BEIJING – China’s gross domestic product (GDP) is projected to expand around 5% for the full year of 2024, President Xi Jinping announced, indicating that the world’s second-largest economy is on track to meet its official target.
Economic Stability: At a New Year event on January 1, President Xi stated that China’s economy was “overall stable and progressing amid stability,” according to a speech published by the official Xinhua News Agency. He highlighted that risks in key areas were effectively addressed, while employment and prices remained steady.
Growth Forecast: Although a precise figure won’t be available until February, Xi’s disclosure capped off a year of economic uncertainty. The growth goal was initially seen as a “target without a plan,” but the outlook for 2024 improved after policymakers introduced a series of stimulus measures since late September 2023. Economists now forecast an expansion of 4.8% for the year.
Continued Support: Xi signaled that support for the economy would continue into 2025, reiterating a call for more proactive macroeconomic policies during his New Year’s Eve remarks to the nation’s top political advisory body. He acknowledged challenges such as external uncertainties and the need to shift to new growth drivers but urged the nation to remain confident in overcoming them.
Five-Year Plan: “In 2025, we will fully complete the 14th Five-Year Plan, implement more proactive and effective policies,” Xi said. “As always, we grow in wind and rain, and we get stronger through hard times. We must be full of confidence.”
Taiwan Stance: Xi also reiterated the ruling Communist Party’s position on Taiwan, stating, “No one can ever stop China’s reunification,” alluding to Beijing’s longstanding vow to bring the self-ruled island under its control, by force if necessary.
Weak Demand: China is expected to set a 2025 growth target similar to this year’s, with top leaders signaling a willingness to embrace more forceful stimulus measures. This would help counter any impact from potential increases in US tariffs after President-elect Donald Trump returns to the White House in February.
Official Target: The official GDP growth target for 2025 will be revealed in March during annual legislative sessions. Chinese leaders plan to set an annual growth goal of about 5% for 2026, according to Reuters. Economists surveyed by Bloomberg estimate 4.5% growth in 2025.
Policy Measures: Officials at key meetings in December pledged to use greater public borrowing and spending, as well as monetary easing, to spur growth in 2025. They endorsed the first shift in monetary policy stance in 14 years to a “moderately loose” one.
Economic Challenges: Despite these measures, the economy faces weak domestic demand and an uncertain outlook for exports. Deflation is likely to persist into next year, and the property market remains in a slump. Beijing’s initial stimulus next year is expected to fall short of the radical action analysts believe is required to stem the downward spiral in prices, but officials may step up support later if growth falters.
Monetary Easing: China’s next easing step could come from the People’s Bank of China (PBOC), which has yet to provide a liquidity boost by cutting the amount of cash banks must hold in reserves. PBOC Governor Pan Gongsheng indicated in October 2024 that the central bank might lower the reserve requirement ratio (RRR) by 25 to 50 basis points depending on liquidity conditions by the year’s end.
Yuan Stability: The PBOC’s decision likely considered the need to stabilize the yuan. High-profile easing measures like an RRR cut could add depreciation pressure on the yuan, worsening its yield disadvantage compared to dollar assets and.