Beijing struggles to transfer industrial, export gains to consumers

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BEIJING- China’s economy grew 5 percent last year, matching the government’s target, but in a lopsided fashion, with many people complaining of worsening living standards as Beijing struggles to transfer its industrial and export gains to consumers.

The imbalance raises concerns that structural problems may deepen in 2025, when China plans a similar growth performance by going deeper into debt to counter the impact of expected US tariff hikes, potentially as soon as Monday when Donald Trump is inaugurated as president.

December data showed industrial output far outpacing retail sales, and the unemployment rate ticking higher, highlighting the supply-side strength of an economy running a trillion-dollar trade surplus, but also its domestic weakness.

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Export-led growth has been partly underpinned by factory gate deflation which makes Chinese goods more competitive on global markets, but also exposes Beijing to greater conflicts as trade gaps with other countries widen. Within borders, falling prices have ripped into corporate profits and workers’ incomes.

Andrew Wang, an executive at a company providing industrial automation services for the booming electrical vehicle sector, said revenues fell 16 percent last year, prompting him to cut jobs, which he expects to do again soon.

“The data China released was different from what most people felt,” Wang said, comparing this year’s outlook with notching up the difficulty level on a treadmill.

“We need to run faster just to stay where we are.”

China’s National Bureau of Statistics and the State Council Information Office, which handles media queries, did not immediately respond to questions about doubts over official data.

“It seems dubious that China precisely hit its growth target for 2024 at a time when the economy continues to face tepid domestic demand, persistent deflationary pressures, and flailing property and equity markets,” said Eswar Prasad, trade policy professor at Cornell University and a former China director at the International Monetary Fund.

“Looking ahead, China not only faces significant domestic challenges but also a hostile external environment.”

If the bulk of the extra stimulus Beijing has lined up for this year keeps flowing towards industrial upgrades and infrastructure, rather than households, it could exacerbate overcapacity in factories, weaken consumption, and increase deflationary pressures, analysts say.

Nomura analysts said that to deliver “a truly sustainable” growth recovery, Beijing needs to ease fiscal and monetary policy, resolve the protracted property crisis, reform its tax and social welfare systems and alleviate geopolitical tensions.

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