China: Fourth Quarter 2024 GDP Surges to 5.4 percent YoY

China's economy has once again demonstrated its resilience, as the fourth quarter of 2024 saw GDP growth surge to 5.4% year-on-year (YoY), a notable improvement from the 4.6% recorded in the third quarter. This marks not only the highest quarterly growth of the year but also the fastest YoY expansion since the second quarter of 2023. The result surpassed expectations, underscoring the strength of China's economic recovery amidst a challenging global environment. In this article, Liam Gerald, a broker at PrimeUnityGroup will take a deep dive into this subject.

Key Highlights of the GDP Surge

1. Faster Pace of Growth: The fourth-quarter growth of 5.4% YoY significantly exceeded the previous quarter's 4.6%, reflecting a robust rebound in economic activity. This acceleration signals a sustained recovery trajectory, bolstered by targeted fiscal and monetary policies.
2. Overcoming Base Effects: While the second quarter of 2023 benefited from a favorable base effect due to the pandemic-induced low comparison, the fourth-quarter performance in 2024 stands out. The absence of similar base distortions emphasizes the genuine underlying strength of this growth.
3. Full-Year Growth at 5.0%: The strong fourth-quarter performance has effectively lifted full-year growth to 5.0%, aligning closely with Beijing's "around 5%" target. This outcome dispels any doubts about the feasibility of achieving this goal and underscores policymakers' effective management of the economy.

Driving Forces Behind the Growth

Several factors contributed to this better-than-expected performance in the fourth quarter:

1. Resilient Domestic Demand

The rebound in consumer confidence and domestic consumption has been a cornerstone of China's economic recovery. Retail sales, a key indicator of consumer demand, showed strong momentum in the fourth quarter, driven by:

• Pent-Up Demand: Following a period of subdued activity, Chinese consumers demonstrated robust spending patterns, particularly during major festivals and holidays.
• Policy Support: Targeted subsidies, tax cuts, and consumption incentives provided by the government helped sustain spending levels.

2. Recovery in the Property Market

The property market, a significant contributor to China's GDP, showed signs of stabilization after prolonged weakness. Supportive measures, such as reduced mortgage rates and relaxed purchasing restrictions, played a crucial role in reviving activity in this sector.

3. Industrial Output and Exports

Industrial production gained momentum in the fourth quarter, underpinned by recovering global demand and a more stable geopolitical environment. Export growth, though moderated by global headwinds, remained resilient, with sectors like high-tech manufacturing and green energy products leading the charge.

4. Government Stimulus Measures

Proactive fiscal policies, including infrastructure spending and targeted liquidity injections, provided a much-needed boost to economic activity. The People's Bank of China's (PBOC) accommodative stance also ensured sufficient credit availability to support growth.

Implications of the Strong Growth

The better-than-expected GDP growth in the fourth quarter carries several implications for the Chinese economy and beyond:

1. Confidence in Policy Effectiveness

The ability to achieve the 5.0% full-year target despite global economic uncertainties validates the effectiveness of China's economic policies. This outcome strengthens market confidence in Beijing's capacity to manage the economy amidst challenges.

2. Impacts on Global Markets

China's economic performance has far-reaching implications for global markets. The robust growth in the fourth quarter provides a positive signal for:

• Commodity Demand: Increased economic activity in China is likely to drive demand for key commodities such as oil, copper, and iron ore.
• Supply Chains: With industrial production and exports on the rise, global supply chain stability may improve.

3. Investor Sentiment

The strong GDP growth is likely to bolster investor sentiment, leading to potential inflows into Chinese equities and bonds. Improved confidence in China's economic trajectory could also enhance the appeal of the yuan.

4. Long-Term Growth Strategy

The results reaffirm China's commitment to achieving sustainable, high-quality growth. With structural reforms and innovation-driven policies in focus, the government is likely to continue prioritizing stability and modernization over short-term gains.

Looking Ahead

China's fourth-quarter GDP growth of 5.4% YoY is a testament to its resilience and adaptability in a complex global landscape. By achieving the full-year target of 5.0%, Beijing has reaffirmed its ability to balance short-term recovery with long-term development goals.

Moving forward, the focus is likely to remain on:

• Supporting domestic demand through targeted policies.
• Advancing innovation and technology to drive sustainable growth.
• Enhancing trade partnerships and supply chain resilience.

With these priorities in mind, China appears well-positioned to navigate the challenges ahead and maintain its role as a key driver of global economic growth.