In a significant development that has caused tremors in international markets, China's GDP growth for the final quarter of 2024 was only 4.8%, which is significantly lower than the 5.2% forecast by analysts. China's pivotal position as the world's second-largest economy has prompted apprehensions regarding the global economic prognosis, as evidenced by the news that was disclosed on December 12, 2024.
The disappointing growth rate is indicative of the persistent obstacles that China's economy faces, such as a real estate sector that is struggling, lackluster domestic consumption, and a cautious approach to stimulus measures by the government. The property market, which has been a significant generator of economic activity for a long time, is currently experiencing challenges due to a decrease in new housing starts and developer defaults.
Additionally, consumer spending has not been as robust as anticipated following the lifting of stringent COVID-19 restrictions, as demand has been dampened by high youth unemployment and a general lack of consumer confidence. Fears of a global downturn and trade tensions, particularly with the United States and Europe, have also impacted exports, which are another pillar of Chinese economic growth.
The global financial markets responded immediately. The Hang Seng Index experienced a 2.5% decline in early trading, particularly in Hong Kong and Shanghai, where Asian markets experienced significant declines. Investor apprehensions regarding global growth prospects were reflected in the decline of stock indices such as the FTSE 100, DAX, and CAC 40 in Europe.
Commodity markets were also affected, as prices for copper and iron ore, which are significant exports from China, decreased as a result of anticipated decreased demand. Oil prices also decreased as investors revised their assessments of China's energy requirements.
In response, the Chinese government has suggested that it may implement additional policy modifications, such as targeted fiscal measures or additional relaxation of monetary policy, in order to stimulate development. Nevertheless, it is imperative to maintain a delicate equilibrium; an excessive amount of stimulus could rekindle inflationary concerns on a global and domestic scale, while insufficient action could perpetuate economic stagnation.
The implications are extensive on a global scale. Australia and Brazil, two nations that are significantly dependent on exports to China, are anticipating potential economic repercussions. Manufacturers and luxury products producers in Europe, who regard China as a substantial market, are currently revising their growth projections. Although the United States is less reliant on exports to China, it may experience indirect consequences as a result of fluctuations in global commodity prices and investment flows.
In light of this development, the International Monetary Fund (IMF) has already indicated that it may revise its global growth projections for 2025 downward. In the interim, central banks worldwide are currently in a predicament, as they must determine whether this downturn in China requires a reevaluation of their monetary policies, particularly if it results in a more extensive global economic slowdown.
The international community is intently monitoring Beijing's policy direction as markets process this data. The global economic landscape in 2025 may be significantly influenced by China's ability to navigate these turbulent waters, which could have a global impact on economic stability, trade, and investment.