China meets 2025 growth target on back of exports

China, the second largest economy after the United States, has managed to meet its growth target of 5 per cent for 2025 based on its robust export growth of $1.2 trillion, which equals the GDP of Saudi Arabia, a G20 economy. The domestic economy is however sliding. Experts believe that maintaining GDP growth on the basis of exports alone would be difficult. It looks rather unrealistic to expect that China will be able to maintain its trade surplus at the 2025 rate.

If it were to do so, then its exports would equal that of France in 2030 at $3t and that of Germany in 2033 at $5t. But this will be a growth rate that will be impossible to sustain because the fear is that surge n Chinese exports would force many countries to raise tariffs against China.

According to Christopher Beddor, an economist at a private consultancy, “It is hard to imagine how the trade surplus could continue to expand at this clip indefinitely into the future, if only because that would incur a wider protectionist backlash abroad.”

While China would like to maintain a 5 per cent growth rate in 2026 as well, it is more likely that it will be 4.5 per cent. The indications were quite clear with Quarter 4 growth rate of 4.5 per cent compared to 4.8 per cent growth rate in the same period in 2024.

Even the 5 per cent growth of 2025 is the lowest for China in decades. In the last decade, China’s growth rate fell to 6 per cent, and many in China were reconciled to the fact that 6 per cent growth rate would be the new normal. But now the growth rate is slipping further, making it difficult to sustain even a 5 per cent growth rate.

The slump in domestic consumption is attributed to the crash in the property markets, and this affects the manufacturing sector in several segments. As there is no domestic growth, Chinese are spending less.

It has also meant that Chinese businesses at home are not able to invest in expansion schemes because people are buying less. And job growth has slowed down considerably.

China’s central bank has earmarked a $144 billion package for private enterprises. It seems a challenge to policy-makers as well as entrepreneurs to revive domestic growth. Trade surpluses through exports need to be ploughed back into the domestic economy to kick-start growth but for that to happen fresh thinking on policy is needed.

Exports-led economic growth has served smaller economies in south-east Asia like Thailand and Malaysia but they too reached a breaking point with the 1997 crisis because of weaker domestic economy. With the global markets going through volatility, exports remain a risky prospect.

While exports do play an important role in the growth of an economy, they cannot remain the mainstay without growth on the home front. Chinese are not spending because the contraction in the domestic economy has led to job losses, and people are spending less because of the uncertainty created over jobs. It is a vicious circle in many ways.

The economic growth uncertainties plaguing China are not China-specific. All developed economies, though China refuses to describe its economy as developed despite being in the top bracket, face the challenge of remaining at the top once they have reached the peak. It is indeed difficult to maintain peak performance for too long though China accomplished the near-impossible by sustaining a 10 per cent annual growth rate for three decades. It looks like that China is now faced with what can only be described as growth fatigue.