The World Bank has recently updated its economic outlook for China, increasing its short-term growth forecast for the country’s GDP in 2024 to 4.5%, a rise of 0.4 percentage points. This adjustment is attributed to a series of policy easing measures introduced by the Chinese government, as well as strong export performance. Additionally, the organization’s full-year growth forecast for 2023 has been slightly raised to 4.9%, nearing the Chinese government’s target of around 5%.
Despite these positive adjustments, the World Bank emphasizes the importance of substantive reforms to enhance confidence among households and businesses. It highlights that previous stimulus measures have not effectively stimulated growth and calls for deeper reforms in areas such as education, healthcare, and social welfare. China’s economy has been grappling with slowing growth, primarily driven by weak domestic demand and deflationary pressures exacerbated by difficulties in the real estate sector.
The World Bank’s analysis indicates that over 500 million people may be at risk of falling out of the middle class, reflecting a potential economic vulnerability just a generation after many escaped poverty. Although China has achieved significant success in reducing poverty over the past four decades, with 800 million people lifted out of low income, a substantial proportion of the population, around 38.2%, is classified as part of a “vulnerable middle class.” This group earns above the low-income threshold but lacks economic security.
Further evaluations suggest that while the share of the economically secure middle class in China is increasing rapidly, it remains accompanied by a significant number of individuals who are still economically fragile. Experts note that the country’s post-COVID-19 economic challenges may stem from structural weaknesses that began to emerge with past reforms.
Despite these challenges, some analysts observe a more optimistic outlook due to recent policy statements indicating a shift towards improved social security and income distribution. The effectiveness of forthcoming reforms in transforming fiscal policy into a mechanism for better resource allocation and economic stability remains a critical concern for China’s future growth trajectory.