China achieved a 5.0% economic growth rate last year, successfully meeting the target of "around 5%." This was made possible by the substantial economic stimulus measures implemented since September last year, which boosted the fourth quarter growth rate to 5.4%. However, skepticism prevails over whether such a "surprising growth" can be replicated this year. The potential decline in exports and industrial production, which spurred last year's economic growth due to the upcoming high tariffs on Chinese imports announced by the Trump administration, poses a significant risk. This could exacerbate the real estate slump, sluggish domestic consumption, and low inflation pressures, ultimately dragging down the growth rate to the 4% range. The world is waiting for the Chinese government to embark on more aggressive economic stimulus measures.
On the 17th, China's National Bureau of Statistics announced that the country's gross domestic product (GDP) reached 134.9 trillion yuan (approximately 2.6754 trillion won), marking a 5.0% increase compared to the same period last year. This performance surpassed the market expectations of 4.9%, compiled by Bloomberg and others. Thus, the Chinese government succeeded in achieving its target of "around 5%." However, this figure represents a 0.2 percentage point decline from the 5.2% recorded in 2023.
To meet the 5.0% growth rate, China accelerated its stimulus measures before the fourth quarter. Since the end of September last year, it mobilized various financial tools, including interest rate cuts and currency policies. Although it started strong with a growth rate of 5.3% in the first quarter, it faced a drop to 4.7% in the second quarter and 4.6% in the third quarter, raising red flags about achieving the target. Despite the cumulative growth rate of 4.8% in the first to third quarters, the Chinese government managed to record 5.4% in the fourth quarter, achieving the best performance since the second quarter of 2023 (6.3%). The National Bureau of Statistics noted, "Appropriate timing in deploying and introducing policy packages has yielded new progress," and it stated, "This has effectively enhanced social trust and clearly rebound the economy, allowing us to smoothly achieve major goals and missions in economic and social development."
However, it seems difficult for China to avoid the assessment that it narrowly achieved the 5.0% growth rate. This result relies entirely on the industrial sector. The annual industrial production announced on the same day recorded a growth rate of 5.8%, surpassing the previous year's level of 4.6%. The performance in December exceeded market expectations (5.4%) by achieving 6.2%. Similarly, the previously announced annual export value (in dollar terms) increased by 5.9% year-on-year, marking the highest growth rate since 2022 (7.0%). RAY, chief economist at Australia and New Zealand Banking Group (ANZ), remarked, "This is GDP growth driven by factories."
However, the other sectors struggled considerably. The persistent consumption slump that had hindered the Chinese economy throughout the year was also reflected in the indicators. The annual retail sales growth rate was 3.5%, less than half of the 7.2% in 2023. This growth was attributed to a 3.7% increase in December, which surpassed market expectations (3.5%). Fixed assets saw a cumulative growth of 3.2% from January to December, falling short of the forecast (3.3%). The real estate slump remains serious, with annual real estate development investment decreasing by 10.6%, a larger decline than that seen from January to November (-10.4%). The annual inflation rate stood at just 0.2%, far below the Chinese government's target inflation rate of around 3%, and approaching the threshold of deflation. The urban unemployment rate in December worsened to 5.1%, up from 5.0% the previous month.
The shadow over the Chinese economy can also be seen in its declining population. As of the end of last year, China's population stood at 1.40828 billion, a decrease of 1.39 million from the previous year. Although 9.54 million babies were born last year, an increase of 520,000 from the previous year, the number of deaths at 10.93 million surpassed the number of births, leading to three consecutive years of population decline. The increase in births last year is likely a temporary phenomenon, largely due to individuals who delayed childbirth during the COVID-19 pandemic concentrating their births in the Year of the Dragon last year. Bloomberg noted, "China's population problem will ultimately burden growth due to a decreasing workforce, potentially harming the country's economic outlook. As the elderly population expands, pension funds already facing financial shortages will experience increased pressure."
◇ China facing Trump, likely to see growth stall at 4%
Economic analysts worldwide believe that China will have a hard time achieving a growth rate in the 5% range this year. Last year, forecasts indicated a hopeful start, with expectations for the Chinese economy to grow in the 5% range through the early part of the year. However, the current prediction is already only in the low to mid-4% range. The World Bank (WB) estimates that China's economy will grow by 4.3% this year. The International Monetary Fund (IMF) and the Asian Development Bank (ADB) project growth rates of 4.5%, while the Organisation for Economic Co-operation and Development (OECD) estimates 4.7%.
This is largely due to the likely collapse of exports, which was the main growth driver last year. The impact of the Trump administration's proposed 60% tariff on Chinese imports plays a significant role. If this happens, manufacturing vitality will inevitably decline. UOB economist Ho Wye Chen stated, "Some of the industrial sector led growth may be related to pre-Trump production and export acceleration, and it may not sustain in the future, leaving this year's outlook still weak." The analysis that the real estate slump and sluggish domestic consumption won't be easily resolved also restricts this year's growth rate.
Nevertheless, it seems likely that the Chinese leadership will maintain the economic growth target of "around 5%" this year. Opinions suggest that more aggressive stimulus measures are needed. So far, China has only stated its intention to activate the economy through looser currency policies and fiscal expenditure, without outlining concrete plans or figures. Zhang Zhiwei, chief economist at Pinpoint Asset Management, noted, "The policy shift in September last year helped stabilize the economy in the fourth quarter, but large-scale and continuous policy support is necessary to boost economic momentum and maintain recovery, especially in order to suppress rising unemployment, fiscal policies need to adopt a more proactive stance."