China's economy has successfully achieved its growth target for 2024 despite facing a challenging domestic and global environment. It is encouraging news for domestic consumption and the global economy, as the world's second-largest economy remains a key driver, contributing about 30 percent to overall global economic growth.
According to the National Bureau of Statistics, China's economy grew by 5 percent year-on-year in 2024, with its GDP reaching 134.91 trillion yuan ($18.77 trillion). At a news conference, Kang Yi, the NBS chief, described these economic achievements as "hard-won" and emphasized that they would provide a solid foundation for realizing the goals outlined in China's 14th Five-Year Plan (2021-25).
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The domestic economy experienced a significant acceleration in the fourth quarter of 2024, growing by 5.4 percent year-on-year, an increase from the 4.6 percent in the previous quarter. This acceleration occurred despite the numerous challenges China faced. Although substantial efforts were made to stimulate domestic demand, consumption growth remained modest, many businesses encountered operational difficulties, and employment issues persisted. Additionally, geopolitical conflicts and rising protectionism further complicated domestic conditions.
On a positive note, industrial production reported an annual growth of 5.8 percent in 2024, up from the 4.6 percent growth in 2023. Over the past year, China has made noticeable progress in its pursuit of high-quality development, expanding electric vehicle production, increasing train travel, achieving record grain harvests, and boosting foreign trade.
Achievements in foreign trade have become particularly noteworthy. In 2024, China reported an unprecedented trade surplus of nearly $1 trillion. According to the General Administration of Customs, exports reached $3.58 trillion, while imports totaled $2.59 trillion, resulting in a surplus of $990 billion. China produces about one-third of the world's manufactured goods, more than the combined output of the United States, Japan, Germany, the Republic of Korea and the United Kingdom. December 2024 was particularly impressive, achieving a record monthly surplus of $104.8 billion.
China's export success is founded on significant investments in education, manufacturing and infrastructure. Chinese universities produce more engineers every year than all American colleges across all fields. Despite increasing opposition, many importers see China as the most competitive supplier.
A distinctive feature of the Chinese governance model is its remarkable speed in responding and adapting to the changing economic landscape. Following negative economic news around the middle of 2024, the government swiftly introduced a series of critical economic stimulus measures in September, including cuts to loan interest rates and bank reserve ratios, and a substantial fiscal package of 10 trillion yuan to address local government debt issues.
What stands out is the strong support from the Chinese public for the government's program to boost household consumption, a phenomenon that is hard to imagine in other parts of the world. This backing has played a significant role in the success of initiatives, including the exchange of consumer goods such as home appliances and cars.
The authorities also took significant steps to create a more favorable business environment for the private sector. They intensified efforts to combat "remote fishing", a practice where profit-driven enforcement targets private entrepreneurs outside local jurisdictions. Additionally, they relaxed restrictions on foreign investment. The real estate sector experienced necessary positive adjustments, including reduction in mortgage rates for home purchases and lowering transaction taxes and down payment ratios, all aimed at stabilizing the market and overcoming the downturn.
The authorities acknowledge that imbalances and discrepancies in development are still evident and that significant efforts will be required to achieve the long-term goals set for 2035.
At his news conference, Kang Yi emphasized that the authorities plan to implement a more proactive fiscal policy and moderately loose monetary policy for 2025. They are aimed to strengthen unconventional countercyclical adjustments and boost domestic demand across all sectors.
Furthermore, Vice-Finance Minister Liao Min earlier indicated that as part of this policy initiative, China intends to substantially increase its fiscal deficit in 2025 and issue a larger number of government bonds, including ultra-long special treasury bonds and special local government bonds.
What challenges will the Chinese economy face in 2025, and how will it address them? With the new US administration threatening to impose additional tariffs on about $500 billion worth of Chinese imports, the investment climate in China is deteriorating. Under these new, stricter conditions, it will be nearly impossible for China to maintain its record export volume. The US, Canada, and the European Union have accused Beijing of overproduction and imposed tariffs on Chinese imports. While Chinese exporters can shift their focus to emerging markets, those markets do not have or cannot generate the same level of demand as North America and Europe. A decline in exports will also hurt energy, raw materials and logistics services suppliers.
The biggest challenge facing the Chinese economy in 2025 will remain the real estate sector. Before the real estate crisis, the sector accounted for nearly one-third of China's economy and employed millions of people, including builders, developers, cement manufacturers and interior designers. Some experts expect the housing slump to bottom out this year. But banking giant Goldman Sachs has warned that the downturn will continue to be a "multi-year drag" on China's economic growth.
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The impact on consumer spending has been significant — household consumption now represents only 29 percent of China's economic output, down from 47 percent in the second quarter and 59 percent before the onset of the pandemic.
Nonetheless, if the private sector begins to invest and innovate, it could enhance income and employment opportunities, likely boosting consumer confidence. Also, rising national and provincial debt and high unemployment have also negatively affected savings and spending.
Given the challenges China faces this year and to maintain economic growth of about 5 percent, the country must take ambitious and bold steps to boost the economy, strengthen measures to support the private sector, and more actively engage with emerging markets in the Global South. Experience shows that China has consistently addressed economic challenges, promptly and effectively. I am optimistic that the trend will continue this year as well.
The author, former prime minister of the Kyrgyz Republic, is a professor at the Belt and Road School of Beijing Normal University.
The views don't necessarily reflect those of China Daily.
