The 3 Industries Driving China's Economy

China is one of the largest countries in the world. The Asian nation also has one of the world's largest economies, ranking second to the United States. According to the World Bank, China's gross domestic product (GDP) was $17.96 trillion in 2022—rising steadily since the country began reforming its economy in 1978. Changes ushered in by the federal government helped bring millions of people out of poverty and put a number of its industries on the world map. This article looks at the top three industries driving China's economy: services, manufacturing, and agriculture.

1. Services

China's services sector represented more than 54% of the economic output in 2023. By contrast, the services industry represented slightly more than 46% of GDP in 2013. Consumption of goods is a major factor and driver of growth and continues to help boost the country's economy. The country reported $6.63 trillion in 2023, which is an increase of 7.2% in one year.

China's retail sales increased 10.1% between November 2022 and November 2023. Retail sales represent consumer spending within the economy. As a comparison, retail sales in the United States showed an increase of just over 4% within that same period.

A healthy services sector is a sign of healthy domestic consumption. It also indicates an increase in per capita wealth, which gives the Chinese people the capacity to afford their own output.

2. Industry and Manufacturing

China's manufacturing and industrial sector represented over 38% of China's GDP in 2023. However, China's industrial production has been on the decline in recent years, coming in at 4.5% in March 2024.

China's manufacturing sector has been declining as a percentage of GDP. In 2013, manufacturing and industry accounted for 44.2% of GDP. The decline is likely due to China transitioning towards a domestically-driven consumer spending economy. Chinese goods within the manufacturing and industry sector include iron, steel, aluminum, textiles, cement, chemicals, toys, electronics, rail cars, ships, aircraft, and many other products.

China exports many goods globally, including to the U.S. The top exported goods for China at the end of 2022 were electronic goods, computers, and machinery.

China has a thriving automobile manufacturing industry and is the world's largest car manufacturer. The country produced more than 30.1 million vehicles in 2023. That's compared to 10.6 million produced in the U.S.. Japan was the third-largest producer with about nine million followed by India with about 5.9 million units produced in 2023.

3. Agriculture

Agriculture is the third-largest sector in China, representing 7.1% of the country's total output as measured by GDP as of the end of 2023. The share of GDP is down from 8.9% in 2013. Although the percentage is not as high as emerging market economies in Africa, it is higher than the 5.6% share of U.S. GDP in 2023.

China produces many agricultural goods, including corn, rice, wheat, soy, cotton, peanuts, and apples. China also produces 69% of the world's nectarines and peaches, while it's the leader in peanut, rice, and wheat production as of 2020.

China's Economic Outlook

China opened up and reformed its economy in 1978. The country has experienced significant growth since then. China wiped out extreme poverty in 2020, raising itself as an upper-middle country. Economic growth has been largely due to investment and manufacturing.

The country's economy grew 5.2% in 2023. This followed moderate growth after the COVID-19 pandemic. The World Bank estimates the economy to continue growing at a rate of 4.5% in 2024, and expects to see sluggish demand and low inflation.

The Bottom Line

China has the second-largest economy in the world by GDP. Government spending is helping fuel the country's economic growth. Although there are certain challenges, including sluggish consumer spending and inflation, experts believe China's economy will continue to grow. This is largely due to its three main sectors: services, manufacturing and industry, and agriculture.