China’s GDP expansion is currently underperforming that of the rest of Asia, which has raised concerns among economists and policymakers alike. The country’s economy is facing significant challenges, such as a property crisis and high levels of youth unemployment, that are expected to impact its economic growth in the coming years.

According to data collected by HSBC in November 2024, China is projected to experience slower per-capita GDP growth compared to other Asian countries between 2023 and 2026. While India and Southeast Asian nations are expected to see an average growth rate of 6.5% during this period, China is only projected to achieve a growth rate of 3.9%.

The reasons behind China’s underperformance are manifold. Strong foreign and domestic private investment flows, a thriving technology sector, a growing middle class, and a youthful demographic have been key drivers of growth in other Asian economies. In contrast, China is facing challenges related to consumer demand deficits and economic restructuring that have dampened its growth prospects.

In response to these challenges, China’s top leaders have signaled their intentions to implement more robust stimulus measures to boost consumer spending and drive economic growth. Plans for interest rate reductions and increases in government expenditure have been proposed as potential strategies to address the current economic slowdown.

Robin Xing, chief China economist at Morgan Stanley, has warned that the Communist Party faces a “long, long battle” to reflate the economy. In an interview with Bloomberg Television, Xing emphasized that 2025 will be a year of significant challenges for China and that it may take until 2026 for the government to identify the right policy mix to stimulate growth effectively.

Xing also suggested that a combination of consumption-centric stimulus measures and reforms to the social safety net could be necessary to jumpstart economic growth in China. By focusing on increasing consumer spending and providing a more robust safety net for its citizens, the Chinese government hopes to address the underlying issues that have led to its current economic underperformance.

Despite the challenges that lie ahead, China remains a key player in the global economy and has the potential to bounce back from its current slowdown. By implementing the right policy measures and focusing on long-term growth strategies, China can overcome its current obstacles and position itself for success in the years to come.