China: Donald Trump’s tariffs are not China’s only problem

China is scheduled to release its 2024 gross domestic product ( GDP ) figures despite its ongoing struggle to recover from a long-running property crisis, high local government debt, and youth unemployment.

Beijing set a “around 5 %” annual growth target last month, and President Xi Jinping claimed that the second-largest economy in the world was on track to achieve it.

” As always, we grow in wind and rain, and we get stronger through tough times. We may be full of confidence”, he said.

According to the World Bank, lower borrowing costs and rising exports will enable China to experience annual growth of 4.9 %, according to experts.

Investors, however, are bracing themselves: the threat of President-elect Donald Trump’s tariffs on$ 500bn ( £409bn ) worth of Chinese goods looms large.

That is not all that prevents China from achieving its development goals the following month.

As Beijing lowers interest charges in an effort to boost growth, the Chinese yuan may continue to decline. Business and consumer confidence are at a low point.

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

There are becoming more and more cautions that China’s economy will slow down in 2025. One major driving factor of last year’s growth is now at risk: imports.

China has relied on production to combat the recession, so it has been exporting a record amount of electric cars, 3D printers, and business computers.

China has been accused of producing too many items by the US, Canada, and the European Union, and tariffs have been imposed on Chinese exports to protect local jobs and businesses.

According to experts, Chinese manufacturers may then concentrate on other regions of the world. However, those nations are likely to be in emerging areas, which have lower require levels than those in North America and Europe.

That might have an impact on Chinese companies that are trying to grow, which might also have an effect on energy and raw materials manufacturers.

By 2035, Xi wants to transform China from a shop for low goods to a high-tech superstar, but it’s not clear how production can continue to be such a major development driver in the face of rising taxes.

In China, home money is mainly invested in the home business. It made up about a third of China’s market before the real estate problems, and it employs millions of people, from contractors and developers to concrete producers and interior designers.

Beijing has put in place a number of measures to stabilize the real estate market, and China Securities Regulatory Commission ( CSRC ), the country’s official regulator, has declared it will support reforms vehemently.

However, there are still far too many unoccupied homes and commercial properties, and the surplus keeps lowering rates.

The home market collapse is expected to middle out this year, but Wall Street banker Goldman Sachs claims that the decline may have a “multi-year pull” on China’s economic development.

It’s now hit paying tough- in the last three decades of 2024, household consumption contributed just 29 % to China’s economic activity, down from 59 % before the pandemic.

One of the reasons Beijing has increased imports is that. It wants to mitigate domestic spending that is slow on fresh cars, expensive goods, and almost everything else.

The government has even introduced programmes like consumer goods trade-ins, where people can exchange their washing machines, microwaves and rice cookers.

However, researchers are unsure whether these kinds of actions alone are sufficient to address deeper problems in the economy.

They claim that people will need more cash in their hands before pre-Covid levels for saving returns.

China must regain the population’s dog nature, but we are still far from it, according to Shuang Ding, Chief Economist for Greater China and North Asia at Standard Chartered Bank.

” People will have more confidence in consuming and the private business starts to engage and develop, which will increase revenue and the career prospects, and people will start to have more confidence in doing so.”

Savings and investing have also been impacted by high public debt and poverty.

Official figures suggest the youth jobless rate remains high compared to before the pandemic, and that wage rises have stalled.

President Xi has pledged to invest in the cutting-edge fields that the government refers to as “new creative forces.”

That has allowed China to lead the charge in fields like solar panel materials and batteries for electric vehicles up until now.

Last month, China even overtook Japan as the country’s biggest automobile exporter.

However, international businesses are less eager to invest in China because of the lackluster financial picture, doubt over tariffs, and other political uncertainties.

According to Stephanie Leung from the money management system StashAway, it’s not about foreign or domestic investment; rather, it’s about businesses not seeing a bright future.

They want to view a wider group of investors joining,” they said.

For all of these reasons, experts believe the measures to support the economy will only partially alleviate the impact of potential new US tariffs.

In a recent report, Goldman Sachs ‘ Chief China Economist Hui Shan stated that” we expect them to choose the past” and that Beijing must either take big, strong measures or take that the market is not going to grow so quickly.

Mr. Ding from Standard Chartered Bank said that” China needs to stabilise the house areas and produce enough work to maintain cultural stability.”

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

The Chinese Communist Party may be concerned about these kinds of social strains brought on by financial concerns and an eroding prosperity.

After all, China’s rapid progress made it a global energy, and the promise of more wealth has largely contributed to its leaders ‘ ability to keep a tight lid on dissent.