China’s economy has grown at an extraordinary rate of more than 9% every year for about 30 consecutive years which, by 2010, had already made it one of the biggest in the world.
Even though the increase in China’s GDP has slowed in recent years, its economy continues to expand. In 2023, China’s GDP grew by 5.2%, and the IMF projections indicate there will be a GDP growth rate of about 4.6% in 2024. The country’s development rate outperformed that of the United States, the European Union, and Japan which achieved 2.5%, 0.5%, and 1.9%, respectively.
Source: Statista
A more in-depth look at the GDP distribution among Chinese economic sectors reveals a slow transition from a primarily industrial economy to one that is centered on services, with the service sector contributing more GDP than manufacturing.
China still has room to grow, say experts, particularly in view of the fact that more people are moving from rural to urban regions and more money is being invested in manufacturing, services, and green energy.
Even if a growth of only 3% to 4% is considered, China’s economic development continues to outpace that of developed nations. For instance, the IMF has predicted that real GDP growth in the United States will decrease to 1.5% in 2024 from 2.1% in 2023.
Largest sectors of the Chinese economy
In 2023, the service and industrial sectors accounted for 54.6% and 38.3% of China’s GDP, respectively, with the agricultural sector ranking third with 7%. In 2023, China’s GDP totaled about ¥126.06 trillion (over US$17 trillion).
Source: Statista
* Preliminary data. Shares calculated by Statista.
** Revised figure published in December 2023.
1️⃣ Chinese service sector
With services accounting for 54.6% of China’s GDP in 2023, this is the nation’s largest economic sector. It includes a wide range of sub-sectors, such as expert services, healthcare, and entertainment. From 2015 onward, over 50% of China’s GDP has been derived from the service sector.
Retail sales of consumer goods showed a strong 6.8% year-over-year increase over the first three quarters of 2023.
2️⃣ Chinese industrial and manufacturing sector
The industrial and manufacturing sector accounts for more than 38% of the country’s GDP, putting it in in second place among the largest sectors of the Chinese economy. Despite the slow decline in industrial output levels that has been registered over the last couple of years, the industrial sector is still extremely important, traditionally contributing significantly to the domestic economy.
The country’s industrial output significantly solidified in Q1 of 2024 with the value-added industrial output increasing by 6.1% year on year, according to figures issued by the Chinese National Bureau of Statistics.
Today, Chinese companies are moving away from the labor-intensive industry and prioritizing value-driven production. They are also focusing on the domestic market, with the government playing an important role in the industry’s development through tax incentives and other encouraging measures.
The nation’s manufacturing and industrial sectors will continue to be key contributors to the country’s economic growth in the years to come.
3️⃣ Chinese agricultural sector
Agriculture, with its contribution to GDP reaching 7%, is China’s third largest economic sector. China has always been a major producer, user, exporter, and importer of agricultural goods. The agricultural market’s gross output value is expected to reach US$1,682 billion in 2028, registering an annual growth rate of 5.95% between 2024 and 2028.
Amidst geopolitical conflicts, climate change, and demographic shifts, the nation is committed to improving food security and achieving self-sufficiency in agricultural technologies but at the moment China remains a major importer of agricultural products worldwide. The agricultural market is anticipated to import goods worth US$218.1 billion in 2024 and between 2024 and 2028 the agricultural import growth rate is projected to be 17.73%.
4️⃣ Chinese real estate sector
The real estate industry has contributed significantly to China’s economic growth in recent decades. As much as 20% of the nation’s economic output has historically come from this sector. For the most part, this is due to significant developments in both large-scale construction and infrastructure.
However, according to data presented in February 2024, despite the government’s efforts to boost the housing market, property prices in China dropped for the eighth consecutive month. Furthermore, for the second consecutive year, the revenue generated from the sale of commercial real estate has fallen.
Sales revenue from commercial real estate sales (2013-2023)
Source: Statista
The value of real estate transactions (both residential and commercial) gradually increased from below ¥1 trillion (US$138 billion) in 2003 to more than ¥15 trillion (US$2 trillion) in 2021 but, by 2023, it had fallen to around ¥12 trillion (US$1.7 trillion).
Even by introducing new measures such as the relaxing of regulations and decreased mortgage rates to promote purchasing, prices continue to decline. However, these initiatives have yet to significantly increase market confidence and recovery, experts say. Both investors and policymakers in China continue to place a high priority on the real estate sector.
5️⃣ Chinese clean energy sector
Investments in clean energy have increased by 40% year-on-year to reach ¥6.3 trillion (US$890 billion). Today, this sector plays a significant role in China’s economic development and contributed ¥11.4 trillion (US$1.6 trillion) to the country’s GDP – more than any other sector.
In 2023, the Chinese renewable energy sector saw a sharp increase in investment, particularly in the so-called “new three” – EVs, lithium-ion batteries, and solar cells.
China is currently the largest producer and market for battery electric vehicles (BEV) worldwide, largely due to government subsidies. In 2023, China’s total BEV exports increased by 70% hitting US$34.1 billion. The biggest recipient, where roughly 40% of Chinese BEVs are exported, is the European Union.
Source: Atlantic Council
*The Commonwealth of Independent States (CIS) includes: Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.
*OECD Asia-Pacific includes: Australia, Japan, South Korea, and New Zealand.
*Other Europe includes: Albania, European Free Trade Association members, North Macedonia, Ukraine, and the United Kingdom.
What about China’s technology sector?
In the modern economy, technology is deeply ingrained in almost every sector. China has made significant investments in technology such as artificial intelligence, the Internet of Things, and robotics, all of which have had a positive impact on various areas of the economy. For instance, technological improvements have had a positive effect on:
- the service sector via fintech and e-commerce
- the industrial sector via automation
- the agricultural sector via agricultural technology
The Chinese government is taking steps to stimulate the growth of the digital economy with the 14th Five-Year Plan for Digital Economy Development emphasizing a focus on blockchain, 6G internet, sensors, integrated circuits, and semiconductor technology.
