China's Economy Surges in Q4, Beating Market Forecasts

China's economy expanded by 5.4% year-over-year in the fourth quarter of 2024, surpassing market expectations and marking a significant rebound from the previous quarter's growth rate of 4.6%. This strong performance can be attributed to a combination of policy stimuli, robust exports, and improving domestic demand.



Policy Stimuli Boost Economic Growth
The Chinese government implemented a series of policy stimuli in fiscal and financial areas since the end of September 2024 to support consumption, investment, real estate, and capital markets. These measures aimed to stabilize housing and financial market prices, contributing to the overall economic growth in Q4. According to the KPMG China report, the government's policy stimuli led to positive changes in many fields, with the foundation of economic recovery being consolidated and real estate and domestic demand bottoming out.

Exports Drive Economic Recovery
Despite the challenging external environment, China's exports rose by 6.0% year-over-year in Q3 2024, thanks to continuous improvement in external demand. This improvement in exports contributed to the overall economic growth in Q4. The strong performance in exports can be attributed to the government's continued implementation of policies on opening up, which helped alleviate supply shock and cope with the lack of demand.

Domestic Demand Shows Signs of Improvement
Although domestic demand remained modest, it showed signs of improvement in Q4. Retail sales increased by 3.7% year-over-year in December 2024, compared to 3% in the previous month. This indicates that consumer spending was picking up, which is a positive sign for the economy. Additionally, Fixed Asset Investment (FAI) advanced 3.2% year-to-date (YTD) YoY in December 2024, which was slightly lower than the 3.3% growth rate in the previous month. While the growth rate was modest, it showed that investment activities were stabilizing, contributing to the overall economic growth in Q4.



Looking Ahead: Challenges and Opportunities
While China's economy showed strong growth in Q4 2024, there are still challenges ahead. The government will need to continue implementing policy stimuli to support economic growth and address the lingering issues in the real estate sector. Additionally, the government must remain vigilant in monitoring the external environment and take appropriate measures to mitigate any potential risks to the economy.

In conclusion, China's economy expanded by 5.4% year-over-year in Q4 2024, beating market forecasts and marking a significant rebound from the previous quarter. The strong performance can be attributed to a combination of policy stimuli, robust exports, and improving domestic demand. As the government continues to implement supportive policies and address the challenges facing the economy, investors can expect China's economy to maintain its momentum in the coming quarters.