China’s 2024 GDP Hits 5%

Despite the positive growth figures, China faces significant economic headwinds in the form of mounting trade tensions with the United States, sluggish consumer confidence, and a fragile real estate sector. These vulnerabilities, if not addressed through comprehensive policy interventions, could undermine the sustainability of the recovery. The government has rolled out several stimulus measures to stabilize growth, but questions remain as to whether these short-term boosts can translate into long-term economic resilience.

Exports also played a crucial role in driving growth, expanding by 7.1% over the year. This was especially evident in December, when Chinese businesses ramped up shipments ahead of anticipated U.S. tariffs under the incoming Trump administration. The trade surplus reached a record $992 billion, largely driven by exports of electronics, machinery, and industrial components. However, this surge may not be sustainable, as much of it was due to frontloading of shipments before potential trade restrictions take effect in 2025. If these tariffs are implemented, China could face a sharp decline in export growth, putting further pressure on domestic consumption to fill the gap.

While China’s manufacturing sector has benefited from strong exports, there are concerns about global demand weakening in 2025. As key trading partners, including the United States and European Union, face economic slowdowns, China’s export-driven recovery may lose momentum. The government will need to recalibrate its economic strategy, shifting focus towards boosting domestic consumption and enhancing supply chain resilience to mitigate external risks.

A key issue dampening consumption is deflationary pressure. Consumer prices in China have remained stagnant, with core inflation remaining close to zero for most of 2024. Weak price growth indicates subdued demand, which in turn discourages business investment and hiring. The government has responded with a series of interest rate cuts and subsidies aimed at boosting household spending, but these measures have yet to yield significant results. The challenge for policymakers is to restore confidence among consumers, ensuring that households feel secure enough to increase their spending.

Another factor affecting domestic demand is declining household wealth, particularly due to the ongoing property downturn. With real estate prices falling and investment returns weakening, consumers have less discretionary income to spend. A sustained recovery in domestic consumption will require not just short-term stimulus, but deeper structural reforms to boost wages, improve social safety nets, and provide greater economic security for middle-class households.

The property downturn has also negatively affected broader investment trends. Fixed-asset investment rose by just 3.2%, falling short of economists’ projections. Infrastructure spending by the government has provided some support, but private sector investment remains weak. Many businesses remain cautious about expanding their operations given the uncertain economic outlook, particularly with ongoing geopolitical tensions and weak domestic demand.

If the property market remains depressed, it will continue to weigh on consumer sentiment and financial stability. The government will need to implement stronger policy interventions, such as direct fiscal support for distressed developers and incentives for first-time homebuyers, to prevent further declines in the sector. Without a clear path to recovery in real estate, China’s broader economic outlook will remain fragile.

One of the key challenges facing China’s job market is the transition from low-skilled manufacturing jobs to higher-value industries. Automation and supply chain shifts have displaced many workers, particularly in traditional manufacturing hubs. While the government has prioritized the development of high-tech industries, it has struggled to create sufficient employment opportunities to absorb displaced workers. Addressing this imbalance will require significant investment in vocational training, digital infrastructure, and labor market reforms.

Another concern is the rise of informal employment, as many workers are forced into gig economy jobs or lower-paying service roles. While these jobs provide short-term relief, they lack stability and benefits, making it difficult for workers to sustain long-term financial security. To foster a more resilient labor market, China will need to implement policies that promote stable, high-quality job creation and provide stronger labor protections.

If these tariffs are implemented, they could significantly disrupt China’s export-driven growth model. The U.S. remains one of China’s largest trading partners, and a deterioration in trade relations could have far-reaching consequences for supply chains and global economic stability. China will need to explore alternative trade partnerships, strengthen domestic innovation, and accelerate the development of its internal market to mitigate the impact of U.S. protectionist policies.

​While China’s 2024 economic performance has exceeded expectations, sustaining growth in 2025 will require deeper structural reforms. The government must focus on strengthening domestic consumption, stabilizing the labor market, and addressing financial vulnerabilities in the property sector. With geopolitical uncertainties looming, China’s ability to navigate these challenges will determine its long-term economic trajectory.