Three reasons Trump tariffs aren’t China’s only issue

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

But it is one of the slowest rates of growth in decades as the globe’s second largest economy struggles to shake off a protracted property crisis, high local government obligation and youth unemployment.

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

Beijing has rarely missed its growth targets in the history.

Experts had broadly predicted this rate of growth. The globe financial institution said lower borrowing costs and rising exports would cruel China could achieve annual growth of 4.9%.

Investors, however, are bracing themselves: the threat of President-elect Donald Trump’s tariffs on $500bn (£409bn) worth of Chinese goods looms large.

Yet that is not all that stands in the way of China achieving its growth targets next year.

Business and buyer confidence is low, and the Chinese yuan will continue to weaken as Beijing cuts profit rates in a bid to boost growth.

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

There is a growing chorus of warnings that China’s economy will leisurely in 2025. One major driving factor of last year’s growth is now at hazard: exports.

China has relied on manufacturing to assist exit the slowdown – so, it has been exporting a record number of electric vehicles, 3D printers and industrial robots.

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

Experts declare Chinese exporters may now focus on other parts of the globe. But those countries are likely to be in emerging markets, which don’t have the same levels of demand as North America and Europe.

That could impact Chinese businesses that are hoping to expand, in turn hitting suppliers of vigor and raw materials.

Xi wants to transform China from the globe’s factory for cheap goods into a high-tech powerhouse by 2035 but it’s ambiguous how manufacturing can continue to be such a large growth driver in the face of rising tariffs.

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

Beijing has implemented a slew of policies to stabilise the property trade and the the monetary markets watchdog, the China stocks and bonds Regulatory fee (CSRC), has said it will vigorously back reforms.

But there are still too many vacant homes and commercial properties, and that oversupply continues to force down prices.

The property trade slump is expected to bottom out this year, but Wall Street banking giant Goldman Sachs says the downturn will be a “multi-year drag” on China’s market advancement.

It’s already hit spending challenging – in the last three months of 2024, household consumption contributed just 29% to China’s economic activity, down from 59% before the pandemic.

That is one of the reasons Beijing has stepped up exports. It wants to assist offset sluggish domestic spending on recent cars, luxury items and almost everything else.

The government has even introduced programmes like buyer goods trade-ins, where people can swap their washing machines, microwaves and rice cookers.

But experts wonder whether these kinds of measures alone are sufficient without addressing deeper issues in the economy.

They declare people will require more money in their pockets before pre-Covid levels for spending profit.

“China needs to bring back the animal spirit of the population and we are still far from that,” said Shuang Ding, Chief Economist for Greater China and North Asia at Standard Chartered financial institution.

“If the private sector starts to invest and create that could boost income and the job outlook, and people will have more confidence to consume.”

Steep community obligation and unemployment have also affected funds and spending.

Official figures recommend the youth jobless rate remains high compared to before the pandemic, and that wage rises have stalled.

President Xi has promised to invest in the cutting-edge industries that the government calls “recent productive forces”.

Until now, that has helped China become a chief in goods like renewable vigor products such as solar panels and electric vehicle batteries.

Last year, China also overtook Japan as the globe’s biggest car exporter.

But the lacklustre economic picture, uncertainty over tariffs and other geopolitical uncertainties cruel the appetite of foreign businesses for fund in China is subdued.

It’s not about foreign or domestic fund – it’s that businesses don’t view a luminous upcoming, said Stephanie Leung from affluence management platform StashAway.

“They would like to view a more diversified set of investors coming in.”

For all of these reasons, experts depend the measures to back the economy will only partially alleviate the impact of potential recent US tariffs.

Beijing must either undertake large, bold measures or receive that the economy is not going to develop so quick, Goldman Sachs’ Chief China Economist Hui Shan wrote in a recent update, adding: “We expect them to choose the former.”

“China needs to stabilise property markets and make sufficient jobs to ensure social stability,” Mr Ding from Standard Chartered financial institution said.

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

These sort of social strains as a outcome of economic grievances and an erosion of affluence will be a concern for the Chinese Communist event.

After all, explosive growth turned China into a global power, and the commitment of increased prosperity has largely helped its leaders keep a tight lid on dissent.