Donald Trump’s tariffs are not China’s only problem

China’s economy rebounded in the last three months of last year, enabling the government to achieve its 5% growth target in 2024, Beijing announced on Friday.

But it is one of the slowest growth rates in decades, as the world’s second-largest economy struggles to extricate itself from a prolonged housing crisis, high local government debt and youth unemployment .

The head of the country’s statistics bureau said China’s economic achievements in 2024 were “hard-won”, after the government launched a series of stimulus measures late last year.

Beijing has rarely missed its growth targets in the past.

Experts had widely predicted this growth rate. The World Bank said lower borrowing costs and higher exports would help China achieve annual growth of 4.9%.

Investors are bracing themselves, however: the threat of tariffs imposed by President-elect Donald Trump on $500 billion (£409 billion) of Chinese goods looms.

But that’s not all that’s stopping China from meeting its growth targets next year.

Business and consumer confidence is low, and China’s yuan will continue to weaken as Beijing lowers interest rates in a bid to boost growth.

Here are three reasons why Xi has bigger challenges ahead Trump’s tariffs:

Warnings are growing that China’s economy will slow in 2025. One of the biggest drivers of last year’s growth is now under threat: exports.

China relied on the manufacturing sector to emerge from the slowdown: it therefore exported a record number of electric vehicles, 3D printers and industrial robots.

The United States, Canada and the European Union have accused China of manufacturing too many goods and have imposed tariffs on Chinese imports to protect domestic jobs and businesses.

Experts believe that Chinese exporters could now focus on other regions of the world. But these countries will likely be in emerging markets, which do not have the same levels of demand as North America and Europe.

This could impact Chinese companies hoping to expand, and in turn hit energy and raw material suppliers.

Xi wants to transform China from a global factory for cheap goods into a high-tech powerhouse by 2035, but it is unclear how manufacturing can continue to be such an important engine of growth in the face of rising tariffs customs.

In China, household wealth is largely invested in the real estate market. Before the real estate crisis, it accounted for nearly a third of China’s economy, employing millions of people, from builders and developers to cement producers and interior designers.

Beijing has implemented a series of policies to stabilize the property market and financial market watchdog the China Securities Regulatory Commission (CSRC) has said it will vigorously support the reforms.

But there are still too many empty housing and commercial properties, and this oversupply continues to drive down prices.

The housing market crisis is expected to bottom out this year, but Wall Street banking giant Goldman Sachs says the slowdown will be a “multi-year drag” on China’s economic growth.

Spending is already hard hit: in the last three months of 2024, household consumption contributed only 29% to China’s economic activity, compared to 59% before the pandemic.

This is one of the reasons why Beijing has stepped up its exports. He wants to help offset weak domestic spending on new cars, luxury items and almost everything else.

The government has even implemented programs like trade in consumer goodswhere people can exchange their washing machines, microwaves and rice cookers.

But experts question whether these types of measures are enough on their own without addressing deeper problems in the economy.

They say people will need more money in their pockets ahead of pre-Covid levels to make their spending profitable.

“China needs to bring back the animal spirit of the people and we are still far from that,” said Shuang Ding, chief economist for Greater China and North Asia at Standard Chartered Bank.

“If the private sector starts to invest and innovate, it could increase incomes and job prospects, and people will have more confidence to consume.”

The scale of public debt and unemployment have also affected saving and spending.

Official figures suggest youth unemployment rate remains high compared to before the pandemic and wage increases have stalled.

President Xi has promised to invest in high-tech industries that the government calls “new productive forces.”

So far, this has helped China become a leader in products such as renewable energy products such as solar panels and electric vehicle batteries.

Last year, China also overtook Japan as the world’s largest car exporter.

But the gloomy economic situation, uncertainty over tariffs and other geopolitical uncertainties mean that foreign companies’ appetite for investment in China is muted.

It’s not about foreign or domestic investment, but rather that companies don’t see a bright future, said Stephanie Leung of wealth management platform StashAway.

“They would like to see a more diverse set of investors come in.”

For all these reasons, experts believe that measures to support the economy will only partially mitigate the impact of potential crises. new American tariffs.

Beijing must either take big, bold steps or accept that the economy will not grow as fast, Hui Shan, chief China economist at Goldman Sachs, wrote in a recent report, adding: “We expect them to let them choose the first solution.

“China needs to stabilize property markets and create enough jobs to ensure social stability,” said Mr. Ding of Standard Chartered Bank.

According to researcher China Dissent Monitor, there were more than 900 protests in China between June and September 2024, led by workers and landowners, 27% more than the same period a year earlier.

This type of social tension resulting from economic grievances and an erosion of wealth will be a concern for the Chinese Communist Party.

After all, explosive growth has made China a global power, and the promise of increased prosperity has largely helped its leaders tightly contain dissent.