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Chinese economy: deflation hits industry and real estate


January, 20 2025
watermark Economic news

For the second year in a row, Chinese industry has been feeling strong deflationary pressure amid a mismatch between supply and demand. Prices in the manufacturing sector decreased by 2.3% last year. Transportation and real estate also made a significant contribution to deflation.


China's economy, the world's second largest, is facing persistent deflation due to weak domestic demand amid rising production. The GDP deflator shrank by 0.8% last year and is likely to continue to decline in 2025, which will be the longest period in decades. High competition among enterprises forming 80% of the industry has lowered export prices, which led to a record foreign trade surplus of almost $1 trillion last year. 


The prolonged downturn in China's real estate market began to ease after Beijing's stimulus measures in September. The growth in the fourth quarter was the first in seven quarters. The National Bureau of Statistics has revised the GDP data for 2023, increasing it by 2.7% using a more accurate housing assessment methodology.


Despite deflation, the economy achieved a 5% growth target, although nominal GDP increased by only 4.2%, the slowest pace since the late 1970s. The secondary sector grew by 5.3% in 2024, surpassing the tertiary sector with an increase of 5% for the first time since 2012.


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