China’s Economic Outlook for 2024

China’s economy is projected to grow by about 5% in 2024, according to President Xi Jinping, indicating a likely achievement of its official growth target.

During a New Year’s event, Xi characterized the economy as “overall stable and progressing amid stability,” as reported by Xinhua News Agency. He emphasized that risks in crucial areas are well-managed, with stable employment and inflation rates.

Although the final GDP figure will be confirmed next month, Xi’s remarks mark the end of a year fraught with economic uncertainty. Initially, some viewed the 5% growth goal as a “target without a plan,” but optimism grew following several stimulus measures introduced by policymakers since late September. Economists now predict a growth rate of approximately 4.8% for the year.

Xi suggested that economic support would continue into 2025, affirming the necessity for proactive macroeconomic policies during his New Year’s Eve address to top political advisors.

China plans to target a similar growth rate for 2025, with indications from leaders to implement stronger stimulus measures as needed, especially with the potential for increased U.S. tariffs under President-elect Donald Trump.

The official growth target for 2025 will be unveiled in March during annual legislative sessions. Reports suggest the goal may remain around 5%, while Bloomberg economists forecast a 4.5% growth for the upcoming year.

In December, policymakers committed to boosting growth through higher public borrowing, increased government spending, and monetary easing. They noted a significant shift in monetary policy after 14 years, now adopting a “moderately loose” stance to restore confidence.

Despite these initiatives, challenges like weak domestic demand and export uncertainties continue to burden the economy. Deflation is anticipated to linger into 2025, compounded by a sluggish property market.

While the initial round of stimulus in 2025 may not meet the aggressive interventions necessary to combat deflation, further support might be introduced later if growth indicators decline, similar to this year’s strategy.

The People’s Bank of China (PBOC) is expected to play a crucial role in the upcoming phase of economic easing. Although a liquidity boost through reduced bank reserve requirements has been suggested for the end of 2024, it has not yet been implemented.

PBOC Governor Pan Gongsheng indicated in October a potential reduction of the reserve requirement ratio (RRR) by 25 to 50 basis points, depending on liquidity conditions. During a pivotal economic meeting in December, leading officials pledged to lower the RRR at an “appropriate time”, although specific details remain unclear.