China hit its economic goals in 2024 despite a consumer spending problem

• China's economy grew 5% in 2024, meeting its growth target.
• Analysts expected China's GDP growth to be 4.9%, close to the 5% target.
• China faces challenges like property crisis, youth unemployment, and deflation.

In a news release on Friday morning, China's National Bureau of Statistics reported its economy grew 5% in 2024 from a year ago, meeting its official target.

Analysts polled by Reuters had expected China's full-year GDP growth to come in at 4.9%, just shy of the official target of around 5% — which analysts had said was ambitious.

Helen Qiao, the chief economist for Greater China at BofA Global Research, told Bloomberg TV that China's GDP numbers look "pretty awesome."

China's policymakers have not yet released their GDP growth target for 2025.

Markets got a slight bump from China's positive GDP release, with the benchmark CSI 300 Index and Hong Kong's Hang Seng Index both closing 0.3% higher on Friday.

In its data release, the NBS referenced some of the challenges the country is facing.

"We must be aware that the adverse effects brought by external environment are increasing, the domestic demands are insufficient, some enterprises have difficulties in production and operation, and the economy is still facing difficulties and challenges," the NBS wrote.

What boosted China's 2024 GDP?

Analysts attribute China's better-than-expected GDP growth to a strong fourth quarter, notably in retail spending.

China's economy grew 5.4% in the fourth quarter from a year ago — better than the 5% analysts had expected — after the government unleashed aggressive measures in September.

Last year, authorities rolled out measures to boost domestic consumption, including a trade-in program for consumer products, including household appliances.

Retail sales hit 4.5 trillion yuan in December. For the fourth quarter, retail sales rose 3.8% to the fastest pace of the year.

Full-year retail sales grew by 3.5% — well lower than the 7.2% growth in 2023.

China's economy continued to be supported by its exports, which sent the country's full-year trade surplus to nearly $1 trillion.

In December, industrial production jumped 6.2% as factories rushed to meet a frontloading of export orders ahead of US President-elect Donald Trump's inauguration on January 20. Trump has threatened to impose a 60% tariff on all Chinese goods, which would raise costs for importers.

All eyes on consumers

Consumer sentiment in China, however, has been lackluster. People aren't spending enough, and some are trading down for cheaper products.

"The key question is if we can see consumer confidence bottom out and begin a meaningful recovery. Pessimism has grown quite entrenched as of late, and it will take a lot of effort to break out of the doldrums," wrote Darren Tay, the head of Asia Pacific country risk at BMI.

China's economy has been struggling to recover from the pandemic. It's facing numerous challenges, including a yearslong property crisis, high youth unemployment, and deflation.

In the longer term, China is grappling with a demographic crisis. The country's population fell for a third straight year in 2024.

Some analysts are calling for caution on China's uneven two-speed economic growth.

"While economic conditions are improving overall, not every sector is benefiting, underscoring potential challenges in job creation," wrote Dilin Wu, a research strategist at the online trading platform Pepperstone.

But bad news could turn into good news for China, Wu added, as an increasing number of challenges may prompt additional stimulus measures during the country's annual parliamentary meetings in March.

How to read China's data releases

Despite the strong showing in China's GDP growth last year, there are longstanding concerns over the accuracy and quality of the country's official data releases.

Gao Shanwen, a prominent Chinese economist, said recently that China's official GDP figures may be inaccurate and higher than actual growth numbers.

Analysts at Rhodium Group wrote in a December report that China's official data needs to be read in the context of implicit "authority bias," as Beijing highlights some positive and stable data while excluding other more negative data.

Notably, China has reported just a modest slowdown in real GDP growth from pre-pandemic levels — from 5.2% in 2023 to 4.8% on a year-to-date basis by the third quarter of 2024 — but authorities have launched a series of aggressive stimulus measures such as a 10 trillion yuan refinancing program for local government debt and a mechanism to support the stock market directly.

"No government adjusts economic policy like that to counter a minor slowdown," the analysts wrote.