Since the end of the COVID-19 pandemic about two years ago, China's economy has been anything but dynamic, grappling with a series of problems.

At home, Chinese consumers have been holding off on spending. At the same time, a long-simmering real estate crisis has made many people poorer and deeply unsure about their future economic well-being.

Across the Pacific, in the United States, Donald Trump is brimming with confidence after returning to the White House for a second term in office as president.

As the world nervously watches how Trump's campaign promise of higher tariffs on imports from virtually the entire world plays out, recent economic data from China gives the US president another reason to act on what he has called unfair trade relations between the two superpowers.

In 2024, the world's second-biggest economy grew by 5%, according to preliminary figures, driven largely by exports and matching exactly the Communist government's growth target set for the year.

Volkmar Baur, a foreign exchange (forex) analyst at Germany's Commerzbank, was not surprised by how precise the growth rate came in.

"It's definitely amusing when you check the numbers [over the year] thinking: 'They'll never hit that target again.' And then, boom — there it is, exactly the growth rate they aimed for at the start of the year," he told DW.

China falls back on export-driven growth

For Thomas Gitzel, chief economist at VP Bank, China's headline growth figure looks better than it likely feels for most Chinese citizens.

"There has been no significant improvement in the perceived economic situation," he told DW, because the real estate crisis remains unresolved, households are still struggling financially, and the economy as a whole continues to be suffering from structural problems like massive overcapacity.

Volkmar Baur adds that Chinese efforts to export its domestic overcapacity due to sluggish domestic demand were clearly reflected in the figures. Exports alone contributed 1.5 percentage points to the 5% growth rate.

"That means domestic demand — what was consumed or invested within China — grew by only 3.5% over the year," he said, which underscores that domestic growth in 2024 was "the weakest for decades," not counting the pandemic years of 2020/21.

"A full 30% of China's growth is driven by external demand, meaning the country hasn't been this reliant on exports since the 1990s," he added.

Soaring trade surplus set to sour Trump

In all likelihood, China's almost $1 trillion (€960 billion) trade surplus with the world in 2024 won't go down well with Donald Trump, who has vowed to curb China's trade surplus with the US.

Baur put the figure in historical perspective saying the surplus was "another $150 billion more than the previous record year of 2022 and more than any other country has ever achieved."

Jacob Gunter from the China-focused think tank, MERICS, also considers the record surplus to be a problem. He told DW that the 2024 figure showed domestic consumption "remained weak," corporate profitability "continued to decline," and Beijing's efforts to stimulate the economy were "once again focused on production rather than boosting consumer spending."

Because household incomes in China have remained relatively low compared to economic output, he added, people are saving their money rather than spending it.

Higher sales but less income for Chinese companies

Beijing is paying a high price for its export boom. Prices for Chinese goods are falling on global markets.

For more than two years now, Chinese steelmakers, for example, have had to endure declining income from their products despite a 20% rise in sales. About one-third of the country's steel companies are operating at a loss, with numbers continuing to rise year after year.

A similar trend is seen in car exports, where China shipped 24% more vehicles abroad last year, but again, at declining export prices. Meanwhile, around a quarter of Chinese automakers are unprofitable, said Baur.

Andrew Wang, an executive at a company providing industrial automation services for the booming electric vehicle sector, told news agency Reuters recently, that his company's revenues fell 16% last year, prompting him to cut jobs, which he expects to do again soon. "The data China released was different from what most people felt," Wang said, comparing this year's outlook with notching up the difficulty level on a treadmill. "We need to run faster just to stay where we are."

Wages falling in growth industries

Despite robust growth, reports frequently surface in Chinese media about workers going months without pay, forcing them to rely on their savings. The true extent of unpaid wages is hard to verify, but overall, wages appear to be declining rather than rising.

A survey on entry-level salaries in what China dubs "New Economy" companies supports this downward trend. The New Economy, as defined in China, includes the country's fastest-growing industries with high research expenditures — primarily in the tech sector.

Commerzbank's Baur says the survey suggests "entry-level salaries seem to have fallen by 8% year-over-year" in these industries. "If wages are dropping even in such dynamic sectors that the government is prioritizing, one can only imagine what it looks like in other areas," he said.

The Trump factor

An increasing number of unprofitable companies, falling wages, rising unemployment, and weak consumer spending — these are just some of the challenges facing China's leadership at the beginning of 2025 — the "Year of the Snake," according to the Chinese zodiac's 12-year cycle.

How long China can continue "exporting its way out" of the crisis depends largely on how tightly US President Donald Trump turns the screws on bilateral trade.

China seems set to be hurt enormously by the impact of Trump's 10% tariff hike on Chinese goods, in effect since February 1, but additional measures against online retailers like Temu, Shein, and AliExpress in the US could further stifle growth.

Currently, goods shipments from abroad worth up to $800 are duty-free in the US. If Trump eliminates this exemption, as is being discussed in Washington, the effects would be significant.

According to calculations by Japan's Nomura Bank, this could slow China's export growth by 1.3 percentage points and trim 0.2 percentage points off GDP growth. The impact could be even greater if Europe and Southeast Asian countries, which have similar tariff rules, follow Trump on his trade-war path against China's surpluses.

This article was originally written in German. It was first published on January 31 and updated for latest developments on February 1.