China’s economy recorded a modest five percent growth last year, the slowest in decades, raising concerns about its health amid global economic challenges and weak domestic demand. Analysts express skepticism about official growth figures, suggesting they may be overly optimistic. While exports have surged, the real estate sector remains in crisis, and consumer confidence is low, particularly among foreign companies. Strategies to enhance domestic demand and boost confidence are crucial as the economy faces ongoing difficulties.
China’s Economic Growth: A Cautious Outlook
Last year, China’s economy experienced a modest growth rate of just five percent, marking the slowest growth in decades, excluding the pandemic years. This development has raised concerns about the underlying health of the economy.
Kang Yi, the head of the National Bureau of Statistics, acknowledged that the Chinese economy is grappling with various challenges. He pointed out that global economic weakness, escalating geopolitical tensions, and a rise in trade protectionism are contributing factors. Additionally, domestic demand remains lackluster, further complicating the economic landscape.
Analysts Express Doubts Over Growth Figures
Despite the official figures aligning with the Communist Party’s target, skepticism persists among economists. Xu Chenggang, an economist from Stanford University, urged caution regarding the reported growth statistics, suggesting that the numbers may be overly optimistic. He noted that independent assessments of China’s GDP often yield lower growth estimates, indicating that the reality may not be as favorable as portrayed.
Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, echoed these sentiments, highlighting that even the official figures represent the weakest growth performance in decades outside of the pandemic years. She emphasized that exports and production investments are currently sustaining growth, which could otherwise plummet to as low as three percent.
In 2024, China’s exports surged to a record value of approximately 3.4 trillion euros, showcasing a strong recovery.
However, other sectors, particularly real estate, remain mired in crisis, and domestic demand continues to falter despite various economic initiatives introduced by the government since the previous autumn. Garcia Herrero pointed out that the Chinese leadership’s strategy leans heavily on exports and maintaining low prices, even in the face of geopolitical challenges.
Interestingly, deflation, which typically raises alarms among economists due to its potential to stifle consumer spending, is viewed differently by Chinese authorities. Xi Jinping’s speeches indicate a belief that deflation enhances competitiveness by making exports cheaper.
Nevertheless, the current economic climate is challenging for foreign entities, particularly German companies, as consumer confidence in China remains low. The German Chamber of Commerce in China has reported a historic low in sentiment among its members, with only a third of companies anticipating improved business prospects in 2025.
As China’s economy strives to navigate these turbulent waters, the need for effective strategies to boost domestic demand and consumer confidence becomes increasingly apparent.