The World Bank has updated its forecast for China’s economic growth, increasing the prediction to 4.5% in 2025, up from the previous 4.1%.
Despite numerous challenges, China’s economy has remained robust, growing at 4.8% in the first three quarters of the year, the World Bank said. However, the growth has slowed down since the second quarter of 2024, due to a decline in domestic demand and a continued downturn in the real estate sector. As a result, the growth forecast for 2024 has been revised upward to 4.9%.
The Chinese government has created policy incentives to strike a balance between short-term support for domestic demand and long-term financial stability, the World Bank said. Structural reforms have also been proposed to revitalize the economy.
“It is important to strike a balance between short-term growth promotion and long-term structural reforms” said Mara Warwick, World Bank Country Director for China, Mongolia, and Korea. “Overcoming the challenges in the real estate sector, strengthening social safety nets, and improving the finances of local governments will be crucial for a sustainable recovery.”
Clear communication of specific policy measures is now crucial to strengthen market and household confidence, the World Bank added.
China’s economy is confronted with both internal and external risks. The World Bank believes that a continued downturn in the real estate sector could further weaken investments and local government revenues, while global uncertainties in the trade sector pose risks for China’s exports.
The update also examines economic mobility. While the Chinese middle class has grown significantly since the 2010s and accounted for 32% of the population in 2021, the World Bank estimates that around 55% of the population remains in economic uncertainty.
“The expansion of opportunities for everyone to climb the economic ladder is important to achieve China’s goal of common prosperity” said Elitza Mileva, the World Bank’s lead economist for China. “Greater social mobility and equal opportunities will, in turn, support growth through higher human capital, greater entrepreneurial initiative, and risk-taking of more economically secure households.