The World Bank lifted on Thursday its forecast for China's economic growth this year and next but warned that subdued household and business confidence, along with headwinds in the property sector, would keep pressure, weighing it down in 2025.
The world's second-biggest economy has struggled this year, mainly due to a property crisis and tepid domestic demand. An expected hike in U.S. tariffs on its goods when U.S. President-elect Donald Trump takes office in January may also hit growth.
"Addressing challenges in the property sector, strengthening social safety nets, and improving local government finances will be essential to unlocking a sustained recovery," Mara Warwick, the World Bank's country director for China, said.
"It is important to balance short-term support to growth with long-term structural reforms," she added in a statement.
Thanks to recent policy easing and near-term export strength, the World Bank expects China's gross domestic product (GDP) growth to be 4.9% this year, up from its June forecast of 4.8%.
Beijing set a growth target of "around 5%" this year, which it says it is confident about achieving.
Although growth for 2025 is also expected to fall to 4.5%, that is still higher than the World Bank's earlier forecast of 4.1%.
Slower household income growth and the negative wealth effect from lower home prices are expected to weigh on consumption into 2025, the Bank added.
To revive growth, Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds next year, Reuters reported this week.
The figures will not be officially unveiled until the annual meeting of China's parliament, the National People's Congress, in March 2025 and could still change before then.
While the housing regulator will continue efforts to stem further declines in China's real estate market next year, the World Bank said a turnaround in the sector was not anticipated until late 2025.
China's middle class has expanded significantly since the 2010s, encompassing 32% of the population in 2021, but World Bank estimates suggest about 55% remain "economically insecure," underscoring the need to generate opportunities.
