China’s economic stagnation poses a significant threat in 2025, with real GDP growth predicted to slow down to 4.5% and potentially drop as low as 3% due to US President-elect Donald Trump’s tariffs on Chinese exports.
China‘s Economic Stagnation: A Looming Threat in 2025
China has outlined plans for more economic stimulus to boost consumer spending amid continued economic malaise. The country’s top annual economic meeting concluded with leader Xi Jinping announcing fiscal and monetary policies aimed at boosting growth, including taking steps towards interest rate cuts and more government borrowing.
According to research by Goldman Sachs, China‘s real GDP growth is predicted to slow down to 4.5% in 2025 from 4.9% in 2024. This slowdown is expected to be further exacerbated by the looming threat of US President-elect Donald Trump‘s tariffs on Chinese exports, which could drop China’s economic growth rate to as low as 3%.
The Real Estate Market: A Key Factor in Boosting Growth
Real estate markets are seen as a crucial factor in boosting growth, with housing accounting for about 20% of GDP and representing 70% of household wealth. However, the market has been sluggish, leading to widespread economic downturns and affecting local government finances.
The Chinese government pledged to “stabilize the real estate and stock markets” next year and “continue to make efforts to halt the decline and stabilize the real estate market.” However, experts argue that the key to stabilizing the market lies in the government purchasing local inventory housing, which could potentially restore confidence in the market.
China’s Response to Trump’s Tariffs
Beijing is taking a cautious approach to responding to Trump’s potential tariff increases. While China did not directly mention the US-China trade war during the conference, they emphasized that “the adverse effects brought by changes in the current external environment are deepening.”
The Chinese government is quietly refining a toolkit to respond if tensions escalate, including cybersecurity investigations, tightened export controls, and regulatory scrutiny of foreign firms.
Bolstering Domestic Production
China is also actively pursuing strategies to bolster domestic production in face of the ongoing tech war with the US. “Tackling key core technologies” was highlighted at this year’s conference. However, experts argue that pursuing technological independence without significant investment could stifle the growth of the service sector.
A Challenging Road Ahead
Achieving China’s GDP growth target for 2024 remains challenging, and economists predict that the government may set the same target for 2025. To achieve this goal, decisive action is needed, especially on property stabilization. The real estate market involves a wide range of upstream and downstream industries, and its decline can lead to widespread economic downturns.
In conclusion, China’s economic stagnation poses a significant threat in 2025. The government’s efforts to boost growth through fiscal and monetary policies, as well as the purchasing of local inventory housing, will be crucial in stabilizing the real estate market and bolstering domestic production. However, the looming threat of US President-elect Donald Trump’s tariffs on Chinese exports remains a significant challenge that must be addressed.
