BEIJING, Dec. 26, 2024 — Despite multiple challenges, China’s economic expansion remained physically powerful at 4. 8% in the first three quarters of the year. But the expansion has moderated since the second quarter of 2024, weighed down by sluggish domestic demand and a prolonged slowdown in the property sector. The government has implemented stimulus measures aimed at balancing short-term domestic needs with long-term monetary stability objectives. To complement those stimulus measures, China’s most recent economic update “Reviving Demand, Regaining Momentum” suggests structural reforms to reinvigorate the expansion.
According to the update released today, China’s expansion is estimated at 4. 9% in 2024 and projected at 4. 5% in 2025. Although recent policy easing measures are expected to provide moderate support, subdued household and business confidence, as well as headwinds in the genuine market real estate sector will continue to weigh on the expansion in 2025. Structural constraints to expansion are accompanied by low consumption, high levels of indebtedness among property developers and local governments, and an aging sector. population.
“It is important to balance short-term support to growth with long-term structural reforms,” said Mara Warwick, World Bank Country Director for China, Mongolia, and Korea. “Addressing challenges in the property sector, strengthening social safety nets, and improving local government finances will be essential to unlocking a sustained recovery. Clear communication of specific policy measures will be crucial to strengthening the confidence of markets and households.”
China’s economy faces both domestic and external risks. Domestically, a more persistent downturn in the property sector could further weaken investment and local government revenues. Additionally, further weakening of labor market conditions due to lower enterprise profitability and reduced hiring could reduce consumption. Globally, heightened uncertainties around trade pose risks to China’s exports. On the upside, higher-than expected fiscal spending and more decisive policy actions to stabilize the property sector, following recent guidance from policymakers, could lift the growth forecast above the current baseline projection.
The update also explores economic mobility. Improving economic mobility is vital in China, as it can bridge rural-urban gaps, decrease the source of income inequality, and unlock higher domestic income, a key pillar for rebalancing the economy towards more sustainable growth, driven through domestic demand. While China’s middle class level has risen since the 2010s, reaching 32% of the population in 2021, World Bank estimates suggest that around 55% of the population remains economically precarious, highlighting the need to address disparities in opportunity.
“It is vital to expand opportunities so that everyone can move up the economic ladder and achieve China’s goal of achieving unusually prosperity,” said Elitza Mileva, chief economist for China at the World Bank. “Equal opportunities and greater social mobility, in turn, expansion through greater human capital and greater entrepreneurship and risk-taking through economically secure homes. “
Download the Report: Reviving demand, regaining momentum
Video: China Economic Update – December 2024
Website: World Bank in China
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