Exports Surge Amid US Tariff Threats, But Domestic Challenges Persist

China’s economy expanded by 5% in 2024, meeting the government’s growth target despite a slowing trend compared to the previous year. The nation’s economic momentum was bolstered by strong exports, as companies and consumers rushed to beat potential tariff hikes by US President-elect Donald Trump. However, some economists question whether the economy is truly growing at the pace indicated by official figures.

Exports saw a significant increase of 7.1% in annual terms, with manufacturing and industrial output rising by 5.8%. However, retail sales growth remained weak at just 3.5%. Despite these challenges, the economy showed signs of recovery in the last quarter, growing 5.4% between October and December. Government stimulus measures and policies aimed at boosting confidence played a role in this improvement.

Slower Growth and Long-Term Challenges for China’s Economy

China’s economy faces several long-term challenges, including weaker consumer spending, deflationary pressures, and an aging population. The country’s population shrank by 1.39 million to 1.408 billion in 2024, continuing a decline that has lasted for three years. The government’s birth control policies, alongside rising living costs, have contributed to lower birth rates and fewer young workers.

Economists caution that the official growth figures might not reflect the true pace of economic activity. With deflationary pressures and weak domestic demand, China could face further slowdowns in the coming years. Capital Economics’ Zichun Huang predicts that while fiscal spending could temporarily support the economy, growth will likely slow again in 2025.

The US, under President-elect Trump, is expected to impose further tariffs on Chinese goods, adding to the external challenges. Additionally, US restrictions on advanced semiconductor exports are also putting pressure on China’s tech sector.

To support domestic demand, China has rolled out a series of stimulus measures, including fiscal spending, reduced bank reserve requirements, and efforts to boost the real estate market. However, economists argue that structural reforms are necessary to boost productivity and reduce the country’s dependence on exports and construction.