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 2024 growth target of 5%, Beijing said on Friday.

But it is at one of the slowest growth rates in decades, with the world’s second-largest economy struggling to overcome a protracted property crisis, high local government debt and youth unemployment.

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

Beijing has rarely missed its growth targets in the past.

According to experts, they predicted this growth rate. The World Bank said lower borrowing costs and rising exports meant China could achieve annual growth of 4.9%.

Investors, however, are struggling: The threat of tariffs from President-elect Donald Trump on $500bn (£409bn) worth of Chinese goods is looming.

However, that is not all that is preventing China from achieving its growth targets next year.

Business and consumer confidence are low, and China’s yuan will continue to weaken as Beijing cuts interest rates in a bid to boost growth.

Here are three reasons why he has bigger challenges than Xi Trump’s tariffs:

There are growing warnings that China’s economy will slow down in 2025. A key driver of last year’s growth is now at risk: exports.

China has relied on manufacturing to help it out of the slowdown; therefore, it is exporting a record number of electric vehicles, 3D printers and industrial robots.

The US, Canada and the European Union have accused China of making too many goods and have imposed tariffs on Chinese imports to protect domestic jobs and businesses.

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

This could affect Chinese businesses hoping to expand, hitting energy and raw material suppliers.

Xi wants to transform China from the world’s factory of cheap goods to a high-tech powerhouse by 2035, but it is unclear how manufacturing can continue to be a strong driver of growth in the face of rising rates.

In China, household wealth is largely invested in the real estate market. Before the real estate crisis, it accounted for nearly a third of China’s economy—employing millions of people, builders and developers, cement producers and interior designers.

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

But too many residential and commercial properties are still vacant, and this oversupply continues to drive prices down.

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

It has already hit spending hard: In the last three months of 2024, domestic consumption contributed just 29% to China’s economic activity, down from 59% before the pandemic.

This is one of the reasons why Beijing has increased its exports. It’s meant to help offset sluggish household spending on new cars, luxury items and just about everything else.

The government has also introduced programs like trade in consumer goodswhere people can trade washing machines, microwave ovens and rice cookers.

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

They say people will need more cash in their pockets to pay back their pre-Covid expenses.

“China needs to restore the animal spirit of the population and we are still far from that,” said Shuang Ding, chief economist for Greater China and North Asia at Standard Chartered Bank.

“If the private sector starts to invest and innovate this can increase incomes and job prospects, and people will have more confidence to consume.”

Public debt and unemployment have also had an impact on savings and spending.

Official figures suggest youth unemployment rate remains high compared to pre-pandemic, and wage increases have stalled.

President Xi has promised that the government will invest in cutting-edge industries that he calls “new productive forces.”

So far, it has helped China become a leader in renewable energy products such as solar panels and electric vehicle batteries.

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

But the poor economic picture, uncertainty over tariffs and other geopolitical uncertainties dampen the appetite of foreign companies to invest in China.

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

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

For all these reasons, experts believe that measures to support the economy will partially mitigate the potential impact New US rates.

Beijing needs to take big, bold measures or accept that the economy is not growing as fast, Hui Shan, Goldman Sachs’ Chief China Economist, wrote in a recent report, adding: “We hope to choose the former.”

“China needs to stabilize the real estate market and create enough jobs to ensure social stability,” said Standard Chartered Bank’s Mr. Ding.

According to researcher China Dissent Monitor, There were more than 900 protests in China Directed by employees and owners between June and September 2024 – 27% more than in the same period a year earlier.

These kinds of social tensions resulting from economic grievances and the erosion of wealth will be a concern for the Chinese Communist Party.

After all, explosive growth made China a global powerhouse, and the promise of increased prosperity has largely helped its leaders keep a lid on dissent.