China's economy grows 5% in 2024, driven by exports, stimulus measures

China's economy expanded at a 5% annual pace in 2024, slower than the year before but in line with Beijing's target of around 5% growth, helped by strong exports and recent stimulus measures.

In quarterly terms, the economy grew 5.4% in October-December, the government reported Friday.

Exports accelerated as companies and consumers rushed to beat potential tariff hikes incoming President-elect Donald Trump may impose on Chinese goods.

The national economy was generally stable with steady progress and new achievements were made in high-quality development, according to the report by the National Bureau of Statistics on Friday.

Particularly, with a package of incremental policies being timely rolled out, the social confidence was effectively bolstered and the economy recovered remarkably, it said.

Manufacturing was a strong engine for growth last year, with industrial output jumping 5.8% from a year earlier. Total retail sales of consumer goods grew 3.5% at an annual rate.

Exports expanded 7.1% in annual terms, while imports grew 2.3%  The world's second largest economy has struggled with weaker consumer spending and resulting deflationary pressures as its recovery after the COVID 19 pandemic faltered and the property sector, once a main driver of business activity, fell into a downturn.

The Chinese economy grew at a 5.2% annual rate in 2023, and economists have forecast that it will slow further in coming years.

Some economists say the economy is growing at a slower pace than shown in official estimates.

The precise achievement of the official growth target is highly dubious at a time when most indicators of economic activity and financial markets are flashing red, Eswar Prasad, an economics professor at Cornell University, said in an emailed comment.

The economy continues to be beset by a combination of weak domestic demand and persistent deflationary pressures, in addition to a hostile external environment that could limit exports, he said.

Trump, who will be inaugurated next week, has pledged to increase US import duties on Chinese goods. This week, the Biden administration also imposed further restrictions on exports of advanced semiconductors and technology as it sought to maintain the US lead on advanced technologies and block China's access.

The ruling Communist Party has rolled out a series of stimulus measures, including reducing banks' reserve requirement ratios, cutting interest rates and frontloading billions from its budget in 2025 to fund construction projects. It has ordered banks to lend to beleaguered property developers that were left mired in debt after authorities cracked down on excess borrowing.

Beijing has also expanded a trade-in scheme for consumer goods and raised the wages of millions of government workers to revive domestic demand.

Those incremental moves need to be accompanied by broader structural reforms, some economists say, that will improve productivity and make the economy less reliant on construction and export manufacturing. In particular, private businesses remain wary of boosting investment or hiring after years of policy shifts that have added to uncertainty over their role in the economy.

China needs a strong and multi-pronged policy package to revive growth momentum, Prasad said. Such a package would need to include substantial and well-targeted monetary and fiscal stimulus, complemented by reforms and other measures to revive private sector confidence.