What happens to the world economy and global geopolitics in 2025 will depend significantly on China, the world’s largest exporter and second-largest consumer market. But prevailing assessments of China’s economic health are deeply flawed.
The headlines in 2024 have been mixed. China’s GDP is growing, though the precise rate is always a matter of debate. Youth unemployment, which shocked policymakers when it reached a peak of 21.3% in June 2023, has declined to 17.6%. And the property market crisis finally seems to be moderating, with transactions increasing following the government’s bold intervention to support the sector, which, directly and indirectly, accounts for one-third of the Chinese economy.
And yet, the dynamism that characterized China’s economy over the last three decades seems to be missing. Consumption growth is slow, as apprehensive Chinese households maintain high savings rates. Likewise, foreign investors’ confidence is at an all-time low. As prices drop, fears of a deflationary spiral are growing, recalling the prolonged stagnation that gripped Japan beginning in the 1990s. Against this backdrop, some now argue that China’s economy has already peaked.