China’s economy is still growing but faces some tough headwinds that could slow things down over the next couple of years, according to a new World Bank report, according to the original press release. The country posted solid 5.4% growth in the first quarter of 2025, helped by government policies that boosted consumer spending and home sales in major cities. But economists warn that growth will likely drop to 4.5% this year and 4.0% next year as global trade tensions and domestic challenges take their toll.
The World Bank’s latest China Economic Update paints a picture of an economy trying to rebalance itself while dealing with multiple pressures. Consumer spending remains weak despite government efforts, and the property market in smaller cities is still struggling badly. Manufacturing and exports, which have been China’s reliable growth engines, now face uncertainty from shifting global trade policies that could hurt investment and hiring.
Getting Chinese households to spend more is becoming crucial for keeping growth on track, especially as external challenges mount.
Mara Warwick, the World Bank’s Division Director for China, Mongolia, and Korea, explained the key challenge: “Household consumption will be key to sustaining growth amid external and domestic economic challenges. Beyond short-term stimulus, stronger social safety nets, especially for migrant and temporary workers, would encourage more spending by improving financial security and reducing the need for precautionary saving.”
The job market tells an interesting story about how China’s economy is changing. The country created 21 million new jobs over the past five years – sounds impressive, but that’s actually less than half what it managed in the previous five years. Technology is reshaping which jobs exist, with automation and artificial intelligence eliminating some lower-skilled positions while creating opportunities for highly skilled workers.
China’s government is trying to cushion the economic slowdown through higher infrastructure spending and better social benefits, but longer-term challenges remain significant. An aging population, high debt levels, and slower productivity growth are all weighing on future prospects, making the shift toward a more consumption-driven economy increasingly important for sustainable growth.
