World Bank raises China’s growth forecast, calls for ‘deeper’ reforms

The World Bank has raised its near-term economic forecasts for China, while reiterating its call for President Xi Jinping to implement profound reforms to address lagging confidence and structural issues in the world’s second-largest economy.

The multilateral lender announced on Thursday that it had increased China’s GDP growth forecast for next year by 0.4 percentage points to 4.5%, reflecting a series of policy easing measures introduced by Beijing over the past three months and the strength of the country’s exports.

For the current year, the World Bank adjusted its full-year forecast upwards by 0.1 percentage points to 4.9%, slightly behind Beijing’s growth target of approximately 5% for 2024. The Chinese economy grew by 4.8% during the first nine months of this year.

Recent pledges from Xi’s economic planners to enhance social welfare and consumption support, alongside reforms in fiscal and tax systems, were also highlighted by the report. However, the bank noted that more detailed plans are required to build confidence among households and businesses.

“Traditional stimulus measures will not be enough to revitalize growth,” the World Bank stated, emphasizing the need for deeper reforms in education, health, social welfare protections, pensions, and the household registration system.

China’s economic growth has slowed significantly this year due to weak domestic demand, deep deflationary pressures, and a prolonged slump in the property market, which has eroded household wealth.

While Xi has shifted economic priorities towards high-tech manufacturing and industrial investment, concerns are growing over the risks to exports—particularly given the potential for new tariffs under Donald Trump’s administration, as he returns to the U.S. presidency next month.

The World Bank also released a new analysis of economic mobility in China, covering the period from 2010 to 2021. By its definition, over half a billion people are at risk of falling out of the middle class just one generation after escaping poverty.

The report commended Beijing for its “dramatic achievement” of lifting 800 million people out of poverty over the past 40 years, with the share of low-income earners in the population dropping sharply from 62.3% to 17%. However, it also pointed out that 38.2% of China’s 1.4 billion population is in the “vulnerable middle class”—above the defined low-income threshold but not immune to the risk of falling below it. According to 2017 purchasing power parity calculations, the low-income threshold was set at $6.85 per day.

“No other region of the world has experienced a faster increase in the share of the secure middle-class population than China,” the World Bank observed. “Yet, the vast majority of the population is not yet economically secure,” it added.

Bert Hofman, former World Bank China director and now with the National University of Singapore, noted earlier this month that the lackluster post-COVID performance of the Chinese economy has exposed weaknesses that have accumulated since the last major financial system overhaul in 1994.

Nonetheless, Hofman acknowledged “promising signals” that reforms could be on the horizon. He cited statements by policymakers suggesting an emphasis on improved income distribution and social security in the latter half of 2024.

“Fiscal reforms are now clearly linked to the Chinese Communist Party’s core objective of ‘high-quality growth,’ and the leadership recognizes that reforms must result in a fiscal system that can deliver efficiency, equity, and stability,” Hofman wrote in his 2025 forecast for Asia Society.