China’s economy showed strong signs of recovery in the final quarter of 2024, with the country’s gross domestic product (GDP) growing by 5.4%, surpassing the expectations of economists who had forecasted a 5.0% expansion. The growth rate marked an acceleration from the previous quarter, where GDP grew by 4.6%, and was a key contributor to achieving China’s annual growth target. The country’s GDP growth for the full year of 2024 reached 5.0%, in line with Beijing’s goal of “around 5%.”
The economic acceleration in the fourth quarter was largely attributed to the government’s stimulus measures, which began to take effect in the second half of the year. These measures, including policy shifts in September, played a significant role in stabilizing the economy. However, experts have warned that continued and substantial policy stimulus will be necessary to sustain growth momentum and support the economic recovery. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, commented that the shift in policy stance had helped stabilize the economy in the fourth quarter but noted the importance of long-term and sustained stimulus to boost economic momentum.
China’s National Bureau of Statistics also raised concerns about the external environment, noting that adverse factors from abroad are increasing, and domestic demand remains insufficient. The Bureau urged for more proactive and effective macroeconomic policies to support economic growth in the coming year.
The positive economic data provided a boost to China’s financial markets, with the CSI 300 index, which tracks major blue-chip stocks, reversing its previous downward trend to climb by 0.15%. The offshore yuan also saw a slight appreciation, strengthening to 7.3398 per U.S. dollar, while the 10-year government bond yield fell by 2 basis points to 1.638%.
Despite the positive growth in the fourth quarter, overall growth for the year 2024 was slower compared to the post-pandemic rebound of 5.4% in 2023. The Chinese government also revised the GDP growth figure for 2023 upwards to 7.4%, after an annual revision was carried out in December 2024.
In December, retail sales surged by 3.7% year-on-year, outperforming the anticipated 3.5% growth, while industrial output expanded by 6.2%, surpassing the expected 5.4%. However, concerns about the imbalance between domestic production and weak demand were evident, particularly in the retail sector. Additionally, fixed asset investment for the year rose by 3.2%, which was slightly below the 3.3% forecast in a Reuters poll. The real estate sector continued to be a drag on investment, with property investment declining by 10.6%, compared to the January-November period. The urban unemployment rate increased slightly to 5.1% in December, up from 5.0% in the previous month.
While urban disposable income grew by 4.4%, it lagged behind the overall economic growth, highlighting ongoing income disparities. In contrast, rural residents saw a stronger income growth of 6.3% in 2024, which suggests that rural areas have benefitted more from the recovery compared to urban centers.
The statistics bureau also pointed to the continuing weakness in consumer spending. Despite efforts to boost consumption through trade-in subsidies for cars and home appliances, consumer confidence remains low, and growth in retail sales has been sluggish. The country’s consumer inflation has stayed barely above zero, and wholesale prices continued their decline for the 27th consecutive month in December, underscoring deflationary concerns.
In terms of demographic trends, China’s population declined in 2024 to 1.408 billion, a decrease of 1.39 million people compared to 2023. This marks a continuation of the demographic challenges facing the country, with a decline in population attributed to the rising death rate and a slower-than-expected recovery in birth rates. Tianchen Xu, senior economist at Economic Intelligence Unit, highlighted that the rising death rate in 2024, which increased to 7.76%, further compounds the challenges posed by the nation’s demographic crisis.
The Chinese government’s efforts to boost economic growth have included a series of measures to stimulate both the real estate sector and consumer demand. Since late September 2024, authorities have focused on stabilizing the real estate market, cutting interest rates, and rolling out a significant fiscal package worth 10 trillion yuan ($1.4 trillion) to alleviate local governments’ financial pressures. Additionally, subsidies for consumer trade-ins of used cars and appliances have been expanded to encourage spending. Despite these efforts, some analysts believe that it will take time for the effects of these policies to become apparent.
Bruce Pang, senior research fellow at the National Institution for Finance and Development, emphasized that China is betting on a substantial infusion of policy stimulus and reforms to invigorate domestic demand and combat deflationary pressures in 2025. At the same time, China’s top leaders have committed to a “moderately loose” monetary policy and “proactive” fiscal measures for the current year. The official growth targets for 2025 will be announced in March during the annual parliamentary meetings, with economists predicting that the government will maintain its GDP growth target for the year at around 5%, or potentially slightly lower.
As China navigates a challenging economic landscape with an aging population and external pressures, the country’s focus remains on sustaining growth while addressing domestic consumption weaknesses. The ongoing stimulus measures and fiscal policies are expected to play a central role in China’s economic strategy moving forward, with an eye on long-term stability and growth.
