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Company Formation in China

So you've decided to start a business in China, and researched the Chinese market. Now it's time to decide how you will establish a business in China. What is the best, most viable option for your company, your products, and yourself. Which is the path of least resistance?

The company formation process in China has 14 stages. These are as follows:
  • Obtain a pre-approval notice of the company name, which takes a day.
  • Open a preliminary bank account in which to deposit funds and obtain proof of deposit. This takes a day.
  • Obtain a report verifying company capital from an auditor. This takes 2 days and costs approximately 350 RMB.
  • Obtain registration certification, which takes 5 days and costs approximately 0.08% of capital.
  • Obtain approval from the police department to make a company seal. This takes 1 day.
  • Create the company seal. This takes 1 day and costs approximately 300 RMB.
  • Within 30 days of receiving the business licence, apply for the organisation code certificate which is issued by the Quality and Technology Supervision Bureau. This takes 5 days and costs approximately 150 RMB.
  • Registration with the local statistics bureau. This takes 1 day and costs approximately 20 RMB.
  • Register with tax bureau for state and local tax. This takes 10 days and costs approximately 100 RMB.
  • Open a formal company bank account and transfer the capital to the account. This takes a day.
  • Apply to the relevant authorities to print or purchase financial invoices and receipts. This takes 10 days.
  • Submit an application form to purchase uniform invoices. This takes one day and costs approximately 2 RMB per book of invoices.
  • Register with the local career service centre, which takes 1 day.
  • Registration with the Social Welfare Insurance Centre. This takes 1 day.

Representative Office

A representative office is commonly the inaugural step taken by foreign businesses when establishing their presence in China. But beware, similar to other countries' policies, they cannot sign contracts in their own name. Chinese regulation permits representative offices to develop business relations and deal with technical support, but they are not allowed to directly operate in .

The benefit to this, however, is that these delegate offices can liaise with Chinese government officials and commercial agencies, which are fundamental to successful business. Representative offices can also arrange business visits from company headquarters, and assume PR and admin work.

Wholly Foreign-Owned Enterprise

A Wholly Foreign-Owned Enterprise (WFOE) is an entity that is 100% owned by foreign investors. They are the most favourable choice for overseas companies wanting to set up a permanently in . The overseas investor maintains complete control over the operations, aims and profits of the company, enabling the parent company to focus on other issues, without needing to consider the option of a local partner.

The operational costs are less than those of a joint venture, and a WFOE will also allow bigger scope for the protection of intellectual property.

However, a drawback to this method, specifically for upstart investors, is that local knowledge and contacts may have to be accumulated without regional help. There will also be capitalisation costs which could prove a hindrance.

Joint Ventures

Joint venture, as in other countries, are organisations jointly owned by a national and a foreign investor. For many years, this was the only option available for a foreign investor. In some areas of business, a joint venture is still the only legal route for permanently establishing yourself in . Uniting with a local partner can be advantageous if you want to sell directly to a Chinese market.

For instance, unlike a WFOE, you will have access to your partner's contacts and local knowledge. But the biggest obstacle you may face is finding a partner you can work with, and, likewise, wants to work with you.>

Many joint ventures fail as a consequence of simple miscommunication or misunderstanding, or even clashing business approaches or practice. It is recommended that you chose a partner who complements your style and ethic.

Be vocal and prepare your exit strategy from the outset. It is uncommon that these partnerships are last forever. It's much easier to have a prenuptial agreement than an acrimonious divorce.

China Taxation for US/UK Investors

For investors and business owners from the USA and the UK, China remains an attractive market and supplier.  As such, setting up a legal structure to invest in China continues to be popular. Tax in China is not simple to understand. Fortunately, Moores Rowland Asia Pacific has offices in Beijing, Zhengzhou, Shenzhen, Hong Kong and Macao. Let’s be honest, there are many corporate service providers who can help you set up an entity. There are those that can do it extremely cheaply as well. But you’re reading this for a reason. It’s because you’re from the USA or UK and you know that you need more than just an entity set up. US and UK tax rules are extremely complex – especially around Controlled Foreign Corporations. So you are reading this because you need something structured in a tax efficient way by an internationally qualified team of accountants and tax lawyers with expertise in corporate structuring, cross border taxation and transfer pricing. In the UK, HMRC has recently been speaking to the press; warning about increased scrutiny of taxpayers with international assets. In the USA, after years of cuts, the IRS recently got $11.4 billion.  The money is to be used to improve customer service and fund a “business systems modernization program” meant to bring IRS systems into the 21st century.  Also included in that number is an extra $320 million “to be used solely for carrying out” the new tax law passed in December 2017. Now let’s talk about tax in China. Under the current tax system in China, there are 26 types of taxes, which, according to their nature and function, can be divided into the following 8 categories:
  1. Turnover taxes. This includes three kinds of taxes, namely, Value-Added Tax, Consumption Tax and Business Tax. The levy of these taxes are normally based on the volume of turnover or sales of the taxpayers in the manufacturing, circulation or service sectors.
  2. Income taxes. This includes Enterprise Income Tax (effective prior to 2008, applicable to such domestic enterprises as state-owned enterprises, collectively owned enterprises, private enterprises, joint operation enterprises and joint equity enterprises) and Individual Income Tax. These taxes are levied on the basis of the profits gained by producers or dealers, or the income earned by individuals. Please note that the new Enterprise Income Tax Law of the People's Republic of China has replaced the above two enterprise taxes as of 1 January 2008.
  3. Resource taxes. This consists of Resource Tax and Urban and Township Land Use Tax. These taxes are applicable to the exploiters engaged in natural resource exploitation or to the users of urban and township land. These taxes reflect the chargeable use of state-owned natural resources, and aim to adjust the different profits derived by taxpayers who have access to different availability of natural resources.
  4. Taxes for special purposes. These taxes are City Maintenance and Construction Tax, Farmland Occupation Tax, Fixed Asset Investment Orientation Regulation Tax, Land Appreciation Tax, and Vehicle Acquisition Tax. These taxes are levied on specific items for special regulative purposes.
  5. Property taxes. This encompasses House Property Tax, Urban Real Estate Tax, and Inheritance Tax (not yet levied).
  6. Behavioural taxes. This includes Vehicle and Vessel Usage Tax, Vehicle and Vessel Usage License Plate Tax, Stamp Tax, Deed Tax, Securities Exchange Tax (not yet levied), Slaughter Tax and Banquet Tax. These taxes are levied on specified behaviour.
  7. Agricultural taxes. Taxes belonging to this category are Agriculture Tax (including Agricultural Specialty Tax) and Animal Husbandry Tax which are levied on the enterprises, units and/or individuals receiving income from agriculture and animal husbandry activities.
  8. Customs duties. Customs duties are imposed on the goods and articles imported into and exported out of the territory of the People's Republic of China, including Excise Tax.
Corporate income tax ("CIT") - standard tax rate is 25%, but the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encouraged by the China government (e.g. New/high Tech Enterprises and certain integrated circuits production enterprises).  Tax holidays are also offered to enterprises engaged in encouraged industries.  Other CIT incentives are also available for tax resident enterprises in China. Withholding income tax on payments to non-residents - a concessionary rate of 10% is currently applicable to interest, rental, royalty and other passive income. Individual income tax ("IIT") - progressive rates range from 3% to 45%. The UK expects their CIT to fall to 17% in 2020. The US just saw their CIT fall to 21%. Does that mean that we would see a movement of Chinese firms, or at least U.S. companies operating in China, back to the West? Some consider it unlikely for 3 reasons.  
  1. The main reason for this is that their actual tax burden in China remains lower than the post tax reform US. In China, for a small-sized or nonresident investor, the applied corporate tax is only 20%. Furthermore, if the company’s main business activities fits into the government’s priorities, such as high-tech, the applied corporate taxes may be further reduced to 15% with two years of exemption. More generally, China has a very flexible tax rate that can be easily adapted to fulfill its industrial policy or fight international tax competition. A good example is China’s recent announcement of a temporary tax exemption for foreign companies’ reinvested profits.
  2. In China, wages account for more than 35% of companies’ expenses, and given that wages in China are still much lower than in the U.S., there is even less incentive to move production from China to the U.S.
  3. Most Chinese local governments still offer subsidies to foreign corporates, especially the larger ones, which further eases their net tax burden. This has long been the way for local governments to compete among themselves to attract companies and create jobs in their regions. If companies were to consider leaving for the U.S., Chinese local government can easily increase their subsidies to buffer the negative effect.
At the same time, it is worth sitting with your professional advisors to determine the best structure for your company and your investments given the shifting sands of the tax landscape both in the East and in the West. Our international tax team at Moores Rowland Asia Pacific can advise on cross border issues involving the US, UK or Asia. Feel free to reach out to us at anytime.
In an effort to attract more foreign talents, the State Administration of Foreign Experts Affairs (SAFEA) has quickened reform to make it easier for foreigners to apply for China’s work visa.

Effective on April 1, 2017, the SAFEA rolled out a unified work permit system nationwide that began to process applications both ‘foreign experts’ and ordinary foreign nationals, referred to as R visas and Z visas respectively.

The new system uses a points-based, three-tiered classification system to evaluate which candidates qualify for the work permit.

Compared with the old system, the new one requires fewer supporting application materials, provides a more transparent evaluation process, and shortens turnaround time.

Foreign applicants will benefit from this restructure of the foreign work permit system due to its simpler, clearer, and less time-consuming application process.

Two-in-one reform versus old system

A standard procedure for obtaining a foreigner’s work visa normally involves three critical steps: an application for an employment license, a work visa application at a Chinese embassy, and obtainment of an employment permit.

Under the old system, there were two government entities, the Human Resources and Social Security Bureau (HRSS) and the SAFEA, governing the foreign work visa application process.

The HRSS issued the Employment License and Alien Employment Permit to Z-visa applicants, while the SAFEA issued the Foreign Expert License and Foreign Expert Certificate to R-visa applicants.

However, starting from April 1, the SAFEA became solely responsible for processing all foreign work visa applications. In other words, both Z-visa and R-visa applicants need to submit their applications to only the SAFEA without confusion over where to apply.

In addition, the Employment License and Foreign Expert License have been integrated into a single Notification Letter of Foreigner’s Work Permit, and the Alien Employment Permit and the Foreign Expert Certificate unified into the Foreigner’s Work Permit ID card. Each Foreigner’s Work Permit card will have a unique ID number that does not change regardless of permit renewal or change of employer.

Online application

Under the new system, the employer and foreign applicant can complete the application and submit necessary supporting documents electronically.

An online management service system for foreign workers in China (Management Service System) established by the SAFEA will manage the online registration process. Application materials required for submission are reduced by almost half, with submissions like personal CVs and application letters no longer necessary. The following documents are required:

  • Application form for Foreigner’s Work Permit;
  • Verification of past employment;
  • Verification of education or a verification of professional qualification;
  • Criminal record certificate;
  • Physical examination record for foreigner or overseas Chinese;
  • Copy of the job contract or appointment letter;
  • Passport;
  • ID photo; and
  • Information of accompanying members.
Documents required by applicant’s employer:
  • Registration form;
  • Business license and organization code certificate;
  • ID information of the employer/agent who is responsible for the registration;
  • Industry license documents.

Tiered classification

The SAFEA has adopted a point based three-tiered classification system as a primary method to evaluate which candidates qualify for the new work permit. The classification system divides candidates into three categories: A (above 85 points) for high level talent, B (85 – 60) for professional personnel, and C (less than 60) for non-technical or service workers hired on a temporary or seasonal basis.

The SAFEA assigns scores to each candidate based on his or her education background, salary level, age, time spent working in China, Chinese language proficiency, employment location, etc.

In addition to the points-based classification system, the SAFEA defines a set of special conditions when a candidate qualifies for ‘A’, ‘B’, or ‘C’ level. The SAFEA explicitly listed all special conditions for each status’ level in the Classification Standard for Foreign Workers in China (Pilot). If a candidate meets any of those special conditions, the SAFEA will flag a corresponding level to this person without calculating the total score. For example, A level can automatically be granted to international award recipients, Fortune Global 500 company senior managers or technicians, intellectual property holders of high profile companies, and post-doctoral degree holders under 40 years old. All A level candidates are eligible for service through a ‘green channel’, which offers a pre-entry visa, paperless verification, expedited approval, and other facilitation treatment.

Validity of an Employment Permit

While the maximum validity of a Foreigner’s Employment Permit is five years, in practice five-year permits are rarely granted. First-time applicants are more likely to receive a one-year permit and then renewals for a multi-year work permit.

Although the Beijing Labor Bureau has started to grant more multi-year Employment Permits to first-time applicants, other first-tier cities, including Shanghai, Guangzhou, and Shenzhen, grant them far less frequently.

Consider regional variations

As the Management Service System and relative regulating measures are still under testing, regulatory changes could occur in the near future to optimize the new system.

Additionally, new incentives may be implemented first in China’s Free Trade Zones (FTZs) and later integrated into the national model.

In January this year, a new policy which lowers the application thresholds for foreign master’s graduates from Chinese and “well known” overseas universities is an extension of a scheme piloted in the Shanghai FTZ.

It is therefore recommended that work visa applicants stay up-to-date with both the national scheme and regional policies, as local bureaus have administrative leverage when implementing the national model.

Thus, sufficient preparation and company support is essential to the application process. Companies looking to hire foreign staff should not hesitate to reach out for professional HR guidance to ensure their employees successfully receive China work visas.

China's Legal System

China's legal system covers laws that fall under seven categories and three different levels. The seven categories are the Constitution and Constitution-related, civil and commercial, administrative, economic, social, and criminal laws and the law on lawsuit and non-lawsuit procedures. The three different levels are state laws, administrative regulations and local statutes.

By March 2008, the NPC and its Standing Committee had promulgated more than 229 laws currently in force, the State Council had issued over 600 administrative regulations currently in force, local people's congresses and their standing committees had enacted over 7,000 local statutes currently in force, and the people's congresses of national autonomous areas had enacted over 600 regulations concerning autonomy and local needs. A socialist legal system having Chinese characteristics and centered on the Constitution has taken initial shape. China now has laws governing the basic, important aspects of its political, economic, cultural and social life.

Concerning the Constitution and Constitution-related laws, in addition to having adopted the current Constitution and its four amendments, China has also enacted the Electoral Law, Law on Deputies to the NPC and to Local People's Congresses, and a number of organic laws for state organs, Legislative Law, the Supervision Law and other laws related to state organs. China has also enacted laws concerning systems for regional ethnic autonomy, special administrative regions and primary-level mass self-governance: principally the Law on the Autonomy of Ethnic Minority Regions, the Basic Law of the Hong Kong Special Administrative Region, the Basic Law of the Macao Special Administrative Region, the Organic Law of Villagers' Committees and the Organic Law of Urban Neighborhood Committees.

With regard to civil and commercial law, China has enacted laws concerning property and personal relations between individual entities with equal standing in society. These principally include the General Principles of Civil Law, the Contract Law, the Guarantee Law, the Auction Law, the Trademark Law, the Patent Law, the Copyright Law, the Marriage Law, the Inheritance Law, and the Adoption Law. China also enacted laws concerning commercial relations between individual entities with equal standing in society: principally the Company Law, the Partnership Law, the Law on Single Investor Enterprises, the Securities Law, the Insurance Law, the Negotiable Instruments Law, the Commercial Banking Law, the Maritime law and the Trust Law.

Concerning administrative law, China has enacted laws concerning state administration: principally the Regulations on Administrative Penalties Concerning Law Enforcement, the Administrative Punishment Law, the Administrative Licensing Law, the National Defense Law, the Government Procurement Law, the Education Law, the Law on Scientific and Technological Progress, the Law on Preventing and Controlling Communicable Diseases and the Environmental Protection Law. China has also enacted laws related to oversight of administrative activities: mainly the Law on Administrative Supervision and the Law on Administrative Reconsideration.

With regard to economic law, China has enacted laws concerning macro-economic controls: principally the Budget Law, the Audit Law, the Law on the People's Bank of China, the Price Law, the Personal Income Tax Law, and the Law on Tax Collection and Management. China has enacted laws for maintaining market order: principally the Law on Product Quality and the Advertising Law. China has enacted laws for opening wider to the outside world: principally the Law on Joint Ventures with Chinese and Foreign Investment, the Law on Sino-Foreign Contract Joint Ventures, the Law on Wholly Foreign-Invested Enterprises, and the Foreign Trade Law. China has enacted laws to promote industrial development: principally the Agriculture Law, the Highway Law, the Civil Aviation Law, and the Electric Power Law. China has enacted laws for protecting and rationally developing natural resources: principally the Forestry Law, the Grassland Law, the Water Law, the Mineral Resources Law, and the Law on Land Management. China has also enacted laws for standardizing economic activities: principally the Metrology Law, the Statistics Law and the Surveying Law.

Concerning social law, Chinahas enacted laws concerning labor relations and safeguarding workers: principally the Labor Law, the Trade Union Law and the Law on Mining Safety. China has also enacted laws protecting special groups in society: principally the Law on Security for the Disabled, the Law Protecting Minors, the Law Safeguarding the Rights and Interests of Women and the Law Safeguarding the Rights and Interests of the Elderly.

With regard to criminal law, China has enacted the Criminal Law and adopted more than 10 related supplementary decisions, amendments and legal interpretations to standardize definitions of crimes, assignment of criminal responsibility and determination of punishment.

Concerning lawsuit and non-lawsuit procedures, China has enacted laws to standardize procedures for lawsuits and other legal actions: principally the Criminal Procedures Law, the Civil Procedures Law, the Administrative Procedures Law, the Law on Special Procedures for Maritime Lawsuits, the Extradition Law, and the Arbitration Law.

The demographics of the People's Republic of China are identified by a large population with a relatively small youth division (412 million between age 0 and 24 in 2017), which was partially a result of China's one-child policy which ended in December 2015. China's population reached the billion mark in 1982.

China's population is 1.411 billion, the largest of any country in the world. According to the 2010 census, 91.51% of the population was Han Chinese, and 8.49% were minorities. China's population growth rate is only 0.59%, ranking 159th in the world. China conducted its sixth national population census on 1 November 2010.Unless otherwise indicated, the statistics on this page pertain to mainland China only

Scientific knowledge and its use in technology and economic and societal development has become increasingly global and multipolar. While Europe and the U.S. have traditionally led in scientific development, China in particular has emerged as a new science and technology (S&T) powerhouse.

A key indicator of the rise of China in S&T is its spending on research and development (R&D). Chinese R&D investment has grown remarkably over the past two decades, with the rate of growth greatly exceeding that of the U.S. and the EU.

China is now the second-largest performer in terms of R&D spending, on a country basis, and accounts for 20 percent of total world R&D expenditure. It is also increasingly prominent in industries that intensively use scientific and technological knowledge.

Exhibit 1: R&D spending in billions of dollars (current, in purchasing power parity terms)

While the U.S. has led the world in the production of scientific knowledge for decades, in terms of both quantity and quality, and the EU as a bloc (still including the UK) has outperformed the U.S. in numbers of scientific publications since 1994, China now publishes more than any other country apart from the U.S. China’s scientific priorities are shown by a particularly big increase in its share of published papers in the fields of computer sciences and engineering. While China—for now—is making modest inroads into the top-quality segment of publications, it is already on par with Japan.

This steep improvement in S&T performance has been underpinned by significant strides in science and engineering education. China is now the world’s number one producer of undergraduates with science and engineering degrees, delivering almost one quarter of first university degrees in science and engineering globally. Since 2007, the country has awarded more Ph.D. degrees in natural sciences and engineering than any other country globally.

Exhibit 2: The growing number of degrees awarded (in thousands)

Source: Bruegel, based on NSF (2016) China’s rise in science and technology is not an accident. Successive Chinese leaderships have seen S&T as integral to economic growth and have consequently taken steps to develop the country’s S&T-related infrastructure.

Technology development and innovation figure prominently in the current thirteenth five-year plan (2016-20). China’s National Medium- and Long-Term Program for Science and Technology Development (MLP), introduced in 2006, is an ambitious plan to transform the Chinese economy into a major center of innovation by the year 2020 and to make it the global leader in science and innovation by 2050. One of the goals of the MLP is to boost R&D expenditure to 2.5 percent of gross domestic product (GDP)—a target that has largely already been reached.

Global Implications The benefits from a global science world with China as an extra strong pole will accrue to many, but some will benefit more than others. In particular, the EU and the U.S. will likely respond in different ways to the rise of China as an S&T powerhouse.

The U.S. science system has traditionally benefited from foreigners. The dominant position of the U.S. in science is based on its openness to the brightest talent of all nationalities, and this top position keeps attracting the best talents from around the world, who contribute to U.S. science, technology and economic success. Foreign talent is thus vital for U.S. science and engineering capacity. This is why the U.S. could feel threatened about the fact that the power of its S&T machine will diminish if the pool of foreign talent entering the U.S. dries up. There is no clear evidence so far, however, to justify this fear.

For the moment, the rise of China’s own capacity to produce science and engineering degrees does not seem to disconnect the U.S. from the pool of potential Chinese candidates to recruit from. With continued high attrition rates in China and high stay rates in the U.S. for foreign scientists, this open model, at least for the moment, continues to bear fruit for the U.S., even if the most important source country, China, is rapidly developing its own scientific capability.

China’s growth model for science, although aspiring to be indigenous, still involves sending out its increasingly better locally trained scholars to the best institutes in the world and reaping the benefits upon their return in later stages of their careers when they have fully developed their capabilities. All this leaves a China-U.S. connection that is virtuous, mutually beneficial for both science systems, and so far robust.

Nevertheless, concerns are mounting in the U.S. about the sustainability of its capacity for innovation and international competitiveness, driven by the more recent trend to move to a more restrictive immigration policy. This comes in addition to a reluctance to allocate public funding to support the building of S&T infrastructure.

The EU science pole is largely holding its own, based on the intensifying process of intra-EU integration. However, this process of integration is bumpy, and with the Brexit vote outcome, it is facing a major challenge. Furthermore, the EU S&T pole does not have the same deep openness to foreign scientific talent from China that the U.S. has, resulting in the absence of similarly sized flows of students and researchers.

The EU must show a stronger commitment to joining the science globalization train and subsequently ensure that European economies will benefit from it. An integrated European area for science and technology, characterized by scientific and technological excellence, is a necessary condition for this. Excellence will ensure that talented people in European research institutes and firms will be better able to absorb the new knowledge generated abroad and will be more attractive hubs for the best talent from abroad and for partners for international S&T cooperation and networks. But while reinforcing the European pole by deeper integration, it should also be more open externally.

The intra-EU mobility agenda should avoid navel gazing and be seen more as a lever for global integration. European S&T policymakers should promote and remove barriers for scientific collaboration both intra-EU and with countries outside the bloc. It should do more to attract the best foreign talent, wherever it is located in the world.

Mutual Benefit

China’s ambition to be a global leader in science and innovation by 2050 seems well within reach. The U.S. remains the favored destination for Chinese students, which has led to the creation of U.S.-China science and technology networks and connections that are mutually beneficial, enabling China to catch up and helping the U.S. to keep its position at the science frontier. The EU has much less-developed scientific connections to China than the U.S. The EU should take steps to engage more with China if it is not to miss out in the future multipolar science and technology world.
Since the late 1970s, China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role. China has implemented reforms in a gradualist fashion, resulting in efficiency gains that have contributed to a more than tenfold increase in GDP since 1978. Reforms began with the phaseout of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, growth of the private sector, development of stock markets and a modern banking system, and opening to foreign trade and investment. China continues to pursue an industrial policy, state support of key sectors, and a restrictive investment regime. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2016 stood as the largest economy in the world, surpassing the US in 2014 for the first time in modern history. China became the world's largest exporter in 2010, and the largest trading nation in 2013. Still, China's per capita income is below the world average.

After keeping its currency tightly linked to the US dollar for years, China in July 2005 moved to an exchange rate system that references a basket of currencies. From mid-2005 to late 2008, the renminbi appreciated more than 20% against the US dollar, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing announced it would allow a resumption of gradual liberalization. From 2013 until early2015, the renminbi (RMB) appreciated roughly 2% against the dollar, but the exchange rate fell 13% from mid-2015 until end-2016 amid strong capital outflows in part stemming from the August 2015 official devaluation; in 2017 the RMB resumed appreciating against the dollar – roughly 7% from end-of-2016 to end-of-2017. From 2013 to 2017, China had one of the fastest growing economies in the world, averaging slightly more than 7% real growth per year. In 2015, the People’s Bank of China announced it would continue to carefully push for full convertibility of the renminbi, after the currency was accepted as part of the IMF’s special drawing rights basket. However, since late 2015 the Chinese Government has strengthened capital controls and oversight of overseas investments to better manage the exchange rate and maintain financial stability.

The Chinese Government faces numerous economic challenges including: (a) reducing its high domestic savings rate and correspondingly low domestic household consumption; (b) managing its high corporate debt burden to maintain financial stability; (c) controlling off-balance sheet local government debt used to finance infrastructure stimulus; (d) facilitating higher-wage job opportunities for the aspiring middle class, including rural migrants and college graduates, while maintaining competitiveness; (e) dampening speculative investment in the real estate sector without sharply slowing the economy; (f) reducing industrial overcapacity; and (g) raising productivity growth rates through the more efficient allocation of capital and state-support for innovation. Economic development has progressed further in coastal provinces than in the interior, and by 2016 more than 169.3 million migrant workers and their dependents had relocated to urban areas to find work. One consequence of China’s population control policy known as the “one-child policy” - which was relaxed in 2016 to permit all families to have two children - is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem. China continues to lose arable land because of erosion and urbanization. The Chinese Government is seeking to add energy production capacity from sources other than coal and oil, focusing on natural gas, nuclear, and clean energy development. In 2016, China ratified the Paris Agreement, a multilateral agreement to combat climate change, and committed to peak its carbon dioxide emissions between 2025 and 2030.

The government's 13th Five-Year Plan, unveiled in March 2016, emphasizes the need to increase innovation and boost domestic consumption to make the economy less dependent on government investment, exports, and heavy industry. However, China has made more progress on subsidizing innovation than rebalancing the economy. Beijing has committed to giving the market a more decisive role in allocating resources, but the Chinese Government’s policies continue to favor state-owned enterprises and emphasize stability. Chinese leaders in 2010 pledged to double China’s GDP by 2020, and the 13th Five Year Plan includes annual economic growth targets of at least 6.5% through 2020 to achieve that goal. In recent years, China has renewed its support for state-owned enterprises in sectors considered important to "economic security," explicitly looking to foster globally competitive industries. Chinese leaders also have undermined some market-oriented reforms by reaffirming the “dominant” role of the state in the economy, a stance that threatens to discourage private initiative and make the economy less efficient over time. The slight acceleration in economic growth in 2017—the first such uptick since 2010—gives Beijing more latitude to pursue its economic reforms, focusing on financial sector deleveraging and its Supply-Side Structural Reform agenda, first announced in late 2015.

GDP (purchasing power parity)$23.12 trillion (2017 est.)
$21.66 trillion (2016 est.)
$20.3 trillion (2015 est.)
note: data are in 2017 dollars
GDP (official exchange rate)$11.94 trillion (2016 est.)
note: because China's exchange rate is determined by fiat rather than by market forces, the official exchange rate measure of GDP is not an accurate measure of China's output; GDP at the official exchange rate substantially understates the actual level of China's output vis-a-vis the rest of the world; in China's situation, GDP at purchasing power parity provides the best measure for comparing output across countries
GDP - real growth rate6.8% (2017 est.)
6.7% (2016 est.)
6.9% (2015 est.)
GDP - per capita (PPP)$16,600 (2017 est.)
$15,700 (2016 est.)
$14,800 (2015 est.)
note: data are in 2017 dollars
Gross national saving45.4% of GDP (2017 est.)
45.9% of GDP (2016 est.)
47.5% of GDP (2015 est.)
GDP - composition, by end usehousehold consumption: 39.1%
government consumption: 14.6%
investment in fixed capital: 43.3%
investment in inventories: 1.1%
exports of goods and services: 19.6%
imports of goods and services: -17.7% (2017 est.)
GDP - composition by sectoragriculture: 8.2%
industry: 39.5%
services: 52.2%
(2017 est.)
Population below poverty line3.3%
note: in 2011, China set a new poverty line at RMB 2300 (approximately US $400)
(2016 est.)
Labor force806.7 million
note: by the end of 2012, China's population at working age (15-64 years) was 1.004 billion (2017 est.)
Labor force - by occupationagriculture: 28.3%
industry: 29.3%
services: 42.4%
(2015 est.)
Unemployment rate4% (2017 est.)
4% (2016 est.)
note: data are for registered urban unemployment, which excludes private enterprises and migrants
Household income or consumption by percentage sharelowest 10%: 2.1%
highest 10%: 31.4%
note: data are for urban households only (2012)
Distribution of family income - Gini index46.5 (2016 est.)
46.2 (2015 est.)
Budgetrevenues: $2.672 trillion
expenditures: $3.146 trillion (2017 est.)
Taxes and other revenues22.4% of GDP (2017 est.)
Budget surplus (+) or deficit (-)-4% of GDP (2017 est.)
Public debt18.6% of GDP (2017 est.)
16.1% of GDP (2016 est.)
note: official data; data cover both central government debt and local government debt, including debt officially recognized by China's National Audit Office report in 2011; data exclude policy bank bonds, Ministry of Railway debt, and China Asset Management Company debt
Inflation rate (consumer prices)1.8% (2017 est.)
2% (2016 est.)
Central bank discount rate2.25% (31 December 2016 est.)
2.25% (31 December 2015 est.)
Commercial bank prime lending rate4.4% (31 December 2017 est.)
4.35% (31 December 2016 est.)
Stock of narrow money$8.16 trillion (31 December 2017 est.)
$7.001 trillion (31 December 2016 est.)
Stock of broad money$25.24 trillion (31 December 2017 est.)
$22.3 trillion (31 December 2016 est.)
Stock of domestic credit$26.87 trillion (31 December 2017 est.)
$23.02 trillion (31 December 2016 est.)
Market value of publicly traded shares$7.321 trillion (31 December 2016 est.)
$8.188 trillion (31 December 2015 est.)
$6.005 trillion (31 December 2014 est.)
Agriculture - productsworld leader in gross value of agricultural output; rice, wheat, potatoes, corn, tobacco, peanuts, tea, apples, cotton, pork, mutton, eggs; fish, shrimp
Industriesworld leader in gross value of industrial output; mining and ore processing, iron, steel, aluminum, and other metals, coal; machine building; armaments; textiles and apparel; petroleum; cement; chemicals; fertilizer; consumer products (including footwear, toys, and electronics); food processing; transportation equipment, including automobiles, railcars and locomotives, ships, aircraft; telecommunications equipment, commercial space launch vehicles, satellites
Industrial production growth rate6.2% (2017 est.)
Current Account Balance$162.5 billion (2017 est.)
$196.4 billion (2016 est.)
Exports$2.157 trillion (2017 est.)
$1.99 trillion (2016 est.)
Exports - commoditieselectrical and other machinery, including computers and telecommunications equipment, apparel, furniture, textiles
Exports - partnersUS 18.2%, Hong Kong 13.8%, Japan 6.1%, South Korea 4.5% (2016)
Imports$1.731 trillion (2017 est.)
$1.495 trillion (2016 est.)
Imports - commoditieselectrical and other machinery, including integrated circuits and other computer components, oil and mineral fuels; optical and medical equipment, metal ores, motor vehicles; soybeans
Imports - partnersSouth Korea 10%, Japan 9.2%, US 8.5%, Germany 5.4%, Australia 4.4% (2016)
Reserves of foreign exchange and gold$3.194 trillion (31 December 2017 est.)
$3.098 trillion (31 December 2016 est.)
Debt - external$1.649 trillion (31 December 2017 est.)
$1.467 trillion (31 December 2016 est.)
Stock of direct foreign investment - at home$1.514 trillion (31 December 2017 est.)
$1.391 trillion (31 December 2016 est.)
Stock of direct foreign investment - abroad$1.342 trillion (31 December 2017 est.)
$1.227 trillion (31 December 2016 est.)
Exchange ratesRenminbi yuan (RMB) per US dollar -
6.7588 (2017 est.)
6.6445 (2016 est.)
6.2275 (2015 est.)
6.1434 (2014 est.)
6.1958 (2013 est.)
Fiscal yearcalendar year