Donald Trump’s tariffs aren’t China’s only problem

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

But it is one of the slowest growth rates in decades as the world’s second-largest economy struggles to shake off a lingering housing crisis, high local government debt and youth unemployment.

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

Beijing has rarely missed growth targets in the past.

Experts generally predicted such growth rates. The World Bank said lower borrowing costs and rising exports would mean China could achieve annual growth of 4.9%.

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

But this is not all that prevents China from achieving its growth targets next year.

Business and consumer confidence are low and the Chinese yuan will continue to weaken as Beijing cuts interest rates in a bid to boost growth.

Here are three reasons why Xi has more serious problems than Trump’s tariffs:

There is a growing chorus of warnings that the Chinese economy will slow down in 2025. One of the main drivers of last year’s growth is under threat: exports.

China has relied on manufacturing to help pull itself out of the slowdown – so it exported record numbers of electric cars, 3D printers and industrial robots.

The United States, Canada and the European Union have accused China of producing too many goods and imposed tariffs on Chinese imports to protect jobs and businesses in the country.

Experts say Chinese exporters can now focus on other parts of the world. But these countries are likely to be in emerging markets that do not have the same level of demand as North America and Europe.

That could affect Chinese businesses hoping to expand, in turn hitting energy and raw material suppliers.

Xi wants to transform China from a global factory of cheap goods into a high-tech powerhouse by 2035, but it is unclear how manufacturing can continue to be such a big engine of growth amid rising tariffs.

In China, the family’s well-being is largely invested in the real estate market. Before the real estate crisis, it accounted for almost a third of China’s economy and employed millions of people, from builders and developers to cement manufacturers and interior designers.

Beijing has taken a number of measures to stabilize the real estate market, and financial markets watchdog the China Securities Regulatory Commission (CSRC) has said it will strongly support reforms.

But there are still too many empty homes and commercial properties, and an oversupply continues to drive down prices.

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

This has already hit spending hard, with household consumption accounting for just 29% of China’s economic activity in the last three months of 2024, down from 59% before the pandemic.

This is one of the reasons why Beijing has been increasing exports. He wants to help offset sluggish domestic spending on new cars, luxury goods and just about everything else.

The government has even introduced such programs consumer goods trade-inswhere people can exchange their washing machines, microwave ovens and rice cookers.

But experts question whether the measures alone are enough without addressing deeper problems in the economy.

People will need more money in their pockets before spending returns to pre-Covid levels, they say.

“China needs to bring back the animal spirit of its population, and we are still a long way from that,” said Shuang Ding, chief economist for Greater China and North Asia at Standard Chartered Bank.

“If the private sector starts investing and innovating, it can increase incomes and job prospects, and people will have more confidence to consume.”

High public debt and unemployment have also weighed on savings and spending.

This is evidenced by official figures youth unemployment rate remains high compared to the pre-pandemic period, and wage growth has stalled.

President Xi has pledged to invest in advanced industries, which the government calls “new productive forces.”

So far, this has helped China become a leader in commodities such as renewable energy sources such as solar panels and batteries for electric vehicles.

China also overtook Japan as the world’s largest car exporter last year.

But a bleak economic picture, uncertainty over tariffs and other geopolitical uncertainties mean foreign companies’ appetite for investment in China is subdued.

It’s not about foreign or domestic investment – it’s that businesses don’t see a bright future, said Stephanie Leung of wealth management platform StashAway.

“They would like to see a more diversified set of investors.”

For all these reasons, experts believe that measures to support the economy will only partially mitigate the effects of the potential new US tariffs.

“Beijing must either take serious, bold action or accept that the economy will not grow as fast,” Goldman Sachs chief China economist Hui Shan wrote in a recent report, adding: “We expect them to choose the former.”

“China needs to stabilize property markets and create enough jobs to ensure social stability,” said Standard Chartered Bank’s Mr Ding.

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

Such social tensions as a result of economic problems and declining prosperity will worry the Chinese Communist Party.

After all, explosive growth has turned China into a global power, and the promise of increased prosperity has largely helped its leaders rein in dissent.