China’s fourth-quarter GDP grows at 5.4%, beating market expectations

In the last quarter of 2024, China’s economic activity surged beyond expectations due to the implementation of stimulus measures, enabling the government to achieve its annual growth target.

The nation’s GDP grew by 5.4% in Q4, surpassing the 5.0% growth anticipated by economists polled by Reuters, and outperforming earlier quarters—4.6% in Q3, 4.7% in Q2, and 5.3% in Q1.

This robust performance in the fourth quarter resulted in an overall GDP growth of 5.0% for 2024, as reported by China’s National Bureau of Statistics on Friday, aligning perfectly with the government’s target of “around 5%.”

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted that the policy shift in September last year stabilized the economy in Q4; however, he emphasized the need for substantial and continuous stimulus to sustain economic recovery.

The growth in 2024 was slower than the 5.4% rise recorded in 2023, following the pandemic. As part of annual revisions to preliminary figures, the statistics bureau revised the 2023 GDP growth to 7.4%, as estimated by CNBC from official data.

In December, retail sales increased by 3.7% year-on-year, surpassing Reuters’ forecast of 3.5%. Industrial production also saw a 6.2% rise, exceeding the anticipated 5.4%, highlighting the disparity between domestic production and weak demand.

For the full year, fixed asset investment in 2024 rose by 3.2%, slightly below the 3.3% forecast by a Reuters poll, with real estate investment declining sharply by 10.6% compared to the period from January to November.

Kang Yi, the head of the statistics bureau, indicated signs of recovery in the real estate sector, asserting that its negative impact on economic growth was diminishing while stating that emerging growth drivers, particularly in digital technology, were becoming more significant.

The urban unemployment rate crept up to 5.1% in December from 5.0% the previous month.

Disposible income for urban residents increased by 4.4%, which is slower than the pace of economic growth, while rural residents saw a 6.3% rise in their income in 2024.

The CSI 300 index, which tracks mainland China’s blue-chip stocks, rose by 0.31% in response to favorable data. The offshore yuan strengthened slightly to 7.3398 per U.S. dollar, and the benchmark 10-year government bond yield fell by 2 basis points to 1.638%, according to LSEG data.

According to Chaoping Zhu, a global market strategist at J.P. Morgan Asset Management based in Shanghai, the stock market’s muted reaction to the data release shows investor caution while they await more clarity on policies post-Chinese New Year.

Zhu noted that with appropriate policies in place, there is potential for domestic consumers and business confidence to recover.

Despite seemingly positive headline figures, some economists argue that China’s economic recovery may not be as promising as it appears.

Even with the reported uplifts in real GDP, China’s economy has been experiencing deflation for the seventh consecutive quarter, according to Larry Hu, chief China economist at Macquarie.

Hu expressed skepticism about China’s ability to achieve higher inflation, acknowledging policymakers’ capability to deliver 5% real GDP growth in 2025, but questioning their potential to foster higher inflation, which hinges on fiscal and housing stimulus to enhance domestic demand.

The consumer inflation rate has remained just above zero, with wholesale prices continuing to fall for the 27th month as of December, according to recent official data.

Kang reaffirmed that boosting consumption remains Beijing’s primary focus this year, while also recognizing the ongoing weakness in consumer spending.

This year, he cautioned that the impact of unfavorable external factors could intensify.

Recent data was released just days ahead of Donald Trump’s inauguration as the next U.S. president on January 20. Trump has indicated plans to impose at least a 10% tariff on Chinese goods shortly after taking office and has appointed several China hawks to significant cabinet positions.

The growth momentum, influenced by an increase in exports, is likely to continue into the first quarter of this year, as noted by Erica Tay, director of macro research at Maybank. However, she warned it could negatively affect GDP growth in the latter half of the year, regardless of Trump’s tariffs, as foreign importers currently hold substantial stockpiles.

The data released indicated that domestic growth remains weak, with retail sales showing only a modest response to trade-in subsidies, as per Tay’s observations on sluggish consumer expenditures.

According to the statistics bureau, the national population fell to 1.408 billion in 2024, marking a decrease of 1.39 million from 2023, which itself had seen a drop of 2.08 million from the previous year.

This population decline, occurring even with a rebound in birth rates, highlights a worsening demographic crisis, as emphasized by Tianchen Xu, senior economist at the Economic Intelligence Unit, who pointed out an uptick in the death rate to 7.76% in the last year, compared to 7.1% before the pandemic.

China has been actively working to stimulate economic growth through various measures, as continued uncertainties about real estate and income prospects hinder consumer spending and business confidence, exacerbating deflation risks.

Since late September, Chinese officials have advocated for stabilizing the real estate decline, lowering interest rates, and introducing a five-year fiscal package worth 10 trillion yuan (approximately $1.4 trillion) to alleviate local governments’ financing issues. Beijing has also expanded a consumer trade-in program for used cars and appliances, providing discounts for purchasing new ones.

“They are banking on significant policy stimulus and reforms in 2025 to energize the economy, enhance domestic demand, and counteract disinflationary trends,” remarked Bruce Pang, a distinguished research fellow at the National Institution for Finance and Development.

Top leadership has committed to “proactive” fiscal measures and a “moderately loose” monetary policy for this year. While some analysts predict that stimulus effects may begin to manifest this year, a notable impact may take longer to be realized.

New official growth targets for 2025, along with additional stimulus measures, are expected to be announced during the annual parliamentary meetings in March. Economists anticipate that Beijing will maintain its GDP growth target for 2025 at around 5%, if not slightly lower.