Author: Kevin Yao
BEIJING (Reuters) – China’s economy likely rebounded in the fourth quarter as several rounds of stimulus were launched, allowing the government to largely meet its 2024 growth target, although the risk of new U.S. tariffs could hamper a broader recovery.
A Reuters poll forecast gross domestic product (GDP) rose 5.0% in the October-December period from a year earlier, accelerating from a 4.6% pace in the third quarter.
Full-year economic expansion is expected to be 4.9%, well ahead of the official target of around 5%, the survey showed. The economy grew by 5.2% in 2023.
Larry Hu, chief economist for China at Macquarie, said Beijing’s policy shift in September underscored its determination to defend its growth target. Beijing has rarely missed its growth targets in the past.
“Thanks to this, fourth-quarter GDP growth may recover above 5% year-on-year, so full-year GDP growth may reach a target of around 5%,” Hu said in a note.
“If the 2025 GDP target is reset to around 5%, how much policymakers do to stimulate the weak path (consumption/assets) will depend on the impact of tariffs on the strong path (exports/production).”
On a quarterly basis, the economy is expected to grow by 1.6% in the fourth quarter, compared to growth of 0.9% in the July-September period.
Policymakers have launched a raft of stimulus measures since September, including interest rate cuts, cash injections and steps to tackle hidden local government debt. They also extended the trade-in scheme for consumer goods such as appliances and cars, helping to revive retail sales.
The world’s second-largest economy has struggled to turn around since the post-pandemic recovery quickly petered out, with a lingering property crisis, rising local debt and weak consumer demand weighing heavily on activity.
Exports, one of the few bright spots, could lose steam as President-elect Donald Trump, who has proposed heavy tariffs on Chinese goods, is set to return to the White House next week.
But even as strong exports lifted the country’s trade surplus to a record $992 billion last year, the yuan currency has come under selling pressure. A dominant dollar, sliding Chinese bond yields and the threat of higher trade barriers pushed the yuan to 16-month lows.
A HARD BATTLE AWAITS
At an agenda-setting meeting in December, China’s leaders pledged to increase the budget deficit, issue more debt and ease monetary policy to support economic growth in 2025.
Leaders agreed to maintain an annual growth target of around 5% for this year, supported by a record high budget deficit ratio of 4% and 3 trillion yuan ($409.2 billion) in special government bonds, Reuters reported, citing sources.
Such a goal could be more ambitious than last year, given the slowdown in the economy’s trajectory and increased external headwinds.
According to the survey, China’s economic growth is likely to slow to 4.5% in 2025 and cool further to 4.2% in 2026.
The government is expected to unveil growth targets and stimulus plans during the annual meeting of parliament in March.
China’s central bank is expected to deploy its most aggressive monetary tactics in a decade this year as it tries to revive the economy but risks quickly exhausting its firepower.
Separate activity data for December, which will be released alongside GDP data, is expected to show that consumption rose while factory output growth held steady.
Retail sales, a key measure of spending, are forecast to rise 3.5% in December from a year earlier, up from 3.0% growth in November. Factory output is estimated to have risen 5.4% year-on-year in December, matching November’s growth.
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