China’s Macroeconomic Outlook: Growth amid Complexity
China's economic growth has been a topic of fascination for many economists, policymakers, and investors. In the wake of post-COVID recovery, the Chinese economy continues to navigate a complicated landscape. While the numbers indicate a return to stability, deeper structural issues and a shift in global dynamics suggest that Beijing's growth story is far from simple. To understand China's growth trajectory and current macroeconomic landscape, it's essential to examine today’s numbers against the backdrop of more than four decades of extraordinary economic transformation.
China’s Economic Rise since Opening-Up (1978–2015)
The story of China’s modern economic growth began with the Reform and Opening–up policy launched by Deng Xiaoping in 1978. This policy was a significant change, as it marked a shift from the closed, centrally planned system to a more market-oriented “socialist market economy”. Over the following decades, from 1978 to 2025, China’s economy has expanded at an average rate of close to 10% per year, making it one of the fastest sustained growth stories in economic history.
Agricultural Reforms & Early Liberalization (Late 1970s–1980s)
After the opening of the economy, the initial reforms focused on the agricultural sector through the Household Responsibility System, which replaced collective farming with household-based production. As a result, overall productivity surged and rural incomes rose, which built early momentum for domestic consumption and rural industrialization. During this period, China began decentralizing decision-making and allowing controlled price reforms.
Industrial Takeoff & Export-Led Growth (1990s–2000s)
China entered the global market in the 1990s. Special Economic Zones like Shenzhen became engines of manufacturing growth and attracted foreign investments, the two events which became a pivotal event in the rise of China’s economy:
? The 1992 southern tour by Deng Xiaoping, which revived a reformist enthusiasm in the public
? Second was China's accession to the World Trade Organization in 2001, which became a key to unlocking unprecedented growth.
? Between 1990 and 2010, a massive rural-to-urban migration of 250 million people occurred, supplying labor to factories and boosting demand in urban areas. By the late 2000s, China had established itself as the world’s largest exporter and a core part of global supply chains.
Boom in infrastructure and establishing itself as a global power status (2008-2015)
During the global financial crisis in 2008, China launched a 4 trillion Yuan stimulus 2008 which fueled rapid investment in infrastructure, energy, real estate, and transportation. Chinese growth remained robust, averaging above 7% even amid global turbulence. And in 2010, China surpassed Japan and became the world’s second-largest economy. By mid-2019, China began shifting away from low-cost manufacturing and toward high-tech industries, elevating sectors such as automotive, electronics, and industrial machinery.
Fig.1. China GDP growth over 1975-2024
A Return to Roughly 5% Growth
China met its official growth target of 5% GDP growth in 2024, with real GDP expanding by 5% year on year. The fourth quarter of 2024 saw growth accelerate to 5.4%, outpacing many analysts' expectations. According to the National Bureau of Statistics, this rise has brought China’s GDP to about 134.91 trillion Yuan (≈ US$18.8 trillion). In 2023, Chinese GDP grew slightly faster than in 2022, at 5.2%, underscoring China's ability to recover from economic slowdowns.
China’s Recent Macroeconomic Performance: Stabilizing amid Structural Pressure (2023–2025)
What’s driving the Recovery?
Several dynamic factors have propelled the growth of the Chinese Economy:
• Policy stimulus and public investment: China introduced policies that aimed at fiscal easing and monetary support for the economy. Cutting interest rates, increasing infrastructure spending, and local government financing support have been credited by economists with helping stabilize the economy. The IMF noted that China's growth in 2024 was mainly driven by substantial public investment and a recovery in private consumption following the COVID-19 pandemic.
• Export Strength: Trade proved a key pillar of growth in 2024. China’s total import + export volume hit a record of 43.85 trillion Yuan, a 5% increase from the previous year. Exports grew by 7.1%, while imports rose by 2.3%. High-tech sectors played a significant role in exports, with electromechanical goods accounting for nearly 60% of total exports, and high-end equipment exports surged by more than 40%.
• Industrial strength: With the help of manufacturing gains, the industrial output rose strongly, with a value-added production of 5.8% in 2024. In particular, equipment manufacturing grew by 7.7% and high-tech manufacturing by 8.9%.
• Services Rebound: According to official data, the service (tertiary) sector grew by 5.0% in 2024. Sub-sectors, including IT & Software (10.9% growth), business services (10.4%), and transportation (7.0%), witnessed substantial growth.
• Agriculture: Although this sector is smaller in proportion to the technological and manufacturing sectors, the primary industry (agriculture) also grew by 3.5% in 2024, which supported overall GDP growth.
Underlying Risks & Structural Challenges
Despite this recovery in recent years, China's growth is far from untroubled.
• While this stimulus has boosted spending, consumption remains fragile, especially in the real estate sector and among households.
• The real estate market in China continues to struggle, particularly in lower-tier cities. This highlights a longstanding trend of growth, investment, and consumer sentiment.
• The IMF states that over the medium term, growth will reach 3.5% by 2028, driven mainly by an ageing population and slower productivity gains.
• Uncertainty in global trade policies and economic turbulence pose risks to China’s export-reliant growth.
• The stimulus includes increased borrowing from the public and local governments, raising doubts about its long-term sustainability.
Forecasts & Outlook
The World Bank projects that growth will moderate to 4.5% in 2025 and 4% in 2026, citing export headwinds, softening manufacturing investment, and a sluggish hiring trend. Goldman Sachs is even more cautious and has revised its 2025 forecast to 4.0% and its 2026 forecast to 3.5%, pointing to tariff pressure as the key risk. Meanwhile, the IMF has projected growth of 4.5% in its mid-2024 Article IV consultation, with a gradual decline thereafter.
Structural Shift: Quality over Quantity
The recent policy direction reveals a shift from sheer volume-based growth to higher-quality development. Beijing is now prioritizing high-tech manufacturing and innovation. The 14th five-year plan for 2021-2025 supports the shift and emphasizes research and development, with a focus on “dual circulation” (domestic demand + local trade) and green technology.
Final Thoughts
The recent years’ macroeconomic growth picture paints a nuanced portrait of the future. On paper, the economy has rebounded and is hitting a 5% growth target in exports and manufacturing. But beneath this growth lie challenges that could hinder its smooth trajectory: challenges in the property sector, changing demographics, debt, and lower growth potential. Policymakers are aware of these risks and are pushing to reconfigure China's growth model. The government is now focusing on quality development, which will help rebalance and sustain steady growth in the Chinese economy.
