China’s economy recorded a 5% growth rate in 2024, driven primarily by robust exports and a $1 trillion trade surplus. This performance, announced by the National Bureau of Statistics, met the government’s target of “about 5%” and reflected a slight slowdown compared to 2023’s 5.2% growth.

Surging exports, including electric vehicles, smartphones, and industrial goods, were a significant growth driver. China’s exports of electric and hybrid vehicles set global records, while investments in manufacturing and industrial equipment increased by 9.2%. These gains offset domestic economic challenges, particularly in the real estate sector.

The lingering effects of China’s real estate crash remain evident. Developers struggling to complete projects have reduced construction activity, leading to fewer jobs and weak consumer spending. Many households, whose primary asset is real estate, have seen their savings eroded by declining home values, dampening confidence and spending power.

Deflation has exacerbated these challenges, with prices falling 0.7% in 2024. Persistent price drops pose difficulties for heavily indebted local governments and businesses, complicating their ability to service debt. This deflationary trend has placed additional pressure on policymakers to stabilize the economy.

To counter these issues, the government has implemented several measures. Subsidy programs such as “cash for clunkers” incentivized households to trade in old vehicles and appliances for newer, energy-efficient models. While initially slow, the program gained momentum after subsidy rates doubled in August, boosting car sales to record levels in November and December.

However, questions remain about the long-term effectiveness of these incentives. Analysts suggest the program may have shifted consumer spending toward cars and appliances at the expense of other goods and services, potentially limiting its overall impact on economic recovery.

Despite robust exports, domestic retail sales grew by just 3.5% in 2024, reflecting weak consumer confidence. Manufacturing output rose by 6.1%, with the majority of new production targeting foreign markets. This reliance on exports highlights the fragility of China’s domestic economy.

The government has also increased infrastructure spending and allowed local governments to issue more bonds to fund projects. While these initiatives aim to mitigate the loss of construction jobs, many local governments face funding shortfalls, limiting their ability to contribute effectively.

Official statistics suggest economic stabilization, but skepticism lingers among some economists. Concerns about data accuracy have been raised, with critics suggesting that China’s real growth rate may be closer to 2% over recent years. The suppression of dissenting voices further fuels doubts about the reliability of government figures.

Despite these challenges, the export sector remains a bright spot. December’s trade surplus of $104.8 billion marked the largest single-month surplus ever reported. This performance underscores the resilience of China’s manufacturing sector and its ability to adapt to shifting global demand.

Looking ahead, China faces a delicate balancing act. Policies aimed at stimulating domestic demand must also address underlying structural issues, such as high debt levels and real estate market instability. As the global economy evolves, sustaining growth will require a more diversified and resilient economic strategy.