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BEIJING (Reuters) – China’s economy grew by 5% last year, in line with the government’s target, but less so, with many complaining of worsening living conditions in Beijing. strives to pass on its industrial and commercial profits to consumers.
The imbalance raises concerns that structural problems could deepen in 2025, as China plans to ramp up growth by tapping into debt to counter the fallout from rate hikes. In the US, perhaps as soon as Monday when Donald Trump is inaugurated as president.
December data showed industrial output far outstripping retail sales, and the unemployment rate is rising, highlighting the strength of the supply side of the economy driving trillions of dollars in trade profits, but also weakness its local.
Export-led growth has been supported in part by factory gate reductions that make Chinese goods more competitive in global markets, but also expose Beijing to major conflicts over trade gaps with countries some are growing. Within limits, falling prices have boosted corporate profits and workers’ wages.
Andrew Wang, an executive at a company that provides industrial automation services for the booming electric vehicle sector, said revenue fell 16% last year, prompting him to downsizing, which he expects to do again soon.
“The information provided by China was different from what many people were hearing,” Wang said, comparing this year’s outlook to raising the profile of the problem on a treadmill.
“We need to run fast just to stay where we are.”
China’s National Bureau of Statistics and the State Council Information Office, which handles media inquiries, did not immediately respond to questions about doubts about the official details.
Eswar Prasad, a professor of business policy at Cornell University, said: “It seems doubtful that China will meet its 2024 growth target at a time when the economy continues to face strong demand for home, emerging markets, and commodity and equity markets, former China director at the International Monetary Fund.
“Looking ahead, China not only faces significant domestic challenges but also faces a hostile external environment.”
If much of the extra stimulus Beijing has planned for this year flows to industrial and infrastructure development, rather than households, it could add more capacity to factories, weaken consumption and increase blood pressure, analysts say.
Nomura analysts said that to deliver a “truly sustainable” growth recovery, Beijing needs to ease fiscal and monetary policy, resolve long-term asset problems, reform its tax system and social welfare and reduce political tension.
“Simply put, despite today’s sanguine data, it is not time for Beijing to relax,” analysts said.
‘NECESSARY’
Chinese exporters expect the higher tariffs to have a bigger impact than during Trump’s first term, accelerating the movement of manufacturing abroad and shrinking profits, destroying jobs and investment in the sector. private.
Another trade war would find China more vulnerable when Trump begins to raise tariffs in 2018, as it faces a deepening commodity crisis, massive domestic debt, and youth unemployment of 16%, among other inequalities.
Beijing has pledged to prioritize domestic consumption, but has revealed little other than a recently expanded trade program that supports the purchase of cars, appliances and other goods.
China gave civil servants their first big pay raises in a decade, but financial executives took big pay cuts, as did many in the private sector.
For Jiaqi Zhang, a 25-year-old investor in Beijing, 2024 felt like a recession. His salary was cut for the second year in a row, and he cut his total salary to 30%, and eight or nine of his colleagues lost their jobs, he said.
“There is a general feeling of uncertainty within the company,” said Zhang, who has stopped buying clothes and eating out. “I’m ready to go anytime, I just don’t have anywhere to go now.”
NOTICE
Data on Friday showed the world’s second-largest economy outperformed a 2024 forecast of 4.9% growth. Its reported fourth quarter growth of 5.4% was the fastest since the beginning of 2023.
“The Chinese economy is showing signs of recovery, led by industrial production and imports,” said Frederic Neumann, chief Asia economist at HSBC.
But the explosion may be fueled by pre-US imports ahead of any new tariffs, which would lead to a refund, he said.
“There’s going to be an even greater demand for domestic stimulus” this year, Neumann said.
Shares in China and Hong Kong rose slightly, but the yuan hit a 16-month low. Lower markets reflected shaky confidence in China’s outlook, analysts said.
“Will investors around the world put money in China because they hit 5%? No,” said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis. “So it becomes an inappropriate goal.”
Beijing has rarely missed its growth targets. The last time was in 2022 because of this epidemic. It is expected to maintain a target of around 5% in 2025, but analysts predict growth of 4.5% this year and 4.2% in 2026.
Long-standing doubts about the accuracy of official data have shifted into high gear in the past month.
Comments made by Gao Shanwen, a famous Chinese economist who spoke of “disillusioned youth”, disappeared from social media after going viral. Gao estimated that GDP growth may have exceeded 10 percent between 2021 and 2023.
In a December 31 report, Rhodium Group estimated that China’s economy would grow by only 2.4%-2.8% in 2024, pointing to a disconnect between the relatively stable official figures and the flood of stimulus generated from the mid- way.
This included May’s blockbuster package of goods, the most aggressive fiscal policy cuts since September and a 10 billion yuan ($1.36 trillion) loan for local governments.
“If China’s real growth is below headline rates, it suggests that there is a broader problem of domestic demand in China contributing to global trade tensions,” said Rhodium partner Local Wright. he told Reuters.
“Overcapacity would be less pressing if China’s economy was actually growing at 5%.”
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