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Welcome: What's behind China's economic miracle?

China, a country with a rich history and formidable cultural heritage, has undergone an extraordinary economic transformation in recent decades. With a population of over 1.4 billion people, a vast territory and a diverse economic landscape, China's economy is nevertheless highly heterogeneous. Impressive successes are juxtaposed with problems, inequality, outright slavery and legal policies that have permanently banned mining.

The roadmap for this article, like China itself, is vast: from the fintech revolution that has transformed transactions around the world to the intricacies of the banking system and social inequality.

A quick summary
China is the third largest country in the world by area, covering approximately 9.6 million square kilometres (3.7 million square miles). It shares borders with 14 countries, including Kazakhstan, India and several Southeast Asian countries. The country is ruled by the Communist Party of China (CPC), which operates under a one-party socialist system.

The Economy

China has a socialist market economy that has undergone significant changes in recent decades. The economy is characterised by a combination of state ownership and market-oriented reforms. This approach, often referred to as "socialism with Chinese characteristics", has allowed the country to become the world's second largest economy.

China's key economic elements include

Special socialism: China's economic system combines elements of socialism and capitalism. The government retains significant control over key industries and sectors, while allowing market forces to play a role in resource allocation and production.

State-owned enterprises: China has a large number of state-owned enterprises (SOEs) whose activities span various sectors such as energy, telecommunications and finance. The enterprises are subject to government supervision and strategic guidance.

Market reforms: Since the late 1970s, China has embarked on economic reforms under the leadership of Deng Xiaoping. These reforms introduced market mechanisms, private enterprise and foreign investment, leading to rapid economic growth and, as discussed below, a notional reduction in poverty.

Export-led growth: China's economy was driven by export-oriented manufacturing, which made the country a special player in global supply chains. This approach has contributed to high growth rates and a large trade surplus.

Foreign direct investment: China has actively attracted foreign investment through special economic zones and preferential policies. This has encouraged technology transfer, infrastructure development and industrial growth.

Urbanization and labor force: China's economy encourages rural-urban migration, leading to increased urbanization. A large labor force is an important factor in its economic success.

Infrastructure development: China has made significant investments in infrastructure and logistics projects such as high-speed railways, ports and airports, contributing to economic growth.

Global trade and initiative: China is a major player in global trade and logistics, often acting as a facilitator for major international transactions.

Technology and innovation: China aims to become a world leader in technology and innovation, investing heavily in research and development and implementing initiatives such as "Made in China 2025" to modernize its industries.

Challenges and Issues: Despite impressive growth, China's economy faces challenges such as income inequality, environmental degradation and an aging population.


Social Inequality: Urban > Rural

Social inequality in China is a significant and complex problem that has evolved over the years due to a combination of economic, political and social factors. Rapid economic growth has only widened the gap between poverty and wealth, as it has been unevenly distributed across regions and population groups. The coast and coastal provinces have experienced greater economic growth than rural and inland areas, leading to regional disparities in income and access to opportunities. In addition, China's household registration system, known as hukou, has historically restricted internal migration. Those with rural hukou face the inconvenience of moving to cities, as they do not always have access to education, healthcare and other urban benefits. This only widens the gap, creating a kind of caste system where those born to nurture are no longer able to teach.

China now has more than 6 million people with incomes above six zeros, 67% of all wealth is held by 10% of the population, and 5% of the population owns more than half the money in the country.

Inequality is also fuelled by an education system designed for urban dwellers. Rural schools do not have the capacity to provide the same level of knowledge as urban schools.

This is compounded by the difference in health care; without an urban hukou, you can't get proper care even if you need it.

With this bias towards urbanization, the real battle for housing is also evident. Apartments, like any other property, have become a clear sign of a person's wealth and success.

Unemployed youth

In 2023, the unemployment rate for 16-25 year olds hit a record high of 21 per cent. These are the official statistics. In addition to those who can't really find a job, there is a group of young Chinese who simply don't want to work. Adding the two groups together, 46 per cent of people in this age group have no steady income. This figure is comparable to the 2008 crisis. At the same time, ⅔ have higher education and are highly qualified professionals.

Hence the term "full-time children". When a young person returns to the parental home and takes care of the older generation full time. The younger generation's philosophy has its own terminology. It is called "tai ping" or "lying motionless" - a rebellion against achievement and the idea of reaching maximum heights in one's career.

Repressive laws also limit the choice of fields for future workers, especially in the information and technology industries.

Let us not forget child and forced labor, the disgusting economic environment and the lack of decent working conditions.


In 2022, the Chinese government released a document on plans for the fintech industry, which touches on a timeframe from 2022 to 2025, through which (and a historical prism) it is easiest to understand: what place the industry has in the country.

Historical path

The financial computerisation phase (1993-2004): During this phase, financial institutions in China, such as the People's Bank of China, began to digitize their operations. This included ATMs, payment terminals, loan systems and transaction processing. They moved their internal processes and services into the digital space.

Internet finance stage (2004-2016): During this period, financial institutions and internet companies emerged and harnessed the power of the internet to transform financial services, creating online platforms that linked different aspects of finance: transactions, payments and assets. It was during this period that the concept of online banking, mobile payments and international lending flourished.

Fintech (2016-present): Fintech encompasses a broader range of services. It's not just about the internet - various advanced technologies such as big data, artificial intelligence and blockchain are now coming into play. These technologies are being used to create new financial products, improve efficiency and reduce costs. For example, innovations are being developed in data-driven credit scoring, smart investing and AI-driven supply chain finance.

Importance of Fintech in China

The unique combination of limited traditional financial services (especially in rural areas) and advanced internet infrastructure (especially in urban areas) has fuelled the growth of fintech in China. The use of huge amounts of data has enabled the Chinese sector to become globally recognised. In fact, many projects have targeted very different populations, and products have had to cater to all classes.

As of 2018, China has become a global leader in fintech investment. In 2018, the country experienced an astonishing growth in fintech investment (up 900%), reaching $25.5 billion, representing more than 50% of the global market. By 2019, the sector was valued at $59.2 billion.

Fintech has become an integral part of everyday life in China. In 2019, 87% of China's active population used consumer fintech services such as mobile payments, online banking and insurance. With the increasing availability of fintech, financial inclusion is expected to grow, with more and more rural residents joining the modern financial world.

China's fintech vision for 2025

The vision for 2025 is for China's fintech sector to be characterized by digitisation, artificial intelligence, sustainability and fairness. The goal is to use data as a key driver of production - to promote high-quality digital transformation in finance, improve fintech governance (regulation), deepen the use of key technologies and develop digital infrastructure.

To support the growth of the industry, China is placing a strong emphasis on regulation. Recent measures include the review of internet finance, the suspension of Ant Group's massive IPO, and a crackdown on anti-competitive practices. The 2022-2025 fintech development plan emphasizes increased regulatory oversight, the use of advanced technology for compliance and risk management.

Privacy and data protection have become increasingly important in China's fintech environment. The plan sets clear targets for data collection, use, storage and protection in line with cybersecurity and protection laws. According to the government, transparent data processing practices will be ensured, unfair use will be prevented and user privacy will be protected.

Green Fintech

China's commitment to environmental sustainability extends to fintech. The development plan integrates green financial activities to promote green investment. The aim is to build energy-efficient data centers, reduce energy consumption and contribute to China's environmental goals.

Banking System

Since the establishment of the People's Republic of China (PRC) in 1949, Chinese economic policy has encouraged the nationalization of banks under the Ministry of Finance.

The Ministry controls financial services and manages the nation's capital. Initially, the banking system provided the necessary credit to state-owned enterprises for national planning programmes.

However, this led to an inefficient allocation of savings, with funds channeled into low-productivity areas due to a lack of profit-oriented strategies. The central figure was the People's Bank of China (PBOC), which acted as both a central bank and a commercial bank. It controlled and managed smaller banks and supported national planning efforts.

For almost three decades, the NBK acted as the sole backbone of the Chinese economy. But the 1980s marked a turning point. With the development of private economic activity outside the planned economy, state funding declined. At the same time, the rise in incomes resulting from stable economic growth led to an increase in household savings and deposits. As a result, banks assumed a key role in allocating resources to support China's economic expansion. This transformation required a restructuring of the banking and credit system.

The role of the central bank began to diversify. Deng Xiaoping's economic reforms to decentralize China's banking system in 1980 resulted in the NBK relinquishing some commercial functions, leading to the creation of the "Big Four" banks:

·        Bank of China focused on foreign trade.

·        China Construction Bank specialized in infrastructure financing.

·        Industrial and Commercial Bank of China supported the industrial sector.

·        Agricultural Bank of China served the agricultural sector.

Established as specialized credit institutions, these state-owned banks gradually expanded their services to cover all credit operations, in parallel with supporting state economic plans. The 1990s saw the emergence of non-state commercial banks and other financial institutions, often with the participation of foreign investors.

Despite the growth of these new financial institutions, access to credit for enterprises remained concentrated in four state-owned enterprises. In rural areas, the limited availability of credit from the Agricultural Bank of China and credit cooperatives led to the proliferation of informal channels.

Problems were related to an institutional structure that was not adapted to the needs of a market economy. Resistance to supporting private enterprise and restrictions on financing competitive sectors slowed overall development and reduced efficiency.

Despite significant reforms of the Chinese economy over the past three decades, progress in the banking sector has been gradual. Distortions persist, including the prioritization of state-owned enterprises and staff appointments based on political rather than technical criteria.

Despite China's accession to the World Trade Organisation in 2001 and its commitment to an open and efficient banking sector, structural reforms have been slow.

Today, China's banking system has moved on its own to become more results-oriented and efficient. However, instability remains as foreign banks are constrained by regulatory restrictions that differ from international standards.

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