Since the early 1980s, China's GDP grew at an accelerating pace, averaging over 10% annually, driven by cheap labor, successful implementation of market-based economic regulation mechanisms, active attraction of foreign investment, and priority development of export-oriented industry. In a relatively short period, the country transitioned from a closed and predominantly agrarian state to the status of the "world's factory," the largest exporter, and a key player on the international stage. However, the gradual exhaustion of reform effects and a number of external factors by the early 2010s exposed structural problems in the Chinese economy, the main ones being: slowing production growth rates, dependence on exports and foreign technologies, high savings rate, uneven regional development, social stratification, increasing corporate and provincial external debt, as well as rising wage levels outpacing labor productivity growth. As a result, China's real GDP growth dynamics slowed from 10.6% in 2010 to 6.0% in 2019, while the country's government gradually shifted away from supporting the export-oriented economic model in favor of expanding domestic market capacity.
The COVID-19 pandemic and the global crisis it triggered in 2020-2022 had a serious impact on China's development. Economic support measures adopted by the national government in the initial stages of combating coronavirus allowed the country to avoid recession; however, reduced consumer activity under quarantine restrictions led to a decline in real GDP growth to 2.3% in 2020. In 2021, China's economy showed rapid recovery, with real GDP growth rates exceeding pre-pandemic levels, reaching 8.6% against the backdrop of temporarily increased consumer activity, as well as development of the e-commerce sector. However, in 2022, the country's economy again faced a number of serious internal and external challenges: due to restrictive measures implemented as part of the fight against recurring epidemic outbreaks, and growing problems in the real estate market, China's real GDP growth rate fell to 3.1%.
The Chinese authorities' abandonment of the "zero tolerance" COVID policy and lifting of most epidemiological restrictions in 2023 led to an increase in real GDP growth to 5.4%. This level met government targets but remained notably below the annual average rates the country had demonstrated before the pandemic began. Moderate (by Chinese standards) GDP growth rates are explained by the limited impact of pent-up demand effects amid extremely high savings levels and worsening crisis in the real estate sector. In addition, youth unemployment in China reached a record level (over 20% for the year), the causes of which are considered to be pandemic consequences, as well as supply-demand imbalances in the labor market. In March 2024, the country's government announced its intention to maintain GDP growth at no less than 5% annually. It was expected that achieving this target would be complicated both by various structural problems and by the high base level of 2023, when planned values were achieved through rapid economic recovery following prolonged quarantine restrictions.
In recent years, deflationary pressure has been intensifying in China: consumer prices in the country are growing relatively slowly, which is a marker of weak domestic demand and uneven economic development. In particular, inflation in the country is constrained by high household savings levels and the protracted crisis in the real estate market. Another important factor is the Chinese government's policy aimed at preventing price increases and the potential social tension associated with them.
Against this backdrop, the People's Bank of China is pursuing a loose monetary policy aimed at stimulating economic growth and domestic demand. However, the measures taken by the regulator generally have limited effect, since consumer activity in the country is constrained primarily by factors not directly related to credit availability, national currency exchange rates, and price conditions. As a result, at the end of 2025, inflation in China stood at 0%.
