China’s economy achieved a 5% growth rate in 2024, meeting the government’s target but facing mixed prospects moving forward.
Official data from the National Bureau of Statistics (NBS) highlighted a significant recovery in the fourth quarter, with the economy growing by 5.4% year-on-year, aided by industrial output and strong exports. However, concerns remain about underlying vulnerabilities in the economy, including weak consumer demand and external challenges, particularly trade tensions with the US.
The full-year GDP growth, which exceeded the 4.9% forecast by analysts, represents a slowdown compared to 2023’s growth of 5.2%, marking the lowest rate since 1990, excluding the pandemic years. A key contributor to the 2024 growth was the manufacturing sector, which surged as companies rushed to front-load exports, anticipating higher tariffs from the US.
China’s robust export performance, including a record trade surplus of nearly $1 trillion, contrasted with domestic struggles. Retail sales grew by only 3.5%, signaling continued weak consumer confidence, exacerbated by a prolonged downturn in the housing market. Producer prices have also remained negative for over two years, adding to concerns of deflation.
Despite a series of stimulus measures, including monetary easing and infrastructure investment, the economy is still grappling with insufficient domestic demand. The central government has acknowledged these challenges, and NBS Director Kang Yi warned of heightened geopolitical tensions and trade protectionism. The potential return of US tariffs under President-elect Donald Trump is another looming risk that could stifle exports.
Further complicating China’s economic outlook, the country’s population shrank by 1.4 million in 2024, marking the third consecutive year of decline. This demographic trend adds to long-term structural challenges, alongside rising unemployment and stagnant income growth.
Economists, including Frederic Neumann of HSBC, cautioned that the growth seen in the final quarter of 2024 might be short-lived, as the impact of US import restrictions could be felt more acutely in 2025. With consumer sentiment still weak and businesses wary of expanding, the need for more stimulus to support both consumer spending and job creation remains critical.
While the 5% GDP growth target was achieved, some analysts have questioned the reliability of official data, suggesting that it masks deeper economic fragilities. Despite these concerns, the government is expected to set a similar growth target for 2025, aiming for another year of stable economic performance despite global uncertainties and domestic challenges.
The Financial Times, Reuters, and Market Watch contributed to this report.
