Data Snapshot China’s GDP growth is projected to decelerate sharply from 5.2% in 2023 to 4.2% by 2025, according to BBVA Research’s China Economic Outlook October 2024. This forecast aligns with growing concerns over the country’s long-term economic resilience as it faces structural challenges affecting both domestic consumption and investment, alongside weakening global demand. The trajectory signals an inflection point, as China transitions from its rapid growth years to an era of more tempered, if not fragile, economic performance. Personal consumption is also experiencing a significant slowdown, further exacerbating the challenges. From a high of 6.5% in 2023, personal consumption growth is forecasted to decline to 4.0% by 2025, reflecting weakened consumer confidence and the broader effects of an economic cooldown. This decline highlights the critical role that domestic spending plays in sustaining China’s economic momentum, and the risks that a sharp drop in consumption could pose to the country’s overall growth trajectory. BBVA’s latest figures largely align with September projections by the Economist Intelligence Unit (EIU). Both BBVA and EIU predict steady declines in China’s GDP, although EIU forecasts a slightly more prolonged slowdown, projecting growth to ease from 4.7% in 2024 to 3.8% by 2028. While BBVA’s focus rests on domestic consumption challenges, the EIU offers a broader perspective, noting how geopolitical tensions, particularly the Russia-Ukraine conflict, as well as China’s aging population, further complicate recovery. Notably, EIU also underscores the demographic pressures China faces, particularly with the country’s recent policy shift to raise the retirement age, a move indicative of deeper structural weaknesses. Despite slight variations in timing and emphasis, both reports converge on one undeniable trend: China’s era of high-speed growth is giving way to more moderate expansion, and possibly a more vulnerable economic model. Analysis The projected decline in China’s GDP growth reflects deeper structural shifts as the country transitions from its export-driven model to one increasingly reliant on domestic consumption, as laid out in the country’s “dual circulation” development model. BBVA points to the waning real estate market and weak consumer confidence as major factors driving the slowdown. The continued degradation of personal consumption, a critical pillar of China’s economic framework – from 6.5% in 2023 to just 4.0% by 2025 – is emblematic of broader consumer sentiment issues, where rising unemployment and stagnant wages are undermining confidence and, by extension, household spending. These domestic issues, combined with high youth unemployment and ongoing economic imbalances, suggest that even robust sectors, such as high-tech manufacturing, will not be enough to offset the waning impetus elsewhere in the economy. The decline in personal consumption amplifies the risks, indicating that efforts to stimulate the domestic market may not be sufficient to maintain growth at previous levels. Adding to these challenges, China faces intensifying geopolitical pressures and trade uncertainties, exacerbated by global tensions. The EIU highlights these external threats, particularly in the context of escalating US-China trade friction and tightening global supply chains. While Beijing has employed various stimulus measures to stabilize the economy, the structural issues at play mean that recovery will be neither swift, nor complete. For businesses, these forecasts carry significant implications. Companies that have thrived on China’s rapid market expansion will now need to reassess their strategies, focusing more on operational efficiency and innovation. The global slowdown in China’s growth will also affect supply chains, investment inflows, and, by extension, the economies that have long benefited from the country’s economic boom. The Jing Daily Data Snapshot presents a swift take and analysis on the latest data from the leading research firms in the Chinese luxury and lifestyle markets.
