BEIJING, December 26, 2024 — Despite multiple challenges, China’s economic growth has remained robust at 4.8 percent in the first three quarters of the year. But growth has moderated since the second quarter of 2024, weighed down by subdued domestic demand and a prolonged downturn in the property sector. The government has provided policy stimulus aimed at balancing short-term support for domestic demand with longer-term financial stability objectives. To complement these stimulus measures, the latest China Economic Update “Reviving Demand, Regaining Momentum” suggests structural reforms to revitalize growth.
According to today’s update, China’s expansion is estimated at 4. 9% in 2024 and is projected to be 4. 5% in 2025. Even as recent policy easing measures are expected to provide moderate support, moderate household and business confidence, as well as headwinds in the active sector, expansion will continue to weigh on expansion in 2025. Structural constraints on expansion are accompanied by low consumption, high levels of debt between real estate developers and locals. governments and an aging population.
“It is vital to balance short-term expansion with long-term structural reforms,” said Mara Warwick, World Bank country director for China, Mongolia and Korea. “Addressing the challenging real estate sector situations, strengthening social safety nets and improving local government finances will be key to unlocking a sustainable recovery. Clear communication on express policy measures will be very vital to boost market and household confidence.
The Chinese economy faces internal and external dangers. Nationally, a more persistent slowdown in the real estate sector could further weaken local government investments and revenues. Additionally, further weakening labor market conditions due to declining business profitability and poor hiring could impact consumption. Globally, increased uncertainties around the industry pose dangers for Chinese exports. On the positive side, higher-than-expected fiscal spending and more decisive policy measures to stabilize the real estate sector, following the authorities’ recent guidance, could simply raise expansion forecasts above the existing base projection.
The update also explores economic mobility. Improving economic mobility is vital in China as it can bridge the gaps between rural and urban areas, reduce the source of income inequality and unlock greater domestic income, a key pillar to rebalance the economy towards more sustainable growth, driven by through domestic demand. While the level of China’s middle class has increased since the 2010s, reaching 32% of the population in 2021, World Bank estimates suggest that around 55% of the population remains economically precarious, highlighting highlights the need to address disparities in opportunity.
“Expanding opportunities for everyone to move up the economic ladder is important for achieving China’s goal of common prosperity,” said Elitza Mileva, World Bank Lead Economist for China. “Equal opportunities and greater social mobility will, in turn, support growth through higher human capital and greater entrepreneurship and risk taking by economically secure households.”
Download the report: Reignite demand, regain momentum
Video: China Economic Update – December 2024
Website: World Bank in China
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