Chinese economic growth among slowest in decades

BEIJING: China experienced one of its slowest economic growth rates in decades last year, according to data released on Friday, as leaders brace for a potential trade standoff with incoming US President Donald Trump.

In recent months, Beijing has introduced its most aggressive support measures in years to revive an economy struggling with a prolonged property market debt crisis and sluggish consumer spending.

The economy grew by 5% last year, down from 5.2% in 2023, according to official data from Beijing's National Bureau of Statistics (NBS) released on Friday.

The growth occurred despite a "complicated and severe environment with increasing external pressures and internal difficulties," the NBS stated.

Officials acknowledged that the economy still faces "difficulties and challenges." Retail sales, a key indicator of consumer sentiment, rose by 3.5%, a significant drop from the 7.2% growth recorded in 2023. However, industrial output increased by 5.8%, up from 4.6% the previous year.

The GDP growth rate is the lowest recorded by China since 1990, excluding the financially tumultuous years of the Covid-19 pandemic. Analysts surveyed by AFP estimate that growth could fall to just 4.4% in 2025 and potentially drop below 4% the following year.

China has yet to recover from the pandemic, with domestic spending remaining in a slump and indebted local governments hindering overall growth. In a rare positive development, official data earlier this week showed that China's exports reached a historic high last year. However, looming challenges over the country's massive trade surplus suggest that Beijing may not be able to rely on exports to boost an otherwise lacklustre economy.

Trump, who will begin his second term next week, has vowed to impose heavy sanctions on China. In response, Beijing has introduced several measures in recent months to bolster the economy, including cutting key interest rates, easing local government debt, and expanding subsidy programmes for household goods.

Confidence 'crisis'

Observers closely monitored Friday's data release, which also included readings for the final quarter of last year, for signs that these measures had succeeded in reviving activity. "With a package of incremental policies being timely rolled out... social confidence was effectively bolstered and the economy recovered remarkably," the NBS said.

China's central bank has indicated that 2025 will see further rate cuts as part of a shift towards a "moderately loose" monetary policy stance. However, analysts warn that more efforts are needed to boost domestic consumption as the outlook for Chinese exports becomes increasingly uncertain.

"Monetary policy support alone is unlikely to right the economy," Harry Murphy Cruise of Moody's Analytics told AFP. "China is suffering from a crisis of confidence, not one of credit; families and firms do not have the confidence in the economy to warrant borrowing, regardless of how cheap it is to do so," he wrote. "To that end, fiscal supports are needed to grease the economy's wheels."

One component of Beijing's latest policy measures is a subsidy scheme, now expanded to include more household items such as rice cookers and microwave ovens, aimed at encouraging spending. However, recent data shows that government efforts have not yet achieved a full rebound in consumer activity.

China narrowly avoided slipping into deflation in December, with prices rising at their slowest pace in nine months, according to statistics authorities last week. The country emerged from a four-month period of deflation in February, a month after experiencing the sharpest fall in prices in 14 years. Deflation can pose a threat to the broader economy as consumers tend to delay purchases in anticipation of further price reductions.

By RSS/AFP