"This Year's China Growth Rate Below 5%"... Consumption Slump and Real Estate, Biggest Risks

German Think Tank Surveys 843 Experts from 58 Countries
"Weak Consumption Seen as a Risk to Economic Growth" by 73%
Real Estate 71%, Economic Security Competition 65%
Government Debt 57%, Geopolitical Risks 49%

Although the Chinese government is expected to set this year's economic growth target at around 5% despite the return of former U.S. President Donald Trump, most China experts worldwide predict that China's growth rate this year will fall short of 5%.

The biggest risks to China's economic growth were identified as weak consumption and real estate issues. These concerns outnumbered responses that cited economic security competition, such as tariff increases under the Trump administration, as major risks.

The Mercator Institute for China Studies (MERICS), a German think tank specializing in China, announced these findings on the 15th (local time) at the 'MERICS China Outlook 2025' conference, based on a survey of 843 China experts from 58 countries.

China's economic growth rate was 5.2% in 2023, and last year it was forecasted to be around 5%. Many expect the growth target for this year to also be set around 5% at the upcoming Two Sessions in March. However, 65% of the experts surveyed believed that China's growth rate this year will fall short of 5%. Only 31% responded that the growth rate would reach around 5%.

The most important risks to the Chinese economy were seen as weak consumption and real estate problems. Seventy-three percent of experts responded that weak consumption is an 'important' (41%) or 'very important' (31%) risk to economic growth, and 71% viewed continued instability or collapse in the real estate sector as an 'important' (44%) or 'very important' (27%) risk. Other significant risks identified included economic security competition (65%), debt levels of the central and local governments in China (57%), and geopolitical risks or international conflicts (49%). Government debt was particularly noted as potentially weakening public spending and financial stability.

Economic issues are expected to remain a source of social unrest in China this year. Seventy-six percent of experts believed that falling real estate prices and economic tensions would create discontented groups, but 63% answered that maintaining public order is 'very important' for the Chinese Communist Party this year. Only 12-26% responded that resolving core economic problems would be urgent. When asked what the top priority for President Xi Jinping and Chinese leaders is this year, 29% said China's technological self-reliance, 28% said improving social control, and 25% said economic stability and growth promotion. Regarding the areas Xi Jinping ultimately focuses on, 62% of experts believed it to be national innovation capabilities such as technology, resources, and organization.

Experts also pointed out economic decoupling from the West and export controls in China's research and development (R&D) as notable risks. Fifty-six percent responded that international scientific cooperation, including research collaboration, exchange programs, and resource sharing, would decrease.

Regarding economic and geopolitical competition between China and the United States and the European Union (EU), 70% of experts believed that China would enhance cooperation with non-Western countries. Thirty-eight percent responded that China would support Russia similarly to last year, and 23% believed China would expand political and economic support for Russia. Only 13% of experts expected China to strengthen its mediation role in the Russia-Ukraine war.

Regarding political relations between the EU and China, 56% of experts responded that relations would deteriorate 'to some extent' or 'significantly.' In contrast, 52% of experts believed economic relations would remain stable or improve. Despite recent tariff increases on Chinese electric vehicles, the EU is expected to maintain trade relations with China. Seventy-five percent of experts believed that China's foreign direct investment (FDI) in the European electric vehicle market would increase 'to some extent' (45%) or 'significantly' (30%).

However, only 24% of experts expected political progress between the EU and China regarding trade, investment, and market access. Most experts identified climate and environmental issues as areas where the EU and China could meaningfully cooperate, but only 15% responded that under a second Trump administration, the EU would align with the U.S. on these issues. Thirty-five percent of experts said the EU should balance between the U.S. and China, and 34% said other countries besides the U.S. and China should diversify their partnerships.

Although relations between the U.S. and China are expected to worsen significantly, many believed that military conflict would not occur. Most responses regarding improvement in U.S.-China relations under a second Trump administration were 'very unlikely' (36%) or 'somewhat unlikely' (41%). However, only 27% believed that military conflict could occur in crisis areas such as Taiwan. It is expected that disputes between the U.S. and China will occur extensively in the economic sphere.

Regarding the strengthening of U.S. export controls on high-tech products, 94% responded 'very likely' (55%) or 'somewhat likely' (39%). Regarding a full-scale trade war between the U.S. and China, 88% responded 'very likely' (42%) or 'somewhat likely' (46%). Responses indicating that economic disputes would accelerate were also high at 'very likely' (30%) and 'somewhat likely' (50%). While President Joe Biden aims to reduce economic interdependence from a national security perspective, former President Trump seeks to correct trade imbalances and create jobs within the U.S.

Most respondents believed that President Trump expects Taiwan to play an important role from an economic interest perspective. Eighty-nine percent of experts believed that a second Trump administration would encourage Taiwanese semiconductor companies to invest more in the U.S., and 64% expected the U.S. to sell more weapons to Taiwan.

This content was produced with the assistance of AI translation services.