China's Economy: Growth Amidst Global Challenges

The Chinese economy met its growth target last year, buoyed by a late stimulus and a strong export push ahead of looming US tariffs. Data from the National Bureau of Statistics showed on Friday that the gross domestic product rose by 5%, slightly above the median forecast of 4.9% in a Bloomberg survey. President Xi Jinping pledged at the turn of the year to achieve the target of around 5%. A significant bright spot was exports, which were strong, especially when excluding the price effect, explained Jacqueline Rong, chief economist for China at BNP Paribas. However, the biggest challenge this year remains the US tariffs. In light of Donald Trump's impending return to the White House, China plans further monetary easing and increased public spending to avoid losses from potentially drastic US tariffs on Chinese goods. Following the release of the data, the yuan appreciated by 0.1% on both the onshore and offshore markets, and the benchmark Chinese stock index, the CSI 300, managed to recover an earlier loss of 0.5%. The figures show that Beijing's strategic realignment since the end of September helped to cope with the headwinds of the years-long real estate downturn and persistent deflation. In the last quarter of the year, economic growth accelerated to 5.4% year-on-year and 1.6% quarter-on-quarter, each the highest rates in several quarters. Industrial production was surprisingly robust, as global companies brought forward shipments fearing new tariffs. Yet, while factories were operating at full capacity, domestic demand stagnated; retail sales grew more slowly and unemployment rose. China's trade surplus reached a record level last year despite growing concerns about new US tariffs and complaints about cheap Chinese goods. The nominal GDP growth rate, unadjusted for falling prices, was 4.2%, marking the slowest growth since 2020. The National Bureau of Statistics described the economy as "generally stable" in 2024 but pointed to increased external pressures and challenges such as insufficient domestic demand. This year, fiscal policy is taking center stage in China's stimulus program, while monetary measures remain cautious due to currency pressures and capital outflows.