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China’s economy grew 5 percent last year thanks to a sharp rise in manufacturing, official data showed, as companies began exporting in anticipation of higher U.S. tariffs and as Beijing stepped up stimulus efforts.
The economy “recovered exceptionally” in the fourth quarter of 2024, the Office for National Statistics said, growing 5.4 percent year-on-year and recovering from slower growth in the third quarter.
“With a package of incremental [stimulus] politics. . . confidence has been effectively strengthened and the economy has recovered significantly,” the NBS said in its 2024 GDP data release on Friday.
The annual figure, which slightly beat economists’ forecasts of 4.9 percent, trailed last year’s 5.2 percent growth and was the lowest since 1990, excluding years disrupted by the coronavirus pandemic.
The data comes as Beijing tries to revive strong growth in a two-speed economy, with strong exports and manufacturing offsetting weak household sentiment.
In September, the central bank announced monetary easing and support for the stock market. Beijing also has started the program refinance local government debt and accelerate stimulus spending focused on infrastructure and other areas.
But economists are concerned that China is at risk of entrenched deflation. Producer prices have been in the red for more than two years, while consumer prices recorded a growth of only 0.1 percent in December.
NBS director Kang Yi said at a press conference that 2024 could be “described as very turbulent, marked by heightened geopolitical conflicts and escalating trade protectionism.”
Analysts expect Beijing to set its official 2025 growth target at around 5 percent for the third straight year when its permanent parliament meets in March, although trade facing challenges is expected considering future US President Donald Trump’s threats of higher tariffs.
“The adverse effects of the external environment are deepening. Domestically, there is still insufficient demand,” Kang said, adding that “employment and income growth” are under pressure.
Retail sales rose 3.5 percent last year as consumer confidence remained weak amid a prolonged housing slump, while industrial production rose 5.8 percent thanks to strong manufacturing growth.
Residential real estate prices fell in China’s biggest cities, but new home prices rose in Shanghai.
In another sign of the country’s long-term structural challenges, China’s population shrank by nearly 1.4 million in 2024, its third straight year of decline, as a slight year-over-year increase in births to 9.54 million outpaced 10.93 million deaths .
While China’s economic growth beat expectations, the headline figure “masks some underlying vulnerabilities,” said Frederic Neumann, chief Asia economist at HSBC.
“The surge was really driven by industrial production, hinting at support from the front-loading of exports in anticipation of US import curbs,” Neumann said. “This will inevitably lead to a rebound as US import restrictions start to bite.”
China’s trade surplus with the rest of the world reached a a record of almost a billion dollars in 2024, customs data showed last week, thanks to strong export growth as Chinese manufacturers ramped up production to offset weak domestic demand. Import growth remained more modest.
“The current Achilles heel of the Chinese economy is actually the undecided consumer,” Neumann added. “All this points to the need for greater incentives, especially the need to support the purchasing power of consumers.”
The release also highlighted doubts about China’s official data, which some analysts increasingly worry do not reflect underlying weakness in the economy.
“The apparent achievement of the Chinese government’s growth target is a Pyrrhic victory that further erodes the credibility of official data and, at best, reflects an economy still plagued by hidden weaknesses and a loss of confidence in government policymaking,” said Cornell professor Eswar Prasad. University and Senior Fellow at the Brookings Institution.
Morgan Stanley analysts said the better-than-expected growth in the fourth quarter “could be short-lived” and could soften from the second quarter due to increased exports and insufficient stimulus measures.
“We think the better data likely reduced the sense of urgency in Beijing, and policy could continue to underperform on the housing and welfare fronts,” they wrote in a note.
China’s CSI 300 index of companies listed on the continent rose 0.5 percent in morning trade after the data release, after beginning a decline earlier in the day.
The benchmark is still down about 14 percent from its peak since Oct. 8, when stimulus announcements boosted stocks.
Additional reporting by William Sandlund and Haohsiang Ko in Hong Kong, William Langley in Guangzhou and Wenjia Ding in Beijing
