Written by Kevin Yao
BEIJING (Reuters) – China's economy is likely to rebound in the final quarter of the year as several rounds of policy stimulus begin, enabling the government to largely meet its 2024 growth target, although the risk of new U.S. tariffs could hold back the broader recovery. .
A Reuters poll expects gross domestic product to grow 5.0% in the October-December period from a year earlier, accelerating from the 4.6% pace in the third quarter.
The survey found that economic growth for the full year is expected to reach 4.9%, which largely meets the official target of about 5%. The economy grew by 5.2% in 2023.
Larry Hu, chief China economist at Macquarie, said Beijing's policy pivot in September underscored its determination to defend its growth target. Beijing has rarely failed to meet its growth targets in the past.
“Thanks to this, fourth-quarter GDP growth may rebound above 5% year-on-year, so that full-year GDP growth could reach the target of about 5%,” Hu said in a note.
“If the 2025 GDP target is set at around 5% again, how much policymakers will do to stimulate the weak path (consumption/ownership) will depend on the impact of tariffs on the strong path (exports/manufacturing).”
On a quarterly basis, the economy is expected to grow by 1.6% in the fourth quarter, compared to 0.9% in the July-September period.
Policymakers have launched a range of stimulus measures since September, including interest rate cuts, cash injections and steps to address local governments' hidden debts. They also expanded the trade scheme for consumer goods such as appliances and cars, which helped revive retail sales.
The world's second-largest economy has been struggling for momentum since the post-pandemic recovery faded quickly, with a protracted real estate crisis, mounting domestic debt and weak consumer demand weighing heavily on activity.
Exports, one of the few bright spots, may lose ground as President-elect Donald Trump, who has proposed massive tariffs on Chinese goods, returns to the White House next week.
But although strong exports pushed the country's trade surplus to a record $992 billion last year, the yuan has come under selling pressure. The dominance of the dollar, falling Chinese bond yields and the threat of higher trade barriers pushed the yuan to its lowest levels in 16 months.
A tough battle lies ahead
At an agenda-setting meeting in December, Chinese leaders pledged to increase the budget deficit, issue more debt and ease monetary policy to support economic growth in 2025.
Reuters reported, citing sources, that the leaders agreed to maintain an annual growth target of about 5% for this year, supported by a record high budget deficit of 4% and 3 trillion yuan ($409.2 billion) in special treasury bonds.
Such a target may be more ambitious than last year given the slowdown in the economy's trajectory and increased external headwinds.
China's economic growth is likely to slow to 4.5% in 2025, then decline further to 4.2% in 2026, according to the survey.
The government is expected to unveil growth targets and stimulus plans during Parliament's annual meeting in March.
China's central bank is expected to deploy its most aggressive monetary tactics in a decade this year as it tries to revive the economy, but in doing so it risks quickly exhausting its strength.
Separate data on December activity, which will be published alongside GDP data, is expected to show consumption rising while factory output growth stabilized.
Retail sales, a key measure of consumption, are expected to grow 3.5% in December from a year earlier, versus a 3.0% rise in November. Factory output is expected to grow 5.4% in December year-on-year, matching November's rise.
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