The World Bank warned on Tuesday that despite Beijing’s stimulus measures providing a short-term boost to the economy, they are not sufficient to alter the country’s long-term prospects. The World Bank predicts that China’s economic growth will further weaken in 2025, adding extra pressure on the East Asia region.
According to the World Bank’s semi-annual economic outlook report, China’s economic growth is projected to decrease from an estimated 4.8% in 2024 to 4.3% next year. This slowdown is expected to affect the economic growth of countries in the East Asia and Pacific region, including Australia, South Korea, Indonesia, dropping from 4.8% this year to 4.4% in 2025.
The World Bank stated, “China’s economic growth over the past thirty years has benefited neighboring countries and generated positive spillover effects, but the driving force and scope of influence are diminishing.” The World Bank also remarked that although “the recent fiscal support announced by Beijing may sustain short-term growth, long-term growth will depend on deeper structural reforms.” The World Bank forecasts that China’s economic growth will significantly slow down in 2025, impacting the East Asia region.
The World Bank’s growth forecast for China aligns closely with Bloomberg’s survey.
Apart from China’s economic slowdown, changes in trade and investment flows and increasing global policy uncertainties pose risks to the economic growth of the East Asia and Pacific region. For instance, while the US-China trade war has provided market opportunities for countries like Vietnam to “connect” with major trading nations, new data indicates that with stricter import and export regulations, economies may trend towards being “one-way connectors,” reliant on specific markets for imports or exports and unable to establish broader two-way trade networks.
The World Bank also examined how new technologies like industrial robots and artificial intelligence impact labor markets across Asia.
The report highlights that the prevalence of manual labor in the Asian region means the proportion of jobs threatened by artificial intelligence is lower compared to advanced economies. However, this also reflects weaker capabilities of local businesses in utilizing artificial intelligence to enhance productivity, potentially affecting the region’s long-term competitiveness.
Chinese Communist Party officials have set an economic growth target of around 5% this year. However, due to weak consumer spending, inadequate purchasing power, and a sharp decline in the real estate market, the possibility of achieving this goal appears increasingly slim.