China reports robust 2024 growth after wobbles prompt stimulus

[WORLD] China's economy expanded by 5% in 2024, meeting the government's target and demonstrating resilience amid global uncertainties. This growth came after a series of stimulus measures were implemented to counter economic headwinds, particularly in the real estate sector and domestic consumption.

Economic Performance Highlights

The National Bureau of Statistics (NBS) reported that China's gross domestic product (GDP) grew by 5.4% year-on-year in the fourth quarter of 2024, surpassing analysts' expectations and marking the fastest growth since the second quarter of 20237. This strong finish helped the world's second-largest economy achieve its annual growth target of "around 5%".

Key economic indicators for 2024 include:

GDP growth: 5% year-on-year

Industrial production: 5.8% increase

Retail sales: 3.5% growth

Exports: 7.1% expansion

Imports: 2.3% growth

Stimulus Measures Drive Recovery

The Chinese government implemented a series of stimulus measures throughout 2024 to bolster economic growth and address challenges in various sectors. These initiatives included:

• Reducing banks' reserve requirement ratios
• Cutting interest rates
• Frontloading billions from the 2025 budget for construction projects
• Ordering banks to lend to struggling property developers
• Expanding trade-in schemes for consumer goods
• Raising wages for millions of government workers

These measures were particularly crucial in supporting the real estate sector, which had been a significant drag on economic growth in recent years.

Challenges and Concerns

Despite the positive growth figures, several challenges and concerns persist:

Real Estate Sector: The property market continues to face difficulties, with new home starts and completions declining significantly.

Domestic Consumption: Retail sales growth remained sluggish, indicating persistent caution among consumers.

Deflationary Pressures: Consumer price inflation remained near zero, while producer prices continued to decline.

Youth Unemployment: High unemployment rates among young people continue to be a concern for policymakers.

Data Reliability: Some economists question the accuracy of official growth figures, suggesting that actual growth may be lower than reported.

Global Impact and Trade Relations

China's economic performance has significant implications for the global economy. In 2023, China accounted for approximately 30% of global growth, and its continued expansion is seen as positive for worldwide economic prospects.

However, the threat of new trade tensions with the United States looms on the horizon. President-elect Donald Trump has pledged to increase import duties on Chinese goods, which could potentially impact China's export-driven growth.

Outlook for 2025

Looking ahead to 2025, economists project a slight moderation in growth:

Goldman Sachs forecasts 4.5% growth for 2025

The World Bank projects 4.5% growth for 2025

These projections take into account potential headwinds, including the impact of possible U.S. tariffs and ongoing domestic challenges.

Expert Opinions

Eswar Prasad, an economics professor at Cornell University, commented on the economic situation:

"The precise achievement of the official growth target is highly dubious at a time when most indicators of economic activity and financial markets are flashing red. The economy continues to be beset by a combination of weak domestic demand and persistent deflationary pressures, in addition to a hostile external environment that could limit exports".

Hui Shan, Chief China Economist at Goldman Sachs, noted:

"The choice in front of Chinese policymakers is simple: either to provide a large dose of policy offset or to accept a notably lower headline real GDP growth. We expect them to choose the former".

Structural Reforms and Long-term Goals

While short-term stimulus measures have helped stabilize growth, China's leadership remains focused on long-term structural reforms. The government aims to transition the economy towards a more technology-driven and self-reliant growth model.

This shift towards higher-quality growth may result in slower economic expansion in the coming years. Goldman Sachs Research forecasts real GDP growth to average 3.5% from 2025 to 2035, compared to 9.0% during 2000-2019.

Population Dynamics

China's demographic challenges continue to impact economic growth. The country's population declined for the third consecutive year in 2024, falling by 1.39 million to 1.408 billion. This ongoing demographic shift adds pressure to long-term growth prospects and underscores the need for productivity improvements and economic restructuring.

China's economy demonstrated resilience in 2024, achieving its growth target of 5% despite various challenges. The government's stimulus measures played a crucial role in supporting growth, particularly in the face of real estate sector difficulties and weak domestic consumption.

However, concerns persist about the sustainability of this growth model and the accuracy of official data. As China navigates potential trade tensions and continues its transition towards a more balanced and high-quality growth model, policymakers will need to address structural issues while maintaining economic stability.

The coming years will be critical for China as it seeks to balance short-term growth with long-term economic transformation. The global economy will be watching closely, given China's significant role in driving worldwide economic growth.

Economists both domestically and outside have long regarded China's official economic statistics with suspicion. However, the gap between the figures and the real world has rarely been as obvious as it is right now.

Economists and experts who monitor the second-largest economy in the world say that the discrepancy between China's official figures and alternative indicators of economic activity has grown in recent years.

These observations highlight the ongoing debate about the reliability of China's official economic data and underscore the importance of considering multiple indicators when assessing the country's economic performance.