Economic activity in China picked up in early 2024, driven by stronger exports, while growth in domestic demand moderated. Manufacturing and infrastructure investment and consumer spending on services remained robust, despite the ongoing property market correction, according to the World Bank's latest report titled "Growing Beyond Property: Cyclical Lifts and Structural Challenges," released today.
The World Bank has revised China's GDP growth projection for 2024 to 4.8 percent, an increase of 0.3 percentage points from the December 2023 forecast. This revision reflects stronger-than-expected exports and the impact of policy measures aimed at supporting the property market and increased fiscal spending.
Risks to this growth outlook are broadly balanced. On the upside, earlier stabilization in the property sector and higher-than-expected fiscal spending could lift growth beyond current forecasts. Substantial progress on structural reforms, including improvements in the enabling environment for the private sector, could boost short-term confidence and long-term productivity growth. However, downside risks include a delay in property market recovery beyond 2024, persistent deflationary pressures, slower-than-expected global growth, and increased trade tensions.
“Structural reforms could help China both sustain growth momentum in the short term and pursue long-term objectives,” said Mara Warwick, World Bank Country Director for China, Mongolia, and Korea. “Policies to accelerate the transition to carbon neutrality could boost demand for green technologies, while debt resolution and exit of unviable firms in the property and other sectors would reduce imbalances and free resources that can be used by more productive businesses.”
The report also examines how an aging population will impact economic growth and inequality in China. The demographic transition is manageable with appropriate policies. “The economic challenges from an aging population can be overcome with policies that increase labor force participation and extend productive working lives,” said Elitza Mileva, World Bank Lead Economist for China.“Affordable childcare, better work-life balance, elimination of gender bias in hiring, a higher retirement age, skills upgrading, and lifelong learning are measures that could expand China’s workforce and make it more productive.”