A Divergent Economic Path
China's economy is currently characterized by a 'two-speed' recovery, with significant expansion in emerging industries such contrasting with persistent difficulties in its traditional sectors. While the nation achieved its annual GDP growth target of 5.2% in 2023 and 5.0% in 2024, the underlying drivers of this growth reveal a notable divergence. Exports played a crucial role, contributing 30.3% to GDP growth in 2024.
Boom in New Economy Sectors
The new energy sector, encompassing electric vehicles (EVs), batteries, and solar technologies, has emerged as a primary engine of growth. China stands as the world's largest EV market, accounting for over 70% of global production and 67% of global sales in 2024. In 2024, approximately 12.87 million passenger electric vehicles were sold in China, with plug-in electric vehicles constituting 47.9% of overall automotive sales, a substantial increase from 6.3% in 2020. Chinese manufacturers such as BYD Auto and SAIC Motor hold dominant positions in this market.
Investment in clean energy reached an estimated 6.8 trillion yuan ($940 billion) in 2024, with more than half of this spending directed towards the EV, battery, and solar industries. These clean energy investments contributed approximately 10% to China's GDP in 2024 and grew three times faster than the overall economy. The 'new three' industries—solar cells, lithium batteries, and EVs—saw their exports jump by 30% in 2023. High-tech manufacturing and services also demonstrated strong performance, with new energy vehicle production alone growing by 38.7% in 2024.
Challenges in Traditional Industries
In stark contrast, China's property sector continues to grapple with significant challenges. The real estate industry, which once accounted for a larger share, represented around 13% of China's GDP in early 2024. The market has been in decline since 2022, with expectations that it may not reach its bottom in 2024. Data from the first quarter of 2024 revealed a 9.5% year-on-year decrease in real estate investment. New home sales fell by 19.4% year-on-year, and new construction starts dropped by 23.4% during the same period. By the end of March 2024, the area of unsold residential housing had grown by 23.9%.
The ongoing property crisis has impacted consumer sentiment and contributed to local government debt issues. In response, the government introduced measures in mid-May 2024, including encouraging local governments to purchase unsold apartments and easing residential purchase rules through reduced down-payments and mortgage rates. However, experts suggest that these measures may not fully address the sector's fundamental problems without further intervention. The property sector's health is critical, as it accounts for approximately 30% of GDP and nearly 70% of household wealth.
Outlook and Policy Response
Despite the robust performance of new sectors, the overall economic recovery remains uneven, with weak domestic consumption being a persistent concern. The 'two-speed' nature of the recovery was particularly evident in 2025, where exports continued to drive the economy while consumption and property sectors lagged. Policymakers are focused on addressing these structural imbalances and boosting domestic demand to ensure sustainable growth.
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