Highlights:
China’s GDP grew by 5% in 2024, beating expectations but following 2023 growth of 5.2%.
Growth driven by strong manufacturing and exports, with weak domestic demand.
Deflation concerns persist, with low consumer confidence and modest retail sales growth.
Key background:
China’s economy posted a growth rate of 5% in 2024, surpassing economists’ predictions but reflecting the challenges of the country’s two-speed economy. Official data showed that manufacturing and strong exports were the main contributors to the growth, as Chinese companies frontloaded exports in anticipation of higher tariffs from the United States. Additionally, Beijing’s revitalization measures, including austerity measures and investment in infrastructure, have helped boost economic activity.
The National Bureau of Statistics (NBS) reported growth of 5.4% in the fourth quarter of 2024, marking a recovery from the slowest third quarter. However, the annual growth rate has slowed to 5.2% by 2023, and remains the lowest since 1990, excluding pandemic years. This highlights the dual nature of China’s economy, where a strong export and manufacturing sector collides with weak domestic consumer sentiment.
Despite the positive growth in industrial production, which increased by 5.8%, consumer confidence remains low. Retail sales grew by just 3.5%, and inflation concerns persist, with producer prices remaining negative for more than two years. December saw a modest increase in consumer prices of 0.1%.
China’s demographic challenges are also evident, with the country’s population shrinking by nearly 1.4 million, marking the third consecutive year of decline. This is caused by a higher death rate than the birth rate, which creates long-term structural challenges.
Looking ahead, Beijing is expected to set its 2025 growth target at 5%, as analysts warn of persistent external risks, such as regional tensions and rising trade protectionism. The economy is also threatened by low consumer spending, and experts are urging further stimulus to support domestic needs. Despite the growth rate exceeding expectations, concerns about the vulnerability of the Chinese economy and the reliability of official data continue to shape market sentiment. As trade challenges and internal pressures mount, the path to a sustainable recovery remains uncertain.