Raise incomes to boost consumption

China's GDP grew by 5 percent in 2024. On the surface, this figure seems appropriate, meeting the growth target set by the Chinese government. But most economists agree that the Chinese economy is facing some challenges, including plunging real estate sales and a lack of expected growth in domestic demand.

It is estimated that 2.2 percentage points of the 5 percent growth was contributed by final consumption, 1.3 percentage points by capital formation, and the remainder by net exports of goods and services. This means that without the contribution of net exports, the GDP growth rate would have been only 3.5 percent.

China's trade surplus in 2024 reached an unprecedented $992 billion, triggering protectionist responses from the United States and the European Union. Hindered by high tariffs, China's exports are likely to divert to other regions, leading to potentially more trade frictions with other countries. To maintain healthy relations with its trade partners, it is imperative that China further boost domestic demand.