Economy of China

Summary

China has an upper middle income developing mixed socialist market economy that incorporates industrial policies and strategic five-year plans. It is the world's second largest economy by nominal GDP, behind the United States, and the world's largest economy since 2016 when measured by purchasing power parity (PPP). Due to a volatile currency exchange rate, China's GDP as measured in dollars fluctuates sharply. China accounted for 18.6% of global economy in 2022 in PPP terms, and around 18% in nominal terms in 2022. Historically, China was one of the world's foremost economic powers for most of the two millennia from the 1st until the 19th century. The economy consists of public sector enterprise, state-owned enterprises (SOEs) and mixed-ownership enterprises, as well as a large domestic private sector and openness to foreign businesses in a system. It recently overtook the economy of the European Union in 2021. Private investment and exports are the main drivers of economic growth in China; but, in recent years, the Chinese government has been emphasizing domestic consumption. China is the world's largest manufacturing economy and exporter of goods. It is also the world's fastest-growing consumer market and second-largest importer of goods. China is also the world's largest consumer of numerous commodities, and accounts for about half of global consumption of metals. China is a net importer of services products. It is the largest trading nation in the world and plays a prominent role in international trade. China is the largest recipient of foreign direct investment in the world as of 2020, receiving inflows of

163 billion. It has the second largest outward foreign direct investment, at US

136.91 billion for 2019 alone, following Japan at US$226.65 billion for the same period. As of 2022, China was second in the world in total number of billionaires. In 2018, it was second in millionaires with 3.5 million. According to the 2019 Global Wealth Report by Credit Suisse Group, China surpassed the US in the wealth of the top ten percent of the world's population.

Official source

https://en.wikipedia.org/wiki/Economy_of_China

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Related publications (1)

Essays in Information-Based Asset Pricing

Michael Hasler

I started my Ph.D. studies in the Fall 2008, a period ex-post perceived as being at the core of the Financial Crisis. At that time my ideas were vague and I struggled to find a good research topic. As surprising as it might appear, in one single week the discussions I had with my relatives provided me with enough ideas needed to write my thesis. Indeed, during that single week my relatives contacted me and complained about the fact that they had lost money invested in the financial market. They wanted me to advise them. I simply told them to invest their money in relatively safe bonds. My relatives did not realize how fruitful their behavior was for me. Indeed, after having advised them I wondered whether their willingness to gather information in bad times was optimal or pure irrationality. This issue is addressed in the first chapter of my thesis. The last two chapters investigate the impact of the willingness to gather more information in bad times than in good times on the dynamics of asset prices. My thesis answers two very important questions: When should investors acquire information given that information-processing is costly and what is the impact of the optimal information acquisition strategy on asset price dynamics? Consequently, the main topic of my thesis is the transmission of acquired information in financial markets. In the first chapter I consider a dynamic portfolio choice and costly information acquisition problem. Consistent with my relatives behavior, I show that it is optimal to gather more information in bad times than in good times. As the state of the economy worsens, investors optimally re-balance their portfolio towards safer investment and spend more and more money to gather more and more accurate information regarding future market moves. This result derived in a purely rational setup helps to understand the empirical observation that people tend to pay fluctuating attention to news, focusing more in downturns than in upturns. To the best of my knowledge, this paper is the first to consider costly information acquisition in a dynamic setting. The main contribution is to provide insights on how investors should optimally allocate their wealth to the financial market on the one hand and to information market on the other hand given current market conditions. In the second chapter (with Daniel Andrei) we model the optimal information acquisition strategy obtained in the first chapter in a general equilibrium framework and we show that this strategy (fluctuating attention paid to news) has very interesting implications on the dynamics of asset prices. Our main contribution is to highlight a J-shaped relationship between attention and volatility. By constructing an empirical measure of attention to news, we show that the theoretical prediction of our model holds in the data. Moreover, we are the first to provide a theoretical foundation for the fact that the slope of the term structure of equity premia is pro-cyclical. In the third chapter I investigate the impact of fluctuating attention to news in a multi-asset general equilibrium framework. My main contribution is to show that fluctuating attention to news generates return and volatility spillover effects among financial markets. As a bad shock hits one market, investors raise their attention to that particular market. This implies a simultaneous increase in each market volatility and in each cross-market correlation, a phenomenon called financial contagion. Moreover, I document that the interconnection between attention and uncertainty generates persistence in cross-market correlations. This very interesting result proves that persistence can be generated through Bayesian learning. Finally, I am the first to provide a theoretical foundation for the observed shape of the term structure of correlation. Consistent with empirical findings, I show that fluctuating attention implies an upward sloping term structure of correlation where the shorthand is wider than the longhand.

EPFL2013

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Essays in Information-Based Asset Pricing

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EPFL2013