China’s Growth Faces Structural Challenges Amid Doubts Over Data

China achieved its 5% growth target in 2024, but the uneven performance highlights deepening structural issues. Industrial output outpaced retail sales, while unemployment rose, underscoring reliance on exports and industrial strength over domestic consumption. Falling prices, exacerbated by factory gate deflation, hurt corporate profits and worker incomes, raising global trade tensions.

Domestic challenges persist. Analysts question the accuracy of official data, with some estimating real growth as low as 2.4%-2.8%. Critics point to the disconnect between stable figures and significant stimulus measures, including a $1.36 trillion debt package for local governments and aggressive monetary easing.

Trade tensions could escalate as the U.S. considers higher tariffs. Exporters fear increased reshoring of production abroad, further impacting profits and jobs. Compared to the 2018 trade war, China now faces greater vulnerabilities, including a property crisis and local government debt.

Beijing has pledged to prioritize domestic consumption but offered limited initiatives, such as subsidies for household goods. Financial stress is widespread, with wage cuts across private and public sectors. Many, like investment banker Jiaqi Zhang, report reduced incomes and job insecurity, reflecting broader economic unease.

Despite optimistic official data showing a fourth-quarter growth of 5.4%, analysts suspect this may be inflated by preemptive exports to the U.S. ahead of potential tariffs. Subdued markets, with the yuan near 16-month lows, reveal wavering confidence in China’s outlook.

Skepticism around China’s economic narrative is rising, as experts warn that overstated growth masks fundamental weaknesses in domestic demand and amplifies global trade tensions. Without significant reforms to boost household consumption, China risks deepening imbalances that could challenge its economic stability in 2025 and beyond.