China’s growth is set to slow next year despite temporary boost from stimulus, World Bank warns

China’s economic growth rate is expected to decline further in 2025 despite a temporary boost from recent stimulus measures, according to the World Bank. 

The international lender estimated that China’s growth rate would drop to 4.3% next year, down from a projected 4.8% in 2024, in an economic update on Tuesday. 

The 2024 figure is up 0.3% from the bank’s forecast in April and comes after Beijing rolled out a recent raft of stimulus measures, boosting investor confidence and prompting a stock market rally, which has since fizzled.

However, despite the measures, which have mainly focused on monetary policy, the World Bank’s 2025 growth projection was unchanged from earlier projections.

Speaking to CNBC’s “Street Signs Asia” on Tuesday, Aaditya Mattoo, East Asia and Pacific chief economist at the World Bank, said the “fiscal dimension” of the stimulus measures remained undefined, complicating the projections.

“The question is whether [the stimulus] can actually offset consumer concerns about declining salaries, concerns about declining property incomes and fears about falling ill, growing old, becoming unemployed,” Mattoo said. 

The World Bank attributed weak Chinese consumer spending to many of those concerns, on top of challenges such as persistent property market weakness, an aging population and rising global tensions.

Speaking to CNBC’s “Street Signs Asia” last week, James Sullivan, head of Asia-Pacific equity research at JPMorgan, highlighted the stimulus’ focus on supply and investment rather than China’s issues with consumer spending.

“The million dollar question in China right now is, does [the stimulus] only flow into the supply side of the equation, or does it ultimately flow through into consumer demand? That’s not our expectation right now,” he said.

Meanwhile, Hui Shan, chief China economist at Goldman Sachs, told CNBC’s “Squawk Box Asia” on Tuesday that China’s growth rate next year would highly depend on the size of any additional stimulus package and the outcome of the November U.S. presidential election.

Goldman is still forecasting that China’s 2025 real gross domestic product growth will be at 4.3%.

On Tuesday, the chairman of China’s National Development and Reform Commission pledged more action to bolster the country’s economy, including speeding up special purpose bond issuance to local governments. However, the official stopped short of announcing any new major stimulus plans.

The World Bank has long advocated for China to boost its growth through bold policy actions such as unleashing competition, upgrading infrastructure, and reforming education.

But according to Mattoo, the stimulus is not a substitute for the deeper structural reforms that China will need to lift longer-term growth. However, any boost from the stimulus measures will be welcomed by the rest of the region, which is still highly dependent on China for growth, he added. 

The World Bank estimates that the rest of the East Asia and Pacific region will grow at 4.7% this year and rise to 4.9% next year amid expected export recovery and better financial conditions. 

Nevertheless, the region will need to find more domestic drivers of growth as China slows down, it said.

“For three decades, China’s growth has spilled over beneficially to its neighbors, but the size of that impetus is now diminishing,” the World Bank said in its Tuesday report.