Economy

China: 2024 GDP target achieved (+5%), but growth is at historic lows for decades

China officially celebrates the state of its economy (2024 GDP target reached with +5%), on the eve of Trump’s inauguration (and tariffs) in the White House. But the reality of the Dragon is that of a country in deflation, with growth at one of the lowest levels in recent decades, a demographic crisis that does not stop, stagnant consumption and expansion numbers drugged by exports. And while Beijing spreads the 2024 picture, from Davos, where the World Economic Forum opens on Monday, gloomy forecasts arrive for the world economy in 2025, with China in a sharp slowdown and a Europe in more evident crisis.

The Dragon exceeded expectations in the fourth quarter of 2024, recording GDP growth of 5.4%, but closed the year with one of the weakest economic performances in decades (net of the Covid period). The 5% achieved is in line with the official target set by Beijing, but marks a slowdown compared to the 5.2% of 2023 and highlights the country’s crisis. And that positive sign, supported largely by record exports and domestic stimulus measures, is an illusion of solidity in an economic context marked by chronic weaknesses and gloomy prospects.

What pushed 2024 was certainly the “doped” data: Chinese foreign trade reached record levels, with an increase of 10.7% in December and an annual total of around 3,470 billion dollars, marking an increase of 7.1 % compared to 2023. But exports made in China, despite being the pillar of the Chinese economy, are strongly dependent on a slowing global demand and are increasingly in balance as the (now here we are) of the increase in American duties by the new American president. The backbone of the Chinese economy, therefore, was a strong crutch in 2024, but is creaking for 2025.

And then there is demographic pressure, one of the strongest obstacles for years. The population fell for the third consecutive year, falling by 1.39 million. Added to this is the aging population and low birth rate which are a threat to the workforce and long-term consumption capacity, amplifying the difficulties of an economic system that is struggling to diversify. It is true that 2024 recorded an increase in births (520,000 more than 2023), but the numbers are not enough to reverse the trend that leads analysts, including internal ones, to predict a drastic decline in the Chinese working population in the coming decades.

Added to this are the real estate crisis and the stagnation of domestic consumption, with an unemployment rate that rose to 5.1% in December. The progress in industrial production (+6.2%) and retail sales (+3.7%) is not sufficient to generate the autonomous momentum that Beijing needs. Exports are not enough.

Meanwhile from Davos, where the World Economic Forum opens next week, the forecasts for 2025 are not rosy, for China, but not only. The global economy is set to slow further in 2025, with Europe particularly exposed. 74% of the economists interviewed expect “weak” or “very weak” growth for the Old Continent and a further step backwards for China, with a reduction to 4.4%. The forecasts save the United States in part. Here Davos talks about temporary momentum, but structural problems such as rising public debt and higher inflation, as an effect of protectionist trade policies.

The Davos report highlights the risk of fragmentation. 94% of experts predict a further misalignment in the trade of goods and an isolationism of the United States, a weakness of Europe and a worsening of geopolitical tensions that will undermine the globalization thanks to which China has prospered in recent years. Forecasts are for an increase in volumes, but for growing regionalization and an increase in trade tensions, accelerated by protectionism, conflicts and sanctions. This risks marginalizing Europe compared to the United States and China.

Beijing has a crucial role in all this. The challenge to avoid the growth of less than 4% feared by experts is to relaunch domestic demand, reform the labor market and address the demographic problem. It won’t be easy. And if the Dragon fails to find a sustainable way out, the impact risks reaching the rest of the world too.