New Delhi: As countries devise new strategies to address trade tariffs imposed by the US government, domestic challenges still remain for China like slow growth in the property sector amid weak consumption, according to a report on Thursday.
China’s real GDP growth stood at 5 per cent in 2024, lower than the 5.4 per cent growth in 2023.
“Domestically, two key challenges continue to weigh on the economy – the ongoing troubles in the property sector and weak consumption. Data shows that key property sector indicators such as ‘floor space started’ and ‘floor space sold’ continued to contract in 2024,” according to the report by CareEdge Rating.
Real estate fixed asset investment also fell by around 11 per cent, contracting for the third consecutive year.
“Consumer confidence in China has remained near historically low levels, failing to recover since the second wave of Covid,” the report mentioned, adding that negative wealth effects from the property sector slowdown, along with elevated youth unemployment, continue to dampen consumer sentiment.
As a result, consumption remains weak, with its contribution to real GDP growth declining. This weak consumption is also keeping inflationary pressures muted, with consumer price inflation averaging just 0.3 per cent over the past year and producer prices contracting for over two years.
In 2024, China’s policymakers ramped up stimulus efforts to support the economy. However, the ability of these monetary and fiscal measures to meaningfully revive growth is yet to be seen, according to the report.
During the December Politburo meeting, China’s policymakers committed to implementing a moderately loose monetary policy and a more proactive fiscal policy in 2025. As a result, further stimulus measures are expected going forward, especially in the light of a new trade war with the US.
“However, we believe the current consumer goods trade-in programme may not be sufficient to drive long-term consumption growth. To achieve more sustainable consumption-driven growth, China may need to focus on improving its employment situation and strengthening its social safety net,” said the CareEdge Rating report.
“Our analysis indicates that the additional tariff could reduce China’s real GDP growth by around 0.25pp in 2025. As a result, disinflationary pressures may persist in 2025, especially if domestic demand also remains weak,” it said, adding that uncertainty remains high, and it will be important to track how tariff-related developments unfold.
(IANS)
