China expected to hit 2024 GDP target, but tariffs loom
2025.01.16 18:20
By Kevin Yao
BEIJING (Reuters) – China’s economy likely rebounded in the fourth quarter as several rounds of policy stimulus kicked in, enabling the government to largely meet its 2024 growth target, though the risk of new U.S. tariffs could hold back a broader recovery.
A Reuters poll predicts gross domestic product (GDP) grew 5.0% in October-December from a year earlier, quickening from the 4.6% pace in the third quarter.
Full-year economic expansion was expected to come in at 4.9%, largely meeting the official target of around 5%, the poll found. The economy grew 5.2% in 2023.
Larry Hu, chief China economist at Macquarie, said Beijing’s policy pivot in September underscored its resolve to defend the growth target. Beijing has rarely missed its growth targets in the past.
“Thanks to this, GDP growth in the fourth-quarter may rebound above 5% year-on-year, so that full-year GDP growth could reach the target of around 5%,” Hu said in a note.
“If 2025 GDP target is set at around 5% again, how much policymakers will do to stimulate the weak track (consumption/property) will depend on the impact from tariffs on the strong track (exports/manufacturing).”
On a quarterly basis, the economy is forecast to grow 1.6% in the fourth quarter, versus the 0.9% pace in July-September.
Policymakers have rolled out a blitz of stimulus measures since September, including interest rate cuts, cash injections and steps to tackle hidden debt of local governments. They have also expanded a trade-in scheme for consumer goods such as appliances and autos, helping to revive retail sales.
The world’s second-biggest economy has struggled for traction since a post-pandemic rebound quickly fizzled out, with a protracted property crisis, mounting local debt and weak consumer demand weighing heavily on activity.
Exports, one of the few bright spots, could lose steam as President-elect Donald Trump, who has proposed hefty tariffs on Chinese goods, is set to return to the White House next week.
But even as strong exports propelled the country’s trade surplus to a record high of $992 billion last year, the yuan currency has come under selling pressure. A dominant dollar, sliding Chinese bond yields and the threat of higher trade barriers have pushed the yuan to 16-month lows.
TOUGH BATTLE AHEAD
At an agenda-setting meeting in December, Chinese leaders pledged to increase the budget deficit, issue more debt and loosen monetary policy to support economic growth in 2025.
Leaders have agreed to maintain an annual growth target of around 5% for this year, backed by a record high budget deficit ratio of 4% and 3 trillion yuan ($409.2 billion) in special treasury bonds, Reuters has reported, citing sources.
Such a target could be more ambitious than last year given the economy’s slowing trajectory and increased external headwinds.
China’s economic growth is likely to slow to 4.5% in 2025 and cool further to 4.2% in 2026, according to the poll.
The government is expected to unveil growth targets and stimulus plans during the annual parliament meeting in March.
China’s central bank is expected to deploy its most aggressive monetary tactics in a decade this year as it tries to revive the economy, but in doing so it risks quickly exhausting its firepower.
Separate data on December activity, to be released alongside GDP data, is expected to show consumption picked up while factory output growth steadied.
Retail sales, a key gauge of consumption, are forecast to grow 3.5% in December from a year earlier, versus a 3.0% rise in November. Factory output is seen growing 5.4% in December year-on-year, matching November’s rise.
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