China's economy recovered in the final quarter of last year, achieving the government's growth target of 5% for 2024, as announced by Beijing on Friday. Despite reaching the goal, this growth rate is one of the slowest in decades, with challenges including a prolonged property crisis, high local government debt, and youth unemployment.
The head of China's statistics bureau acknowledged that the country's economic progress in 2024 was hard-won, following government stimulus efforts initiated late the previous year. Historically, Beijing has consistently met its growth objectives.
Expectations of this growth rate were largely in line with forecasts. The World Bank had projected a 4.9% annual growth, citing lower borrowing costs and increased exports as contributing factors.
However, concerns loom large for investors due to the looming threat of President-elect Donald Trump's proposed tariffs on $500 billion (£409 billion) worth of Chinese goods. Moreover, obstacles to China's growth targets in the upcoming year include low business and consumer confidence, continued devaluation of the Chinese yuan through interest rate reductions, and a possible slowdown in exports.
Experts warn that China's economic growth may decelerate in 2025, with a decrease in demand for exports being a significant factor. China has leaned on manufacturing to spur growth by exporting products like electric vehicles, 3D printers, and industrial robots.
The global response to China's exports, including accusations of oversupply and imposition of tariffs by the US, Canada, and the European Union, has prompted Chinese exporters to explore other markets in emerging economies that may not have the same level of demand as North America and Europe.
To transition from a manufacturing hub to a high-tech powerhouse by 2035, China faces challenges such as the impact of rising tariffs on manufacturing growth. The real estate sector, a significant component of China's economy, has been affected by oversupply, driving down prices despite government efforts to stabilize the market.
The decline in the property market has curtailed consumer spending, prompting Beijing to emphasize exports to counterbalance sluggish domestic consumption. Nonetheless, experts stress the need for broader economic reforms to address underlying issues.
To reinvigorate the economy, experts suggest boosting private sector investment and innovation to improve income, job prospects, and consumer confidence. Government efforts to invest in cutting-edge industries to drive economic growth have positioned China as a leader in renewable energy and automotive exports.
However, uncertainties such as trade tensions and geopolitical factors have tempered foreign investment interest in China. Amidst these challenges, Beijing faces the dilemma of adopting significant measures or accepting slower economic growth.
Promoting stability in the property market and job creation while addressing social strains arising from economic grievances will be crucial for China's social stability. These socioeconomic factors are pivotal for the Chinese Communist Party, which has historically maintained control by promising prosperity through economic growth.