Economic analysis of 2024 and inferences for 2025

Editor's note: Qin Yong, a special commentator on current affairs for CGTN, is a Special Guest Researcher of Shanghai Development Research Foundation(SDRF). The article reflects the author's opinion and not necessarily the views of CGTN.

In the fourth quarter of 2024, China's year-on-year GDP growth rate rebounded to 5.4 percent from 4.6 percent in the third quarter, surpassing the market expectation of 5 percent. The strong expansionary policies implemented since the end of September significantly boosted the economic growth momentum in the fourth quarter.

In December, the year-on-year growth rate of industrial added value rose to 6.2 percent from 5.4 percent in November, exceeding the market expectation of 5.4 percent. Exports played a crucial role. Due to the "rush to export" effect under the threat of tariffs and the acceleration of overseas layout by Chinese enterprises in anticipation of tariffs, the year-on-year export of general machinery increased by 15.0 percentage points to 29.0 percent; the year-on-year growth rate of household appliance exports increased by 4.0 percentage points to 14.1 percent in December; and automobile exports also improved remarkably in December. There was a clear overlap between the industries with increased exports and those with higher industrial added value.

The nominal year-on-year growth rate of total retail sales of consumer goods in December increased to 3.7 percent from 3 percent in November. Generally, "trade-in policy" related items such as household appliances, communication equipment, and daily necessities remained the key drivers of the growth in total retail sales of consumer goods.

Regarding fixed asset investment, the year-on-year growth rate in December slightly decreased to 3.2 percent percent from 3.3 percent in November. In terms of sectors, midstream and upstream manufacturing industries generally maintained a high level of prosperity. Among them, the investment in special equipment, metal products, general equipment, non-ferrous smelting, and other industries registered relatively high year-on-year growth rates ranging from 10.7 percent to 19.7 percent; while investment in downstream industries such as food, automobile manufacturing, and electronic equipment manufacturing slowed down.

Real estate development investment, which had been a major drag on fixed asset investment in the past two years, saw its year-on-year decline widen to 13.3 percent in December from 11.6 percent in November. However, the high base effect cannot be overlooked. The two year compound growth rate of real estate investment is still recovering marginally. This is attributable to the improvement in demand under supportive policies. The year-on-year growth rate of commercial housing sales revenue in December increased to 2.4 percent from 1.0 percent in November.

For the whole year of 2024, the real GDP growth rate reached 5 percent, meeting the annual growth target, slightly lower than 5.25 percent in 2023. The secondary industry was the key factor in maintaining a relatively stable GDP growth rate. The year-on-year growth rate of industrial added value for the whole year rebounded to 5.8 percent from 4.6 percent in 2023; the cumulative year-on-year growth rate of nominal fixed asset investment was 3.2 percent, also slightly up from 3 percent in 2023. 

In contrast, the decline in the growth rate of the tertiary industry's GDP was the most significant. The year-on-year growth rate of total retail sales of consumer goods for the whole year also dropped to 3.5 percent from 7.2 percent in 2023. Given that China's service consumption is weaker than goods consumption, it implies that the decline in the service industry may be even more substantial.

In 2025, on the one hand, policies to stimulate consumption should maintain an intensity no less than that in the fourth quarter of 2024; on the other hand, under the impact of Trump's tariffs, overseas demand will also weaken for a certain period. Therefore, policies in 2025 should consider incremental measures.

Finally, from the perspective of China's economic structure, although the market has high expectations for the improvement of fixed investment growth, especially stablizing real estate investment, we believe that the contribution of fixed asset investment demand to economic growth will inevitably decline under the influence of long-term factors such as demographic changes.

Accordingly, the market should set reasonable expectations and explore new economic growth engines in the future path of tilting income distribution towards residents in the economy, improving household income expectations, strengthening the social security safety net, releasing residents' investment and new consumption demands, and achieving the high quality transformation of investment and consumption.

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