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Critical Topics and Their Significance for the UPSC CSE Examination on December 27, 2024

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World Bank raises China’s GDP forecast for 2024, 2025

For Preliminary Examination:  Gross Domestic Product (GDP), Gross Value Added (GVA)

For Mains Examination: GS III - Indian Economy

Context:

The World Bank raised its forecast for China's economic growth in 2024 and 2025, but warned that subdued household and business confidence, along with headwinds in the country’s ailing property sector, would keep weighing it down next year

Read about:

Gross Domestic Product (GDP)

Gross Value Added (GVA)

Key takeaways:

• The world's second-largest economy has faced challenges this year, primarily due to a property market crisis and sluggish domestic demand.
• Concerns also loom over potential U.S. tariff increases on Chinese goods once President-elect Donald Trump assumes office in January, which could further impact economic growth.
• The World Bank projects China's GDP growth at 4.9% this year, slightly higher than its June forecast of 4.8%, driven by recent policy easing and short-term export momentum. Beijing has set a growth target of "around 5%" for the year, expressing confidence in achieving this goal.
• Growth in 2025 is anticipated to decline to 4.5%, although this remains above the World Bank's earlier projection of 4.1%. Slower household income growth and the negative wealth impact of falling home prices are likely to constrain consumption through 2025. In response, Chinese authorities plan to issue a record 3 trillion yuan ($411 billion) in special treasury bonds next year, according to a Reuters report.
• These measures and forecasts will be officially presented at the annual National People's Congress meeting in March 2025, though revisions are possible before then. While efforts by housing regulators aim to stabilize the real estate market, the World Bank does not expect a significant recovery in the sector until late 2025.
• China's middle class, which accounted for 32% of the population in 2021, has grown substantially since the 2010s.
• However, World Bank estimates indicate that around 55% of this group remains "economically insecure," highlighting the importance of creating more opportunities for financial stability