HONG KONG — The Chinese economy showed a growth rate of 5% in 2024, which, while slower compared to the previous year, aligns with Beijing’s aim of achieving “around 5%” growth, bolstered by robust export performance and recent government stimulus initiatives.
According to the latest report, the economy gained traction in the last quarter, posting a growth rate of 5.4% from October to December.
A notable increase in exports was observed as businesses and consumers rushed to stock up ahead of anticipated tariff increases that may be introduced by President-elect Donald Trump on Chinese imports.
The National Bureau of Statistics indicated that “the national economy was generally stable, with steady advancement and new accomplishments in high-quality development.” The report highlighted that timely policy implementation has significantly enhanced public confidence, facilitating a remarkable economic recovery.
Manufacturing served as a key driver for economic growth during the past year, with industrial output rising by 5.8% year-on-year. Retail sales of consumer goods experienced a growth of 3.5% on an annual basis. Exports recorded a 7.1% boost over the year, while imports increased by 2.3%.
Nonetheless, the economy has had to navigate challenges such as subdued consumer spending and deflationary pressures, which have impacted the recovery following the COVID-19 pandemic. The property sector, which previously stimulated business activity, has recently faced a downturn.
In 2023, the Chinese economy expanded at a 5.2% annual rate, with forecasts suggesting a potential slowdown in the years ahead.
Economic analyst Zichun Huang from Capital Economics noted that the economy has regained momentum in the last quarter, partially due to recent policy relaxations. “Increased fiscal spendingshould continue to provide a near-term boost to economic activity,” Huang stated in a report. However, the outlook for growth in 2025 appears to be limited, attributed to the likelihood of Trump implementing tariff increases, coupled with ongoing structural imbalances in the economy.
Another factor weighing on growth is the aging and declining population. The government disclosed that the population has decreased for the third consecutive year, reaching 1.408 billion people by the end of 2024, marking a drop of 1.39 million from the previous year.
Rising living costs outpacing wage growth have led many young individuals in China to delay or forgo marriage and childbirth, further exacerbated by previous birth control policies that restricted families to a single child.
Concerns have been raised among some economists about the accuracy of reported growth rates, with suggestions that actual economic growth may be lagging behind official numbers. “The precise achievement of the official growth target is highly questionable amid numerous indicators indicating economic strain,” remarked Eswar Prasad, an economics professor.
Prasad also highlighted that the economy remains vulnerable due to a combination of weak domestic demand, ongoing deflationary trends, and a challenging international landscape that could potentially hinder export growth.
Looking ahead, Trump, set to be inaugurated next week, has indicated intentions to raise U.S. tariffs on Chinese products. Concurrently, the Biden administration has implemented further trade restrictions concerning exports of advanced technology and semiconductors in a bid to maintain the country’s lead in technological advancements and restrict China’s access.
In response, the Chinese government has implemented a series of stimulus initiatives, including lowering banks’ reserve requirement ratios, interest rate reductions, and expediting expenditures from budgets to finance infrastructure projects. Banks have been directed to extend loans to property developers struggling with significant debts stemming from regulatory actions against excessive borrowing.
Fu Linghui, a spokesperson for the National Bureau of Statistics, expressed that enhancing consumption and fostering domestic demand will be focal points for the current year. “Through coordinated stock policies and strategic incremental modifications, we are observing strengthened economic recovery momentum, rapid recuperation in consumer demand, and more favorable conditions for a moderate resurgence in prices,” he stated.
Beijing’s efforts also include expanding a trade-in program for consumer goods and increasing wages for millions of government employees to stimulate domestic consumption.
However, some economists insist that these incremental changes must be paired with broader structural reforms to enhance productivity and reduce reliance on construction and export manufacturing. Furthermore, private enterprises remain cautious regarding investment or hiring, primarily due to the uncertainty stemming from previous policy changes.
Additionally, a lack of robust social safety nets contributes to families prioritizing savings over spending, while declining housing and stock prices have led to the erosion of household wealth, complicating the recovery process.
To revive growth effectively, Prasad asserts that “a comprehensive and multifaceted policy approach is crucial.” This approach should involve substantial monetary and fiscal stimulus, alongside reforms aimed at restoring private sector confidence and stimulating economic momentum.
