China is expected to experience a significant economic slowdown in 2024, according to a report released by the World Bank on December 14, 2023. Despite a recent recovery fueled by investments in factories and construction, coupled with increased demand for services, the annual growth is projected to decline from 5.2% in the current year to 4.5% in 2024.
The report emphasizes the fragility of China’s economic recovery, attributing it to ongoing challenges in the property sector, weakened global demand for Chinese exports, high levels of debt, and fluctuating consumer confidence. These factors, compounded by setbacks from the COVID-19 pandemic and other shocks, contribute to a delicate economic landscape.
While the forecast aligns with other predictions, the World Bank anticipates further deceleration in 2025, with growth expected to drop to 4.3%. China’s economic performance has demonstrated volatility in recent years, ranging from 2.2% growth in 2020 to a robust 8.4% in 2021, followed by a dip to 3% last year. The pandemic’s impact on manufacturing and transport, along with regulatory measures affecting the technology sector and a downturn in the property industry, have influenced these fluctuations.
The report points out that the majority of jobs created during China’s recovery are low-skilled positions in service industries with modest pay. Cautious consumer behavior is observed due to concerns about the limited social safety nets and the rapidly aging population, placing a heavier burden on younger generations to support the elderly.
Highlighting considerable downside risks, the report underscores the importance of structural reforms for sustained economic growth. It suggests that central government intervention to support financially strained local governments would boost confidence in the economy. The report also emphasizes the need for addressing challenges in the real estate sector, where investment has declined by 18% in the past two years, and urges resolution of unpaid debts among overextended property developers.
While China has seen substantial investment in manufacturing, particularly in electric vehicles, batteries, and renewable energy technologies, consumer spending remains a crucial factor for long-term growth. The report notes a decline in consumer spending during the omicron wave of COVID-19 and highlights the need for a recovery in this area to achieve robust economic growth.
In conclusion, the World Bank’s report emphasizes the challenges facing China’s economy in the coming years and recommends strategic reforms to address structural issues, boost consumer confidence, and navigate potential downside risks.
