) are both common methods of payment for Chinese companies. These are two negotiable instruments: whereas CAD is issued by companies to entrust the payer to unconditionally pay the specified amount to the beneficiary on the date, BAD is issued by the acceptance applicant, entrusting the acceptance bank to make unconditional payment of a certain amount of money to the payee or bearer on the designated date. In practice, BAD is regarded as safer and therefore more accepted than CAD.

Letter of credit and cheques are also used, but are less popular in China. The use of letters of credit is typically confined to big companies; and cheques are used infrequently by both individuals and companies.

SWIFT bank transfers are also among the most popular means of payment as they are rapid, secure, and supported by a developed banking network, both internationally and domestically.

Debt Collection

Amicable phase

The creditor makes phone calls and sends letters of collection to chase the debtor for payment. If debtor is responsive and acknowledges the debt, the two parties will negotiate payment plans to try to have payment settled. In the existence of a dispute, both parties need to come to an agreement or offer discount on debt amount.


Legal proceedings

The Chinese court system is complex. It is divided into multiple tribunals at different levels. The basic People’s Courts are at the lowest level with the County People’s Courts or Municipal People’s Courts. The basic People’s Courts have jurisdictions over most cases of first instance. Intermediate People’s Courts handle certain cases in first instance, such as major foreign-related cases, as well as appeal proceedings brought against decisions rendered by the basic People’s Courts. At the Higher level, the High People’s Courts decide on major cases in first instance. The Supreme People’s Court is at the highest level, which handles interpretation issues, and has jurisdiction over cases that have a major impact nationwide.


Fast-Track Procedure

If the debt is purely monetary, there are no other debt disputes between the creditor and the debtor, and the repayment order can be served on the debtor, the creditor can apply for a repayment order against debtor with the court. The debtor has 15 days to repay the debt after the order is issued; otherwise, he must submit a defence before the payment deadline. If debtor fails to do either, the creditor can apply for enforcement. However, if debtor’s written defence or objection is approved by the court and the ruling for terminating the debt payment order is issued, the debt payment order will be invalidated and the creditor can choose to pursue legal action. In practice, creditors do not usually use the fast-track procedure and will immediately initiate legal proceedings when the amicable phase fails.


Ordinary Procedure

Legal proceedings commence with the creditor lodging the case and submitting statement of claims with the court with corresponding jurisdiction. Once the case is accepted, court summons will be delivered to parties involved. Usually within one month, the first hearing will be arranged and the court will make a final attempt to reach a payment agreement between creditor and debtor via

mediation. If no agreement can be reached, the litigation continues with several rounds of hearings, before a judgement is rendered by the court.

In theory, a first instance ruling could be rendered within six months after the case’s acceptance, but in practice, proceedings can last longer as the complexity of the case increases (for example, when there is more than one creditor, or when a foreign party is involved). In some cases, the whole process can last to one to two years. Furthermore, appeal proceedings must be terminated within three months after appeal acceptance.

Enforcement of a Legal Decision

Domestic judgments, once obtained, can be executed by, for example, seizing the debtor’s bank accounts, property, or by a transfer of rights. The creditor can apply for enforcement with the People’s Court or with an enforcement officer.

For foreign judgments, the recognition and enforcement is based on the provisions of an international treaty concluded or acceded to by both China and the foreign country or under the principle of reciprocity. In practice, enforcing foreign arbitral awards is easier than enforcing foreign court decisions in China, because over 150 countries including China have signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, June 10, 1958).

Another method of enforcement is the “Arrange­ment on Reciprocal Recognition and Enforcement of judgments in Civil and Commercial Matters” (REJA) between China and Hong Kong. There are similar arrangements between mainland China and Macao, as well as between mainland China and Taiwan. It provides a legal basis for Chinese courts to enforcement judgments from Hong Kong, Macao, and Taiwan. It allows creditors to use courts from Hong Kong, Macao, and Taiwan for cases in mainland China.

Insolvency Proceedings

Parties may agree debt restructuring arrangements without going to court. However, such arrangements must not jeopardize the interests of any other creditors – otherwise, they may subsequently be declared invalid in any court bankruptcy proceedings.

The 2007 Chinese enterprise bankruptcy law sets out three types of formal bankruptcy proceedings: bankruptcy, reorganization and reconciliation.


Restructuring proceedings

This can prevent a company with plentiful assets while experiencing cash flow difficulties from entering bankruptcy. Either debtor or creditor can apply with the court for Restructuring, which allows debtor to manage its properties under an administrator’s supervision. A restructuring plan should be approved by a majority of creditors in each voting class (secured, creditors, employees…) at creditor’s meetings, then sent to the court for approval within ten days from the date of adoption.

After the implementation of the restructuring plan, the administrator will supervise and submit report on debtor’s performance with the court. The administrator or debtor must file an application to the court for approval within ten days from the date of adoption.



This procedure allows the company to settle its liabilities with its creditor prior to the court declaration of debtor’s bankruptcy. The debtor directly submits a payment proposal to the court and upon receiving court’s approval on compromise payment proposal, the debtor will recover its properties and business from the administrators. The administrator will supervise debtor’s performance and report to the court. If the debtor fails to implement the compromise proposal, the court will terminate this procedure and declare debtor bankrupt as requested by the creditors.



The procedure has the purpose to liquidate an insolvent company and distribute its assets to its creditors. The bankruptcy request should be applied with the court and the request can be sent both in the name of debtor and a creditor. Once accepting the bankruptcy petition, the court will appoint an administrator from the liquidation committee and debtor will be notified within five days and is required to submit financial statement to court within 15 days. The administrator will verify the claims and distribute the assets to creditors. After the final distribution is completed, the court will receive administrator’s report and decide whether to conclude the proceedings within 15 days.


Special provisions regarding enterprise bankruptcy proceedings during the 2020 COVID-19 pandemic:
  • In the event of creditors applying for a company’s bankruptcy proceedings due to debtor’s debt payment default as a result of the pandemic or pandemic prevention measures, the people’s court should endeavour to prevent debtor’s bankruptcy by actively facilitating debt negotiation between debtor and creditor with measures such as payment instalments, extension of credit terms, revising the contract prices.
  • The court should distinguish the companies under financial distress mainly due to COVID-19 from the ones already suffering from financial difficulties prior to the pandemic. For the former, the bankruptcy proceeding shall be prevented, while for the latter, the court shall let them go bankrupt.
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