Jamie Spencer
The World Bank has revised its economic growth forecasts for China for 2024 and 2025, projecting modest improvements but cautioning about lingering issues that could dampen recovery. While policy easing and strong exports have boosted near-term growth prospects, subdued household and business confidence, along with challenges in the property sector, remain significant hurdles for the world’s second-largest economy.
Revised Growth Projections
The World Bank now expects China’s gross domestic product (GDP) to grow by 4.9% in 2024, slightly up from its earlier forecast of 4.8%. For 2025, growth is projected at 4.5%, higher than the previous estimate of 4.1%.
These figures align closely with Beijing’s stated target of “around 5%” growth for 2024, a goal Chinese officials have expressed confidence in achieving.
Key Challenges Facing the Economy
China has faced a difficult year, primarily due to:
- A property sector crisis, which has led to falling home prices and a negative wealth effect.
- Tepid domestic demand, reflecting slower household income growth.
- The looming threat of higher U.S. tariffs under President-elect Donald Trump’s administration, which could further impact exports.
Mara Warwick, the World Bank’s country director for China, emphasized the importance of addressing structural challenges. “Addressing challenges in the property sector, strengthening social safety nets, and improving local government finances will be essential to unlocking a sustained recovery,” she said.
Policy Measures to Support Growth
To stimulate the economy, Chinese authorities have announced a record issuance of 3 trillion yuan ($411 billion) in special treasury bonds for 2025. These funds, aimed at boosting public spending, represent an aggressive fiscal policy response to support growth.
The details of this plan will be officially unveiled at the National People’s Congress in March 2025, but the scale of the bonds highlights the urgency of addressing economic weaknesses.
Real Estate Sector Outlook
Despite ongoing efforts by housing regulators to stabilize the real estate market, the World Bank does not anticipate a significant turnaround in the sector until late 2025. The property sector’s struggles continue to weigh heavily on household wealth and consumer confidence.
Broader Economic Implications
China’s middle class has grown substantially over the past decade, accounting for 32% of the population in 2021. However, the World Bank estimates that 55% of Chinese citizens remain “economically insecure,” underlining the need for policies that generate sustainable opportunities for a broader segment of the population.
Balancing Growth and Structural Reforms
Warwick stressed the importance of balancing short-term growth support with long-term structural reforms. Policymakers face the dual challenge of reviving economic momentum while implementing measures to address systemic issues, including social safety nets and local government finances.
Conclusion
While China’s growth prospects have slightly improved, the country remains at a crossroads. Effective fiscal and regulatory interventions will be critical in navigating near-term headwinds and ensuring a sustainable recovery.
