China’s economy ended 2024 on a strong note, achieving the government’s growth target of 5%, thanks to an 11th-hour stimulus package and a surge in exports in anticipation of looming U.S. tariffs. The country’s gross domestic product (GDP) grew 5.0%, slightly surpassing the median estimate of 4.9% in a Bloomberg survey. President Xi Jinping had set the goal of around 5% growth, which was reached despite persistent challenges in the economy.
In the final quarter of the year, the economy expanded by 5.4% year-on-year, the fastest pace in six quarters and better than economists’ expectations of 5%. On a quarterly basis, GDP growth of 1.6% was the highest since March 2023. Following the data release, the yuan strengthened by 0.1% both in onshore and offshore markets, and the CSI 300 index of Chinese stocks rose by 0.2%, recovering from an earlier loss.
The growth figures indicate that Beijing’s policy pivot since late September helped counterbalance the negative effects of a long-standing property downturn and entrenched deflationary pressures.
Key Insights:
- Industrial Production: A significant contributor to growth was the unexpected strength in industrial production, which rose 6.2% in December compared to the previous year, the fastest pace since April 2024. Raymond Yeung, chief economist for Greater China at ANZ, noted that the growth was largely “factory-driven.”
- Domestic Demand and Retail Sales: While industrial production surged, domestic demand remained weak. Retail sales grew at a faster pace but still underperformed, expanding by less than 4%. The job market also faced strain, with unemployment rising for the first time since August.
- Property Market: The property market continued its contraction, with property sales extending a year-long slump. This remains a significant challenge for the economy.
- Nominal GDP Growth: China’s nominal GDP growth, which is unadjusted for deflation, expanded by just 4.2% in 2024. This marked the slowest pace since 2020, highlighting the ongoing deflationary pressures across the economy.
Outlook for 2025:
Looking ahead, China’s fiscal policy will be central to its economic strategy in 2025, as the government prepares to respond to external challenges, particularly the potential impact of tariffs imposed by U.S. President-elect Donald Trump. Trump has threatened tariffs as high as 60% on Chinese goods, which could significantly disrupt trade and hurt key sectors of the economy.
The National Bureau of Statistics (NBS) acknowledged that while 2024 ended with “overall stability,” significant challenges remain. These include a worsening external environment, weak domestic demand, difficulties for some companies, and growing economic pressures.
To support growth, China is expected to prioritize fiscal stimulus over monetary easing. The People’s Bank of China has refrained from drastic actions such as reducing banks’ reserve requirement ratios, as this could exacerbate concerns over the yuan’s depreciation and capital outflows.
Despite the strong Q4 performance, the broader outlook remains uncertain. As China faces domestic and external pressures, the coming year will be critical in determining whether the country can maintain stability and momentum amidst shifting global trade dynamics and ongoing internal challenges.
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