China is navigating a complex economic landscape as it seeks to stabilize growth amidst rising global tariffs and internal challenges. With a heavy reliance on manufacturing, China has exported a record number of electric vehicles, 3D printers, and industrial robots to counteract its economic slowdown. However, the anticipated slowdown in 2025, compounded by a decline in exports, presents significant challenges. Over 900 protests from June to September 2024, primarily led by workers and property owners, highlight increasing domestic social strains, marking a 27% increase compared to the previous year. These protests underscore concerns about economic grievances and wealth erosion in the nation.
Beijing has implemented several measures to stabilize the economy, including stepping up exports and implementing policies to support the property market. Despite these efforts, experts believe these measures will only partially offset potential new US tariffs. Household consumption contributed a mere 29% to China's economic activity in the last quarter of 2024, a marked decline from the 59% pre-pandemic levels. The property market, a significant component of China's economy accounting for nearly a third of its size before the real estate crisis, continues to be a focal point for economic reforms.
"China needs to stabilise property markets and create sufficient jobs to ensure social stability." – Mr Ding from Standard Chartered Bank
The property market slump is expected to bottom out this year but is predicted to be a "multi-year drag" on China's economic growth. While President Xi Jinping targets an annual growth of "around 5%" for the economy, concerns about social stability remain paramount for the Chinese Communist Party. The party is particularly worried about social strains resulting from economic grievances and wealth erosion.
"We grow in wind and rain, and we get stronger through hard times. We must be full of confidence." – President Xi Jinping
Exports have been a major driver of China's growth, with Beijing increasing exports to stabilize the economy. Last year, China overtook Japan as the world's biggest car exporter, underscoring its manufacturing prowess. However, with new tariffs imposed by the US, Canada, and the European Union to protect domestic jobs and businesses, Chinese exporters may need to pivot their focus to other regions.
"We expect them to choose the former." – Goldman Sachs' Chief China Economist Hui Shan
The World Bank forecasts that China will achieve an annual growth rate of 4.9%, aided by lower borrowing costs and rising exports. Nevertheless, experts caution that achieving sustainable growth requires more than just export-led strategies. There is an urgent need to reignite household consumption and stabilize domestic markets.
"China needs to bring back the animal spirit of the population and we are still far from that." – Shuang Ding, Chief Economist for Greater China and North Asia at Standard Chartered Bank
Amidst these challenges, Beijing's policy measures aim to address both immediate economic pressures and long-term structural reforms. The government's focus on stabilizing the property market is critical, given its substantial impact on the broader economy. Policies are being crafted not only to stimulate growth but also to ensure social cohesion and stability.