China’s finance sector has continued to see the growth of its value added outpace expansion in nationwide GDP in the third quarter of 2022.
Figures released by China’s National Bureau of Statistics on 24 October indicate that the value added of the finance sector was 2.48 trillion yuan in the third quarter, for a year-on-year rise of 5.5% and a deceleration of 0.4 percentage points compared to the second quarter.
Growth in the value added of Chinese finance nonetheless outpaced national GDP growth in the third quarter, which stood at 3.9% in year-on-year terms.
In the third quarter the value added of Chinese finance accounted for an 8.1% share of national GDP, for a slight decline compared to the second quarter, yet still comparatively high by international standards.
The value added of the finance sector as a share of GDP has shown a trend of steady increase in China since the Covid pandemic. After peaking at 8.4% in 2015, it subsequently declined to 7.7% during the period from 2016 to 2018, before bouncing back to 7.8% in 2019 and rising steadily ever since.
Growth in the value added of Chinese finance sector has steadily declined however, from its peak period of 2014 – 2015. In 2014 YoY growth in the value added of the Chinese finance sector exceeded 14%, while in the second quarter of 2015 it hit a record high of 19.5%. In 2016 YoY growth started to decline, and has since hovered at around 6%.
An article recently published by the Chinese central bank’s statistical department has sought to explain the reasons for the Chinese finance sector’s higher share of GDP compared to international levels.
The article entitled “Reasons and Consequences of the Value Added of China’s Financial Sector Being Comparatively Large” (我国金融业增加值规模较大的原因和效果) highlights three reasons including:
- High savings rates, requiring that financial institutions convert a larger volume of savings into investment.
- China’s finance system relying primarily on indirect financing. Because financial institutions bear more risk and provide more services, this increases the value added of the financial sector.
- Value added calculations for the finance sector in China do not take into account potential losses, creating the possibility of overestimates.
The statistical department expects the Chinese finance sector’s share of GDP to decline in future however, as savings rates decline, direct financing in China continues to grow, and measures to prevent and dissolve financial risk increase.