World Bank raises China's growth rate to 4.8% again on export strength

Trade surplus surged due to consumer support measures despite a decline in exports to the U.S.

Growth slowdown next year due to slowdown in export growth and end of consumer support measures

The World Bank expects China to achieve a growth rate of 4.8% this year despite the U.S. tariff war.

According to CNBC on the 7th (local time), the World Bank announced that it was raising its forecast for China's economic growth from 4%, predicted in April, to 4.8% on that day.

The World Bank did not specify the exact reasons for raising its forecast, but it appears to have raised China's growth rate based on strong export and trade surplus increases and the Chinese government's consumer support measures.

From January to August this year, exports and the trade surplus, the main drivers of China's economic growth, reached record highs. This was because increased exports to Europe and Southeast Asia offset the sharp decline in exports to the United States. Pre-orders ahead of tariff increases also supported China's export growth.

To maintain domestic demand, Chinese authorities have been using strong stimulus measures, such as consumer compensation sales programs, since late 2024.

Before China and the United States agreed on a trade truce in April, U.S. tariffs on Chinese imports temporarily exceeded 100% by a wide margin. Currently, the two countries are in a tariff truce until mid-November, and the current U.S. tariff rate on China is 57.6%. That is more than double the rate at the beginning of the year.

China's export increase has helped greatly to offset a slowdown in growth caused by weak consumer spending and a real estate downturn. However, this growth momentum is expected to slow.

The World Bank forecasts that China's GDP growth will slow to 4.2% next year due to a slowdown in export growth. It also expects the Chinese government to ease stimulus measures next year to prevent a surge in public debt. Accordingly, it expects that the rapid growth of recent years is unlikely to be repeated.

China's retail sales in August rose only 3.4% year-on-year, falling short of analysts' expectations. Real estate investment fell further, decreasing 12.9% from January to August this year.

Nomura's chief China economist Ting Lu said in a report released the previous day that average daily passenger trips in China during October 1–5 increased 5.4% year-on-year, reaching 296 million. However, he pointed out that this growth was weaker than the 7.9% increase during the May 1–5 holiday.

Economists said that one in seven Chinese youth is unemployed and that they are facing difficulties due to technological innovation and an aging population. The World Bank also pointed out that startup employment growth is sevenfold in the United States, highlighting strong startup growth, whereas China's startup employment growth is fourfold. It emphasized that one difference between China and the United States is the presence of state-owned enterprises.

According to World Bank estimates, if China's GDP falls by 1%p, the growth rate of the remaining developing countries in East Asia and the Pacific falls by 0.3%p. With China's GDP revised upward, the World Bank plans to raise its forecast for the growth rate of East Asia and Pacific developing countries from 4%, predicted earlier this year, to 4.8%.

In June, the World Bank lowered its global economic growth forecast for this year to 2.3% due to trade uncertainty. It said this was the weakest growth since 2008.

Kim Jeong-ah, guest reporter kja@hankyung.com