The economic landscape of China, particularly in the wake of the Trump administration’s tariffs and internal economic strains, calls for an in-depth analysis. According to recent reports, China’s economy grew by just 5% in 2024, marking one of its slowest growth rates in decades. This performance is indicative of a broader struggle as the nation grapples with high local government debt, youth unemployment, and a persistently troubled property sector. President Xi Jinping has emphasized optimism, claiming the economy is poised to meet its growth targets, but the underlying issues remain considerable.
One of the major challenges facing China is the impact of tariffs imposed by the United States, which have put a strain on the nation’s export-driven growth model. Data indicates that China’s economy is expected to experience a slowdown in 2025, largely attributable to deteriorating export conditions. The nation has heavily relied on its manufacturing capabilities to overcome economic hurdles, exporting record numbers of electronic vehicles and high-tech machinery. However, accusations from the United States, Canada, and Europeans regarding the saturation of Chinese goods in international markets have resulted in substantial tariffs, which are likely to compromise China’s competitive edge. Experts suggest that although Chinese exporters may shift their focus to emerging markets, these regions typically lack the demand seen in North America and Europe, posing additional risks to business expansion and, consequently, suppliers of resources.
The second compounding issue is consumer spending, or rather the lack thereof. Traditionally, household wealth in China has been substantially tied to the property market. A decline in this sector has drastically impacted consumer behavior, leading to a significant drop in household consumption’s contribution to the economy—from 59% to just 29% in late 2024. The government has recognized the urgency of this issue, introducing various policies aimed at stabilizing the property market, despite the ongoing oversupply of both residential and commercial properties. Many homes remain vacant, leading to a downward spiral in prices, which raises concerns for businesses and consumers alike. The hope is that once stability is restored, spending will rebound, but experts warn that these measures alone may not be enough to rekindle confidence among consumers.
Finally, foreign business investment in China is not what it used to be. Historically, China has positioned itself as an attractive hub for foreign investors thanks to its booming manufacturing and export capacities. However, the confluence of economic uncertainty and geopolitical tensions has dampened investor sentiment. There’s an expressed desire among businesses for a more stable environment, yet the current unpredictability surrounding tariffs and local economic conditions presents challenges. As highlighted by Stephanie Leung from StashAway, companies are lacking confidence in their future profitability in China, which could stifle innovation and growth.
In light of these multifaceted challenges, experts argue that it is vital for the Chinese government to undertake bold reforms to reverse the tide. Goldman Sachs Chief Economist Hui Shan emphasizes the need for significant measures to stabilize property markets and rectify employment rates to secure social stability. Recent protests across the country, marked by economic grievances, underscore the growing unrest among citizens, exemplifying the potential for dissent if economic prosperity falters.
Overall, while the tariffs imposed during the Trump administration are significant, they are far from being the sole hurdle in China’s path to economic recovery. Beijing faces urgent tasks to bolster consumer confidence, invigorate businesses, and stabilize its property sector—each of which is critical for sustaining its future economic growth and maintaining social harmony. Without these reforms, China risks entering a protracted period of sluggish growth that could have far-reaching consequences for its status on the global stage.
