The economic scars of China’s real estate crash are evident at the country’s many street markets for construction materials. Proprietors of once-bustling shops that sell everything from lighting fixtures and doors to toilet bowls are aching for customers.
At the same time, China’s exports have climbed sharply. Companies are shipping cars, smartphones and many other products to foreign markets that they can no longer sell at home. Private-sector companies are investing heavily in new factories and equipment to expand production for export.
On Friday, the National Bureau of Statistics said that China’s economy grew 5 percent last year, as surging exports and strong investment in factories and industrial equipment mostly offset a lingering slump in construction.
The government had set a target of “about 5 percent” nearly a year ago. The 2024 number was only slightly slower than China’s growth rate of 5.2 percent in 2023, when the country was rebounding after nearly three years of municipal lockdowns, mass quarantines and other stringent pandemic measures.
The economy grew more strongly from October through December than during any other quarter in the year. Lifted by strong car sales, the Chinese economy expanded late last year at a pace that, if extended for a full year, would represent a growth rate of 6.6 percent.
While the official figures often draw skepticism, government economists insist that the economy has regained its footing. “China’s economy is really recovering amid the ups and downs,” said Yang Ping, a director of economic research at the National Development and Reform Commission, China’s main economic planning agency.
The real engine of the economy now lies in an ever-widening trade surplus, which reached almost $1 trillion last year. In December, the surplus, $104.8 billion, was the largest any country had reported for a single month.
China exported enough electric and plug-in hybrid cars last year to form a line across Asia and Europe from Beijing to Rome, Lyu Daliang, director of statistics and analysis at China’s General Administration of Customs, said during a news briefing on Monday. He did not mention that automakers also exported more than twice as many gasoline-powered cars, for which demand in China has halved since 2017 as consumers switched to electric models.
Exports are strong partly because China’s vast population can no longer afford to buy many of the goods churned out by the country’s factories. Dozens of real estate developers have failed, vaporizing jobs and wealth. The surviving developers are struggling to finish projects and barely taking on new apartment buildings.
The middle class has lost much of its savings with a plunge in the value of homes, by far the main asset of most households. The result has been weak consumer spending that is only now starting to bottom out. Corporate profits have been eroding for the past three years.
The Chinese government has pursued several strategies in recent months to stabilize the economy. Government workers have been given raises. Local governments have been allowed to issue more bonds, to offset their recent declines in revenues from the sale of state land to developers.
The national government has encouraged the building of roads and other infrastructure projects to try to address the loss of construction jobs at real estate developers. But Beijing has had trouble finding local governments with enough money to fund these tasks.
To reignite consumer spending, the Ministry of Commerce has pursued an extensive so-called cash for clunkers program. Together, the national and local governments offer subsidies to households that trade in old gas-guzzling cars for electric vehicles and old household appliances for new, more energy-efficient models.
The program had a slow start last spring. The initial subsidies were as little as a tenth of the purchase price of the replacement car or appliance. But sales strengthened considerably through the autumn after the government doubled the financial incentives in August.
China’s car sales set a world record in November, then broke that record in December, when 3.1 million passenger cars were sold. Battery-electric and plug-in hybrid gasoline-electric cars made up half the market.
But some of the national and provincial subsidies for car purchases expired at the end of December, which gave households a strong incentive to make purchases before then. Carmaker executives worry that many of the sales in December were pulled forward from the early months of this year, which could be much weaker.
Some academic economists question whether the cash for clunkers program is prompting households to redirect their spending to new cars and appliances, and away from meals and other consumption. If consumers are shifting how they spend money without increasing overall spending, the effects on the economy will be modest.
Government economists insist that the program is increasing overall spending. This month, they widened the range of appliances that are eligible.
“With these new policies, we can stimulate people’s consumer demand — it is not just a redirection,” Ms. Yang said at a news briefing on Wednesday.
The government has pressured universities, banks and other institutions in mainland China and Hong Kong to make sure that their economists do not question the accuracy of government statistics. Economists who have done so have had their social media accounts blocked and have sometimes lost their jobs and been barred from working in the financial sector.
Questions nonetheless persist about the true health of the economy. Gao Shanwen, chief economist of SDIC Securities, a Chinese brokerage, became the latest to raise doubts about the economy’s actual growth rate during a panel in Washington last month.
“My own speculation is that in the past two to three years, the real number on average might be around 2 percent,” he said, while adding that in the coming years, “we know, and I think, the official number will always be around 5 percent.”
Mr. Gao has disappeared from public view since then. SDIC Securities did not answer questions about Mr. Gao’s remarks, and Mr. Gao could not be reached for comment. Mr. Gao’s license as an investment adviser in Hong Kong, which had been active since 2012, lapsed at the end of December.
Hou Weitang is on the front line of the economic slowdown. Mr. Hou is a wholesaler at a construction materials market in Jinan in eastern China’s Shandong Province. He has worked at the market for 20 years. It was almost deserted on a recent weekend.
Mr. Hou said that business just kept getting worse. Like many entrepreneurs, he now focuses on cutting costs instead of spending or investing.
“We have to reduce expenses, reduce materials prices, engage in price wars and try to sell more,” Mr. Hou said. “All my costs are being cut — only this way can we keep the doors open steadily; otherwise, we won’t be able to cover expenses.”
Li You contributed research.
