China’s 2024 GDP growth set to hit target of around 5%: Xi Jinping

BEIJING – China’s gross domestic product (GDP) is expected to expand around 5 per cent for the full year of 2024, said President Xi Jinping, signalling that the world’s second-largest economy is on track to meet its official target.

China’s economy was “overall stable and progressing amid stability”, Mr Xi said at a New Year’s event on Jan 1, according to a speech published by the official Xinhua news agency. Risks in key areas were effectively addressed, while employment and prices remained steady, he said.

While a precise figure will not be available until February, the Chinese leader’s disclosure capped off a year of economic uncertainty, with the growth goal initially seen as a “target without a plan”. The outlook for 2024 improved after policymakers rolled out a slew of stimulus steps since late September 2023, with economists now forecasting an expansion of 4.8 per cent in 2024.

Mr Xi signalled that support for the economy will continue into 2025 during the New Year’s Eve remarks to the nation’s top political advisory body, reiterating a call to adopt more proactive macroeconomic policies.

Later in the day, in another new year address televised nationally, Mr Xi acknowledged challenges facing China’s economy, including external uncertainties and shifting to new growth drivers, but called on the nation to remain confident in overcoming them. 

“In 2025, we will fully complete the 14th Five-Year Plan, implement more proactive and effective policies,” Mr Xi said. “As always, we grow in wind and rain, and we get stronger through hard times. We must be full of confidence.” 

As in previous years, he also used his speech to reiterate the ruling Communist Party’s position on Taiwan. “No one can ever stop China’s reunification,” he said, alluding to Beijing’s long-time vow to bring the self-ruled island under its control, by force if necessary.

Weak demand

China is expected to set a 2025 growth target roughly similar to that of 2024, as top leaders signalled earlier in December that they are willing to embrace more forceful stimulus measures. That would help the economy counter any impact from potential increases in US tariffs after President-elect Donald Trump returns to the White House in February.

An official GDP growth target would be revealed only in March, when annual legislative sessions are held. Chinese leaders plan to set an annual growth goal of about 5 per cent for 2025, Reuters reported earlier. Economists surveyed by Bloomberg estimate 4.5 per cent growth in 2025.

Officials at key meetings in December pledged to use greater public borrowing and spending as well as monetary easing to spur growth in 2025, in an unusually direct call that sought to boost confidence. They endorsed the first shift in monetary policy stance in 14 years to a “moderately loose” one.

But the economy is still weighed by weak domestic demand and an uncertain outlook for exports, which has been a key growth driver in 2024. Deflation is likely to persist well into 2025, while the property market is still slumping. 

Beijing’s initial stimulus in 2025 is expected to fall short of the kind of radical action analysts believe is required to stem the downward spiral in prices, but officials may step up support later when growth falters, just as they did in 2024.

Previously, Premier Li Qiang also revealed the nation’s growth rate ahead of an official announcement by the statistics bureau in a step to lift sentiment. He said the economy grew 5.2 per cent in 2023, in Davos in January 2024, while highlighting the fact that China did not resort to massive stimulus.

Monetary easing

China’s next easing step could come from the People’s Bank of China (PBOC), which has yet to provide a liquidity boost to markets by cutting the amount of cash banks must hold in reserves – a move it previously flagged as possible by the end of 2024.

PBOC governor Pan Gongsheng in October 2024 said the central bank may lower the reverse requirement ratio (RRR) by 25 to 50 basis points depending on liquidity conditions by the year’s end. China’s top leaders at a key economic meeting in December 2024 also vowed to trim the RRR at an “appropriate time”, without providing more details.

The PBOC’s decision likely took into consideration the need to stabilise the renminbi. High-profile easing measures like an RRR cut could add to depreciation pressure on the renminbi. That is because it would worsen renminbi assets’ yield disadvantage compared with dollar assets, triggering fund outflows. The renminbi declined to its one-year low in December 2024.

The central bank likely withheld the RRR cut, partly because the US Federal Reserve signalled greater caution over how quickly it will lower interest rates, according to Mr Bruce Pang, distinguished senior research fellow at the National Institution for Finance and Development, a think-tank. The next window for an RRR cut could be after Trump takes office as US president on Jan 20, he said.

“The PBOC is preserving policy space to deal with increasing external uncertainties. Injecting too much liquidity could also make it harder to manage the yuan exchange rate and government bond yield,” he said. 

Liquidity in the interbank market remains ample for now, in spite of a seasonal rise in cash demand at the year-end period. The cost for top-rated commercial banks to raise funds from other institutions via one-year debt instruments hovered at the lowest since April 2020 at the end of December. Subdued loan demand may leave cash sitting idle in the banking system.

PBOC is likely to lower the RRR in January before the Chinese New Year holiday – which begins on Jan 28 – if it does not cut in December, according to analysts including Huaxi Securities’ Liu Yu. Over 2025, the PBOC is expected to provide long-term liquidity by cutting the RRR and buying more government bonds. BLOOMBERG