In 2025, China’s economy would confront more challenges due to internal structural problems and continuing trade conflicts. Beijing struggles with poor domestic demand, a shaky real estate market, and dwindling foreign investment, as seen by the fact that its growth objective of 5% was hardly met last year.
Amid these challenges, experts point out that the United States’ tariffs are just one aspect of the issue; the country’s long-term growth prospects are threatened by deeper structural and economic obstacles.
Trade Tensions and Their Impact on Exports
China’s reliance on exports as a growth engine has been increasingly challenged by global trade policies and tariffs. In particular, the threat of expanded duties from the United States, targeting $500 billion worth of Chinese goods, adds to existing strains. While manufacturing has traditionally underpinned China’s economic resilience, particularly in sectors such as electric vehicles, 3D printers, and industrial robotics, rising trade barriers are forcing exporters to pivot towards emerging markets.
However, the size of China’s economic rebound may be constrained by these markets’ inferior purchasing power compared to North America and Europe. Analysts caution that this change may cause supply chains to break and lower demand for raw commodities and energy. Furthermore, as tariffs limit its capacity to compete internationally, China’s goal to transform from a manufacturing powerhouse to a high-tech innovator by 2035 confronts obstacles.
Stephanie Leung, an executive at wealth management platform StashAway, observed that economic stagnation and geopolitical tensions are among the factors impacting foreign investment in China. According to her analysis, businesses are increasingly seeking diversified and stable economic environments.
Domestic Consumption Struggles Amid Property Woes
China’s domestic market, a vital component of economic stability, has been weakened by a prolonged property crisis. Real estate once accounted for nearly a third of the country’s GDP, driving employment and household wealth. However, oversupply in the housing market has led to plummeting property values, eroding consumer confidence and spending power. In the last quarter of 2024, household consumption contributed a mere 29% to economic activity, a steep decline from pre-pandemic levels.
In an attempt to stabilise the sector, the Chinese government has introduced various measures, including trade-in programmes for consumer goods and reforms in financial markets. However, these initiatives have had limited impact. Analysts at Goldman Sachs have described the property market downturn as a challenge likely to weigh on China’s growth for several years.
Youth unemployment and stagnating wages have compounded these challenges, further suppressing consumer spending. Shuang Ding, Chief Economist for Greater China at Standard Chartered Bank, emphasised the need for broader economic reforms to restore confidence. “China needs to bring back the animal spirit of the population, and we are still far from that. If the private sector starts to invest and innovate, that could increase income and the job outlook, and people will have more confidence to consume.” he said.
A Crossroads for China’s Economic Future
As Beijing contends with domestic and international economic pressures, experts argue that incremental policy measures will not suffice. Large-scale reforms in property markets, trade policies, and job creation are crucial to sustain growth and maintain social stability. Over 900 protests were reported in mid-2024, underscoring public frustration with economic stagnation and wealth erosion.
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