The Role of Domestic Demand in China’s Growth

China’s economy grew by 5 per cent in 2024, in line with the government’s target of “around 5 per cent.” The growth was primarily driven by exports and stimulus measures, with the economy gaining momentum in the fourth quarter, expanding by 5.4 per cent year-on-year, up from 4.6 per cent in the previous quarter. The manufacturing sector grew by 5.8 per cent, while the service sector expanded by 5 per cent, both contributing to the overall performance. However, challenges remain, particularly in the real estate sector, as well as concerns about deflation and the aging population.

The government has introduced various stimulus measures to support domestic demand in the short term while maintaining long-term financial stability.

China's economy continues to face both internal and external risks. Domestically, challenges include a prolonged downturn in the real estate sector, which could weaken investment and local government revenues, as well as a deteriorating labor market due to lower business profitability and reduced hiring, which may dampen consumption. Externally, trade uncertainties pose risks to exports. However, higher-than-expected fiscal spending and stronger policy actions to stabilize the housing sector could drive growth beyond current forecasts.

Enhancing economic mobility remains a key priority, as it can help bridge the rural-urban divide, reduce income inequality, and stimulate domestic consumption—critical factors in shifting the economy toward sustainable, demand-driven growth.

Expanding access to economic opportunities is essential for achieving China’s goal of common prosperity. Greater economic mobility can strengthen human capital, encourage entrepreneurship, and promote risk-taking among financially secure households, all of which support long-term economic growth.