China Reports 5% Economic Growth, Credits Strong Export Performance

China’s economy recorded a 5% growth rate for 2024, demonstrating the nation’s ability to weather domestic economic challenges. Fuelled mainly by robust export numbers and significant investment in industrial production, this growth came despite lingering problems in its real estate market and consumer spending.
The National Bureau of Statistics shared that the country’s economy surpassed its “about 5%” growth target set a year ago. While doubts around the accuracy of official statistics persist, this growth—driven by exports reaching unprecedented levels—shows the critical role of trade in keeping China’s economic engine running.
This article examines the factors underlying China’s economic growth, including a $1 trillion trade surplus, challenges within domestic spending, and government measures to stabilise the economy.
Mixed Signals in China’s Economy
Real Estate Market Weakness
China’s real estate sector continues to struggle under the weight of a past crash, with its economic scars visible at street markets and the wholesale hubs that cater to construction demands. Vendors dealing in materials like lighting, doors, and fixtures have reported massive drops in footfall. One long-time wholesaler admitted to a sharp decline in sales, stating, “We have to cut costs just to cover our expenses. Otherwise, we won’t survive.”
The fallout from the construction slowdown is significant. Real estate developers have failed to complete projects, middle-class savings tied up in the housing market have eroded, and construction-related job losses have added to overall economic stagnation. The sector’s collapse has not been adequately balanced by other domestic drivers, resulting in consumer spending remaining weak over the past year.
Deflation Fears
Adding to concerns, prices across China’s economy fell 0.7% in 2024, marking a prolonged period of deflation. The phenomenon, while seemingly beneficial for consumers, makes debt repayments and economic recovery particularly challenging. It has raised alarms among local governments, businesses, and households burdened by debt.
Minimal Domestic Consumption Recovery
While government-led schemes have tried to boost spending, particularly in retail, their impact has been relatively small. Overall retail sales rose by just 3.5% last year, a lower-than-expected figure despite record-breaking car purchases in the final two months.
Efforts such as the “cash for clunkers” programme—providing subsidies for replacing old vehicles and appliances with more efficient models—initially faltered with small incentives. However, the widened financial support for such schemes helped strengthen sales by the latter half of the year. Some fear this initiative redirects spending towards big-ticket items while drawing away from more diverse discretionary spending like dining or travel.
Exports: The Engine Driving Growth
Record Trade Surplus
China’s economic success in recent years owes much to its growing trade surplus, which surged to nearly $1 trillion in 2024—a world record. December alone accounted for $104.8 billion of this total, the largest trade surplus any single nation has recorded in a month.
Automotive and Tech Products Lead
Lead exports included electric and plug-in hybrid vehicles as well as tech products like smartphones. China shipped enough electric cars last year to theoretically form a line stretching from Beijing to Rome. Interestingly, gasoline-powered cars also played a prominent role, as automakers found international buyers for models no longer in high demand within their domestic market. Economic demand for internal combustion engine (ICE) cars in China has almost halved since 2017, underscoring the nation’s rapid shift towards greener energy solutions.
Chinese brands also gained footholds in international markets by capitalising on competitive pricing and increasing global demand for affordable electric solutions. Factory output for export rose sharply, with companies using profits to reinvest in new equipment and manufacturing capacity. Investments in these sectors escalated by 9.2% last year, ensuring supply can cater to the burgeoning overseas appetite for Chinese goods.
Consumers Overseas Make Up for China’s Slack
Exports are thriving primarily because of weak domestic purchasing power. Middle-class consumers in China are spending less, putting pressure on domestic markets for goods ranging from electronics to construction materials. However, export markets are bridging the gap. Strong external demand ensures production lines in China stay active, even when local buying dwindles.
Government Policies to Stabilise Growth
Infrastructure Investment
The Chinese government has countered construction-related job losses by promoting nationwide infrastructure projects. Roads, bridges, and public works have become key areas of focus. However, much of this activity relies on local governments, many of which lack the funds to make such ambitious projects a reality.
Wage and Bond Measures
To address an income deficit among government workers and fund public spending projects, authorities have raised salaries for state employees and enabled local governments to issue new bonds. Combined, these strategies are aimed at offsetting reduced revenue from land leases that had previously provided substantial funding.
Reviving Consumer Spending
The Ministry of Commerce has introduced expanded subsidy programmes to refuel household expenditure. Beyond cars, incentives now extend to upgrading household appliances like dishwashers and microwaves. Officials are optimistic that these measures will encourage retail growth without merely cannibalising other areas of the economy.
Mixed Results
The short-term boost from car purchases and large-scale programmes has been effective, but some economists remain cautious. Critics argue that while targeted initiatives increase spending in select sectors, they do not always trickle down to improve broader consumption trends.
Challenges Ahead for China
Despite the promising numbers, challenges remain for China’s economic future. Domestic consumption is only beginning to recover, weighed down by deflation, high debt, and a cautious middle class reluctant to remobilise savings. Doubts surrounding the accuracy of official economic data further complicate analyses, with some economists suggesting actual growth rates over the past few years may be far lower than reported.
Underlying these issues is a fundamental question of sustainability. Without significant structural reforms, experts question whether China can sustain its growth trajectory solely on export success and limited domestic policy measures. Additionally, the expiration of consumer incentives for cars and appliances in December 2024 could lower purchasing momentum in early 2025.
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