The latest China Economic Update, titled “Reviving Demand, Regaining Momentum,” released by the World Bank today, estimates China’s full-year growth at 4.9% in 2024, with a slight deceleration projected to 4.5% in 2025. The report underscores that while recent policy easing offers moderate support, household and business confidence remains fragile, and the property sector continues to exert downward pressure on the economy.
To account for the effect of recent policy easing and near-term export strength, the growth forecasts for 2024 and 2025 are revised up by 0.1 and 0.4 percentage points, respectively, compared to the projections in the June 2024 China Economic Update.
China’s economy grew by a robust 4.8% in the first three quarters of 2024, despite facing challenges such as subdued domestic demand and a prolonged property sector downturn. However, growth has moderated since the second quarter, prompting the government to implement policy measures aimed at stimulating demand while maintaining financial stability.
Structural challenges to growth include low consumption, high debt levels among property developers and local governments, and an aging population. “It is important to balance short-term support to growth with long-term structural reforms,” said Mara Warwick, World Bank Country Director for China, Mongolia, and Korea. “Addressing challenges in the property sector, strengthening social safety nets, and improving local government finances will be essential to unlocking a sustained recovery. Clear communication of specific policy measures will be crucial to strengthening the confidence of markets and households.”
The report highlights both domestic and global risks to China’s economic outlook. Domestically, a persistent downturn in the property sector could further weaken investment and local government revenues. Additionally, reduced hiring and lower enterprise profitability could strain the labor market, further dampening consumption.
Globally, uncertainties around trade pose challenges to China’s exports. On the upside, higher-than-expected fiscal spending and more decisive measures to stabilize the property market could improve the growth outlook beyond current projections.
The report also explores the importance of enhancing economic mobility to bridge rural-urban divides and reduce income inequality. While China’s middle class has grown significantly since the 2010s, reaching 32% of the population in 2021, approximately 55% of the population remains economically insecure.
“Expanding opportunities for everyone to move up the economic ladder is important for achieving China’s goal of common prosperity,” said Elitza Mileva, World Bank Lead Economist for China. “Equal opportunities and greater social mobility will, in turn, support growth through higher human capital and greater entrepreneurship and risk-taking by economically secure households.”
Structural reforms to revitalize growth, improve social safety nets, and unlock greater domestic consumption are seen as key to ensuring that China’s economy regains momentum while transitioning toward a more sustainable, demand-driven growth model.
