China recorded one of its slowest rates of economic growth in decades last year, data showed Friday, as leaders nervously eye a potential trade standoff with incoming U.S. President-elect Donald Trump.
Beijing has in recent months announced its most aggressive support measures in years in a bid to reignite an economy that has suffered on multiple fronts, including a prolonged property market debt crisis and sluggish consumer spending.
But the economy grew 5% last year, official data from Beijing’s National Bureau of Statistics (NBS) showed Friday, slightly above the 4.9% forecast in an AFP survey of analysts.
Still, the figure was lower than the 5.2% recorded in 2023.
The growth took place in the face of a “complicated and severe environment with increasing external pressures and internal difficulties,” the NBS said.
The economy was still facing “difficulties and challenges,” officials admitted.
Retail sales, a key gauge of consumer sentiment, rose 3.5% — a major slump from the 7.2% growth seen in 2023 — though industrial output increased 5.8%, from 4.6% the previous year.
However, the 5.4% jump in economic growth seen in the final four months far outpaced the 5% forecast in a Bloomberg survey and was much better than the same period in 2023.
The data provided “mixed messages,” Zhiwei Zhang, president of Pinpoint Asset Management, said.
Beijing’s recent policy shift had “helped the economy to stabilize in (the fourth quarter), but it requires large and persistent policy stimulus to boost economic momentum and sustain the recovery,” he said.
Zichun Huang, China economist at Capital Economics, said she expected growth to “continue accelerating in the coming months.”
“The government’s property support measures seem to be providing some relief, with the pace of house price falls slowing and new home sales showing some recovery,” she said.
Trouble ahead?
The GDP growth rate is the lowest recorded by China since 1990, excluding the financially tumultuous years of the COVID-19 pandemic.
And the analysts surveyed by AFP estimated growth could fall to just 4.4% in 2025, and even drop below 4% the following year.
China has so far failed to rebound from the pandemic, with domestic spending mired in a slump and indebted local governments dragging on growth.
In a rare bright spot, official data showed earlier this week that exports reached a historic high last year.
But gathering storm clouds over the country’s massive trade surplus mean Beijing may not be able to count on overseas shipments to boost an otherwise lackluster economy.
Trump, who will begin his second term next week, has promised to unleash heavy sanctions on China.
“We still expect growth to slow for 2025 as a whole, with Trump likely to follow through on his tariff threats soon and persistent structural imbalances still weighing on the economy,” Huang said.
Beijing has introduced a series of measures in recent months to bolster the economy, including cutting key interest rates, easing local government debt and expanding subsidy programs for household goods.
Confidence ‘crisis’
Observers were closely watching Friday’s data release for signs those measures succeeded in reviving activity.
“With a package of incremental policies being timely rolled out … social confidence was effectively bolstered and the economy recovered remarkably,” the NBS said.
China’s central bank has indicated in recent weeks that 2025 will see it implement further rate cuts, part of a key shift characterized by a “moderately loose” monetary policy stance.
But analysts warn more efforts are needed to boost domestic consumption as the outlook for Chinese exports becomes more uncertain.
“Monetary policy support alone is unlikely to right the economy,” Harry Murphy Cruise of Moody’s Analytics told AFP.
“China is suffering from a crisis of confidence, not one of credit; families and firms do not have the confidence in the economy to warrant borrowing, regardless of how cheap it is to do so,” he wrote.
“To that end, fiscal supports are needed to grease the economy’s wheels.”
One component of Beijing’s newest policy toolbox is a subsidy scheme — now expanded to include more household items including rice cookers and microwave ovens — that it hopes will encourage spending.
But recent data shows that government efforts have not yet achieved a full rebound in consumer activity.
China narrowly avoided a slip into deflation in December, statistics authorities said last week, with prices rising at their slowest pace in nine months.
China emerged from a four-month period of deflation in February, a month after suffering the sharpest fall in prices for 14 years.
Deflation can pose a threat to the broader economy as consumers tend to postpone purchases under such conditions, hoping for further reductions.
