The World Bank projects that, despite a brief lift from a slew of recent stimulus measures, China’s economic growth rate will continue to fall in 2025.
In an economic update on Tuesday, the international lender predicted that China’s growth rate will fall to 4.3% in 2024 from a projected 4.8% in 2024.
The 2024 estimate is higher by 0.3% than the bank’s April estimate. It comes after Beijing announced stimulus plans last week, which increased investor confidence and sparked a brief surge in the stock market.
Nevertheless, the World Bank’s growth estimate for 2025 remained constant from earlier estimates in spite of the measures.
Aaditya Mattoo, the World Bank’s top economist for East Asia and the Pacific, stated on Tuesday on CNBC’s “Street Signs Asia” that it was still “undefined” whether the stimulus would have a long-term effect on the overall economy.
According to Mattoo, the challenge is whether it can truly ease consumer worries about shrinking property incomes, reducing salaries, and becoming older, sicker, and jobless.
The World Bank ascribed dismal Chinese consumer spending too many of those worries, along with issues including an aging population, rising global tensions, and a persistently sluggish property market.
James Sullivan, head of JPMorgan’s Asia-Pacific stock research, spoke to CNBC’s “Street Signs Asia” last week about the stimulus’s emphasis on supply and investment rather than China’s problems with consumer spending.
“Does [the stimulus] ultimately flow through into consumer demand, or does it only flow into the supply side of the equation?” is currently the key question in China. We don’t currently anticipate that,” he stated.
On Tuesday, the head of China’s National Development and Reform Commission promised to take further steps to support the nation’s economy, including accelerating the issuing of special-purpose bonds to local governments. The official did not, however, make any other significant stimulus initiatives public.
The World Bank has long urged China to accelerate its economic growth by implementing audacious policies like increasing competition, modernizing infrastructure, and transforming the educational system.
However, Mattoo argues that in order to boost longer-term growth, China will need to implement deeper structural reforms, which the stimulus cannot replace. He noted that any boost from the stimulus measures will be welcomed by the rest of the region, which is still strongly dependent on China for growth.
According to World Bank projections, the remainder of East Asia and the Pacific will increase by 4.7% this year and 4.9% the next year due to anticipated export recovery and improved financial circumstances.
However, it stated that the area must find more domestic development drivers if China slows down.
“China’s growth has positively impacted its neighbors for three decades, but the extent of this boost is now diminishing,” the World Bank stated in a report released on Tuesday.
