This was another dire year for China’s economy, with no end in sight to the problems that began during the COVID-19 pandemic. Beijing seems poised to do whatever it takes to address the economic slowdown, but there is little confidence among investors, firms, and the Chinese public.
The gradual collapse of the real estate bubble that helped drive China’s decades of record GDP growth has shaken households and businesses alike—and undercut belief in in the Chinese Communist Party’s leadership. With China in U.S. President-elect Donald Trump’s crosshairs, as he threatens tariffs and other trade restrictions, there may be even stormier waters ahead in 2025.
This was another dire year for China’s economy, with no end in sight to the problems that began during the COVID-19 pandemic. Beijing seems poised to do whatever it takes to address the economic slowdown, but there is little confidence among investors, firms, and the Chinese public.
The gradual collapse of the real estate bubble that helped drive China’s decades of record GDP growth has shaken households and businesses alike—and undercut belief in in the Chinese Communist Party’s leadership. With China in U.S. President-elect Donald Trump’s crosshairs, as he threatens tariffs and other trade restrictions, there may be even stormier waters ahead in 2025.
Here are five of Foreign Policy’s best reads on the state of the Chinese economy this year.
1. The Hidden Dangers in China’s GDP Numbers
By Amit Kumar, March 11
China is on course to miss its GDP target of 5 percent growth for the year, but that is not the only problem with the country’s notoriously unreliable figures. Amid the economic slowdown, the government has stopped publishing significant amounts of data. Indian analyst Amit Kumar writes that there is still plenty to learn from the numbers, but little of it is good news for Beijing.
Chinese households are massively invested in real estate, where the figures are particularly grim: The property sector shrunk by 10 percent in 2022 and likely by 9.6 percent in 2023. Meanwhile, “China’s new developmental security approach, which manifested in its crackdown on foreign and domestic consultancies alike, has spooked private investors,” Kumar writes, leading to a fall in investment that the government can’t make up.
But one of the biggest dangers is decreasing prices. China just entered the 26th straight month of factory deflation at the factory gate, and the consumer price index is on the brink. Household consumption is falling, and China’s stagnant future may be “baked in the near to medium term. China will not see a return to the high growth rates witnessed in 1980-2010 and will instead stabilize near 4 percent,” Kumar writes.
2. Why Is Xi Not Fixing China’s Economy?
By Scott Kennedy, June 3
One of the big questions about the Chinese economy this year was why President Xi Jinping seemed to be doing so little to fix it. In 2009, faced with the global financial crisis, Chinese authorities opened the floodgates on economic stimulus. In 2024, two years into China’s own economic crisis, Xi is distinctly unwilling to spend anywhere near the same amount.
Scott Kennedy, a senior advisor at the Center for Strategic and International Studies, traveled to China and talked to analysts, officials, and other professionals, finding four broad answers to the question.
One explanation is that Xi doesn’t know, since he is “kept in the dark about the sour state of the economy by cadres who do not want to give him bad news for fear that he would blame the messenger.” Or Xi doesn’t know what to do, faced with a polycrisis ranging from the real estate mess to overstretched local governments.
Others said that Xi “doesn’t agree” with the premise of the question and that he believes China is better off investing in material technologies for the long term than it is worrying about transient economic woes. Finally, one of the most popular answers among Western analysts was one of the least expressed but most passionately held beliefs in China: “Xi doesn’t care,” since his priority isn’t public well-being but the CCP’s grip on power.
3. How China Trapped Itself in America’s Fentanyl Crisis
By Zongyuan Zoe Liu, July 10
Fentanyl has become a flash point between Washington and Beijing, with U.S. politicians routinely blaming China for the drug crisis in the United States. Foreign Policy’s Zongyuan Zoe Liu argues that is not exactly fair. China isn’t turning a blind eye to the problem, but it is more complicated than analysts and policymakers appreciate.
“Policies aimed at boosting China’s chemical and pharmaceutical development and exports have instead created a vast cottage industry of hundreds of thousands of small chemical plants and active pharmaceutical ingredient (API) manufacturers—and with it, a vast money laundering industry that takes advantage of the advanced real-time settlement capabilities of China’s banking system,” Liu writes.
Liu traces how Chinese economic policies accidentally fueled the crisis. “Chinese provinces compete fiercely with one another to attract the pharmaceutical manufacturing industry—accidentally undercutting regulation as a result,” she writes. The thin margins create an incentive to deal with dubious global clients, as well as a secondary money laundering industry that crosses international borders to assist a fentanyl trade that neither country wants.
4. The Coming Clash Between China and the Global South
By James Crabtree, Sept. 11
With the United States and China squaring up, other nations are nervously eyeing the fight from the sidelines. Countries in the global south—usually beneficiaries of Chinese policies such as the Belt and Road Initiative—might be the primary victims of Beijing’s new policies, according to Foreign Policy’s James Crabtree. That could mean a “major strategic dilemma for China, as policies designed to rescue its domestic economy threaten to undermine its ties with the global south—a critical geopolitical battleground with Washington.”
Trump’s tariffs, Crabtree writes, will force Chinese manufacturers out of developed markets and into developing ones—with major consequences for local industries. The effect could be worst for those relatively high up on the chain. “Exporting powerhouses such as Malaysia and Thailand rely on China for the goods that keep their factories running,” he writes, adding, “But this also makes their own domestic manufacturing bases especially vulnerable as China moves into higher-end manufacturing.”
This trend could create opportunities for the United States—or cause China to rethink its policies, if Xi is willing to be flexible.
5. Beijing Has Already Prepared for Trump’s Return
By Lizzi C. Lee, Nov. 13
With Trump returning to the White House, the biggest question for the U.S.-China relationship is just how far the president is willing to take the economic war he began in his first term. Trump has promised sweeping tariffs on China—as well as others, including U.S. allies.
Beijing’s response during Trump’s first term was relatively muted, economist and journalist Lizzi C. Lee writes. This time around, it is prepared for “direct threats to China’s export-driven economy at a time when the country is still struggling with a slow recovery, real-estate instability, and weakened consumer demand.”
China has been honing its own tools to respond to Trump, according to Lee, including “countermeasures against U.S. companies, shifting from firing warning shots to dealing concrete blows.” China is also ready to take advantage of strained supply chains and will move to court countries alienated by Trump’s policies. Since Lee’s piece was published last month, Beijing has already stepped up its measures against U.S. firms.
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