Beijing: In a recent address to a prominent political advisory body, Chinese President Xi Jinping emphasized the need for “more proactive” macroeconomic policies as China gears up for 2025. This statement comes amid ongoing economic challenges that have seen the country grappling with a property market crisis, sluggish consumer spending, and increasing government debt.
Economic Challenges in 2024
China’s economy has faced significant headwinds throughout 2024, struggling to regain momentum after a year marked by several crises. The property sector, a critical component of the economy, continues to face difficulties, which have contributed to weakened consumption. The government’s rising debt levels have further complicated recovery efforts, prompting policymakers to seek innovative solutions.
In response to these challenges, Beijing has implemented a series of aggressive measures aimed at stimulating economic growth. These measures include:
- Interest rate cuts aim to promote borrowing and investment by making loans more affordable.
- Lifting restrictions on home purchases aims to stimulate demand in the struggling property market.
- Reducing the debt burden on local governments helps improve their financial stability and allows for more investment in public services.
Despite these efforts, economists are warning that more direct fiscal stimulus is necessary to fully revive domestic consumption and ensure a robust economic recovery.
The Path Forward: Comprehensive Reforms and High-Level Opening Up
During the New Year’s tea party held by the National Committee of the Chinese People’s Political Consultative Conference, Xi outlined his vision for the year ahead. He stated that China must “further comprehensively deepen reform, expand high-level opening up, better coordinate development and security,” and implement more effective macroeconomic policies.
The government has established an ambitious goal of around 5% growth for the national economy in 2024. While officials are optimistic about achieving this goal, many economists believe it may be narrowly missed. Xi reiterated the importance of steady productivity growth, projecting that the annual GDP would grow by about 5%.
The International Monetary Fund (IMF) projects that China’s economy will grow by 4.8% in 2024, with a slight decline to 4.5% expected in 2025.
Positive Signs in Manufacturing
Xi’s remarks come on the heels of encouraging factory activity figures released by Chinese authorities. The Purchasing Managers’ Index (PMI), a crucial measure of industrial output, registered at 50.1 in December, indicating a third consecutive month of expansion. Although this figure fell short of Bloomberg analysts’ predictions, it remains above the key threshold of 50, signaling growth in manufacturing activity.
Additionally, the non-manufacturing PMI, which assesses activity in the service sector, increased to 52.2 in December, up from 50.0 in November. These figures suggest that the economy is gaining momentum, driven by stronger growth in the services and construction sectors.
Gabriel Ng of Capital Economics noted that the official PMIs indicate that economic conditions improved in December, attributing this uptick to enhanced policy support implemented toward the end of the year. Notably, export orders surged to a four-month high, likely influenced by U.S. importers increasing their orders in anticipation of potential tariffs under a new administration.
Conclusion
As China prepares for 2025, President Xi Jinping’s commitment to implementing more proactive macroeconomic policies reflects the government’s determination to navigate through current economic challenges. With a focus on comprehensive reforms and revitalizing domestic consumption, the country aims to stabilize and strengthen its economy. While positive signs in manufacturing offer hope, the effectiveness of these measures will be critical in achieving sustainable growth in the years to come.