On August 16, 2011, a residential apartment development was intensively built near Kangbashi New District, Ordos City, Mongolia, China.
Shen Qilai|Kobes History|Getty Images
The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, but warned that low household and business confidence and headwinds in the real estate sector will continue to weigh on economic growth next year.
The world’s second-largest economy has struggled this year, largely due to a housing crisis and tepid domestic demand. When U.S. President-elect Trump takes office in January, the U.S. is expected to increase tariffs on its goods, which may also affect economic growth.
“Addressing challenges in the real estate sector, strengthening social safety nets, and improving local government finances are critical to achieving a sustained recovery,” said Marla Warwick, World Bank Country Director for China.
“It is important to balance short-term growth support with long-term structural reforms,” she added in a statement.
Affected by recent policy easing and recent strong exports, the World Bank expects China’s gross domestic product (GDP) growth rate this year to be 4.9%, higher than the 4.8% forecast in June.
Beijing has set a growth target of “around 5%” this year and said it is confident it can achieve it.
Although growth is also expected to fall to 4.5% in 2025, it is still higher than the World Bank’s previous forecast of 4.1%.
The central bank added that negative wealth effects from slower household income growth and falling house prices are expected to weigh on consumption until 2025.
According to a Reuters report this week, Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) of special government bonds next year in an effort to revive economic growth.
The figures won’t be officially released until China’s annual National People’s Congress meeting in March 2025, and could still change before then.
While housing regulators will continue efforts next year to stem a further decline in China’s real estate market, the World Bank said it doesn’t expect the sector to turn around until the end of 2025.
China’s middle class has expanded significantly since the 2010s and will account for 32% of the population by 2021, but the World Bank estimates that about 55% of the middle class remains “economically insecure”, underscoring the need to create opportunities .
