China’s Economy Ends 2024 on Stronger Ground than Anticipated

BEIJING (Reuters) – China’s economy ended 2024 on better footing than expected, helped by a flurry of stimulus measures. However, a new trade war with the United States and weak domestic demand could undermine broader recovery confidence this year.

Exports and Trump’s Tariffs

Exports, among the few bright spots, may falter as U.S. President-elect Donald Trump, who has proposed hefty tariffs on Chinese goods, is set to return to the White House next week.

For the full year 2024, the world’s second-largest economy grew 5.0%, according to data from the National Bureau of Statistics (NBS) released on Friday, meeting the government’s annual growth target of around 5%. Analysts had expected 4.9% growth.

The economy grew 5.4% in the fourth quarter from a year earlier, significantly exceeding analysts’ expectations and marking the quickest growth since the second quarter of 2023. Analysts polled by Reuters had forecast a fourth-quarter gross domestic product (GDP) expansion of 5.0%, up from the third-quarter’s 4.6% pace as support measures began to emerge.

> “China’s economy is showing signs of revival, led by industrial output and exports,” said Frederic Neumann, chief Asia economist at HSBC in Hong Kong. However, he cautioned that strong GDP figures might have been buoyed by front-loading of shipments to the U.S., which will eventually lead to a downturn once tariffs take effect.

Looking Ahead

As exports face pressure in 2025 due to U.S. import restrictions, there will be an increasing need for domestic stimulus.

Following the GDP data, Chinese stocks saw some support, with mainland blue chips rising 0.3% and Hong Kong’s Hang Seng adding 0.14%. The yuan remained stable against the dollar.

On a quarterly basis, GDP grew 1.6% in October-December, matching forecasts and compared to a revised 1.3% gain in the previous quarter.

China’s economy has faced challenges since a post-pandemic rebound waned, facing a prolonged property crisis, rising local debt, and weak consumer demand. Policymakers have pledged more stimulus this year, although analysts indicate the extent of these measures may hinge on how aggressively Trump enacts tariffs and sanctions.

Despite a record trade surplus of $992 billion, the yuan has come under pressure due to a dominant dollar and sliding Chinese bond yields.

Economic Indicators

Recent data from December indicated the economy gained momentum heading into the new year, bolstered by government support. Signs of recovery appeared in the property sector, with new home prices stabilizing for the first time since June 2023. Nevertheless, property investment fell 10.6% year-on-year, the largest decline on record.

Industrial output grew 6.2% annually in December, accelerating from 5.4% in November and exceeding the 5.4% increase forecasted in a Reuters poll, marking the fastest growth since April last year. Retail sales, a consumer demand metric, rose 3.7% last month, up from 3.0% in November, as consumers prepared for the upcoming Lunar New Year holidays.

> “It will require substantial and persistent policy stimulus to boost economic momentum and sustain the recovery. The fiscal policy stance must be more proactive to address the rising unemployment rate,” argued Zhiwei Zhang, chief economist at Pinpoint Asset Management in Hong Kong.

Despite the festive atmosphere, businesses hesitated to hire before the holiday, and the nationwide survey-based jobless rate climbed to 5.1% in December from 5.0% in November.